Yum recently reported profit and revenue drops of 9 per cent each in first quarter of 2015 on the back of the poor performance of its flagship brands, Pizza Hut and KFC. According to a report by The Wall Street Journal, sales at Pizza Hut have dipped by 6 per cent in the first quarter due to declining novelty value.
Liu Yue, a 30-year-old finance worker interviewed by the paper said he used to eat at Pizza Hut but had recently shifted his preferences to Pizza Express because he wanted a nice restaurant, not “unsophisticated” fast food.
To try and win back consumers, Yum Brands has launched a high-end Italian eatery located on the Bund in Shanghai, named Atto Primo. According to WSJ, Atto Primo is an experiment for Yum and will be a test kitchen for Pizza Hut. Will the more upscale offerings work for a fast food brand in China?
In some ways, Pizza Hut is a victim of its own success. While the brand is now almost ubiquitous in China its expansion has come at a cost. The chain has not been able to ensure ingredient quality and safety as it has grown and the fast rate of store openings has left older restaurants looking dated and run down.
Meanwhile, more premium entrants like Pizza Express which offer better ambience and more authentic menus are luring away savvy customers.
For Pizza Hut to find future success in China it will have to do more than regain consumer trust. Ultimately, the brand will have to rethink its approach to China. From a branding perspective, Pizza Hut must modernise its image and its restaurant decor. It needs to transition the restaurant from one that is trying to offer something to everyone — including students, families, and office workers — and instead focus on having a clear image and a clear customer target.
From a menu perspective, Pizza Hut also needs to have a clear identity. Currently, the restaurant tries out so many different menu options that customers do not really know what to expect from the dining experience.
Instead, Pizza Hut should focus on authentic tastes and offering something more appealing to consumers who are increasingly health conscious.
The Chinese consumer’s understanding about what makes a brand authentic is rapidly evolving. Brands that try to appeal to everyone in search of profits are falling by the wayside as authenticity and values become a driving factor in success.
Pizza Hut has gone well beyond its traditional pizza offerings and promotes a variety of food including Japanese, American and Chinese cuisines. Unfortunately, other brands exist that can deliver superior experiences in each.
Consumers in China have become confused about what Pizza Hut does best. So, when they want an authentic pizza experience, they are much more likely to think of Papa Johns or Pizza Express first.
Similarly, if they want a value-for-money pizza, they are likely to think of Dominos. As for Japanese or Chinese cuisine, Pizza Hut is nowhere near top-of-mind.
In terms of brand positioning, Pizza Hut’s marketing seems aimed at selling the venue as a place for youth and families to meet rather than the pizza. It is also extremely hard to find information about pizza on its website.