Yum China is eager to change, independent food delivery is actually a tough battle

Recently, it was revealed that Yum China plans to set up an independent food delivery company and has begun recruiting for the establishment of the new company.

As we all know, in May this year, Yum China announced the acquisition of Daojia Food Club. In addition, since 2015, KFC, a catering brand under Yum China, has reached cooperation with Meituan Waimai and Ele.me and started to enter the food delivery platform. From this point of view, Yum China's move to establish an independent food delivery seems to be sudden, but in fact, judging from its many actions in the food delivery business, it has been planned for a long time. Moreover, the current penetration rate of the food delivery market is actually very low, which means that Yum China has great room for development by entering the food delivery industry.

However, compared with the low penetration rate of the takeaway market, Yum China also faces great competition from the two major domestic Internet takeaway platforms, Meituan and Ele.me. So, what advantages does Yum China have in establishing an independent takeaway business, and what helpless moves does it reveal in the pursuit of reform by traditional catering companies?

Behind independent food delivery: the double squeeze of the decline of the bonus period of foreign fast food and the rise of food delivery

It is not uncommon for former catering giants to seek industrial reform. The Internet has a strong ability to reshuffle traditional industries, and the traditional catering industry is no exception. Even as a domestic catering giant, Yum China still feels the crisis. This crisis comes not only from the birth of a flourishing fast food category, but also from the huge pressure caused by the rising takeaway platforms.

First of all, it is an indisputable fact that the bonus period of foreign fast food development has passed. In March last year, McDonald's announced that it would sell its 20-year franchise rights including mainland China and Hong Kong. In January this year, it successfully "sold itself" to CITIC Capital and Carlyle Group, and the three parties reached a cooperation and established a new company. Public data shows that since being involved in the food safety incident in 2014, McDonald's Chinese stores have experienced a continuous decline for several quarters. It is undeniable that even with many offline stores in China, McDonald's and other foreign fast food are no longer as attractive to urban white-collar workers as before. Instead, subdivided fast food categories have sprung up like mushrooms after rain, which have attracted the attention of many consumers in the era of new consumption upgrades. And the new generation of users who seek novel experiences are even more eager to explore food. Foreign fast food, which used to be the benchmark for catering, can only seek change or accelerate death in the market reshuffle.

Yum China, which owns two major catering brands, KFC and Pizza Hut, is also facing the impact from many rising catering brands. For example, the "dark horse" of the fast food industry, Ban Yaki Kitchen, has rapidly increased its stores since it opened for franchising in 2015. As of July this year, Ban Yaki Kitchen has a total of 1,000 directly-operated stores and franchise stores across the country. Another Internet catering brand, Xi Shao Ye Rou Jia Mo, had 19 stores in Beijing as of April this year and received $12.6 million in Series B financing at the end of last year. On the other hand, foreign fast food companies, in the originally fiercely competitive catering market, although Yum China has been advancing its localization process, it is still difficult to withstand the huge pressure from other catering brands.

Secondly, the rapid rise of Internet food delivery platforms has had an impact on the business development of Yum China. From the current market situation, it can be seen that Yum China's self-built food delivery platform, ZTO Express, has been squeezed by platforms such as Ele.me and Meituan Waimai in terms of user volume and delivery time. Not only is the traffic advantage significantly inferior to the other two platforms, but even the food variety is far behind.

In the face of the two major food delivery platforms that rely on food delivery, Yum China, as an "extra" food delivery platform, has the advantage of integrating resources for development, but it is still far behind others in the food delivery business. Therefore, it is not easy for Yum China to survive in the gap between Ele.me and Meituan Waimai.

From this, we can see the reasons why Yum China is seeking another development path and the difficulties it faces in exploring the food delivery business, as the catering industry itself is squeezed by market space and the food delivery platform is impacting its business. However, Yum China has been in China for more than 30 years and is well prepared to establish an independent food delivery business.

The penetration rate of the takeaway market is still low, and Yum China intends to enter the market to grab a piece of the pie

As we all know, in August this year, Ele.me announced the acquisition of Baidu Waimai. The domestic takeaway market, which was once divided into three parts, soon became dominated by Ele.me and Meituan Waimai, which occupied the vast majority of the domestic takeaway market share. However, compared with the huge user base of the two platforms, the penetration rate of the takeaway market is not high. According to Jiguang data, as of September 2016, the market penetration rates of Ele.me and Meituan Waimai were 3.96% and 2.93% respectively. According to Zhang Xuhao, the founder of Ele.me, in an interview, before the market penetration rate reaches 30%, the platform still has a lot of room for growth.

From this point of view, the takeaway market with low penetration rate has great development opportunities for Yum China, which is about to enter the market. In addition, Yum China itself has certain brand advantages in the domestic catering industry, and its previous early acquisition of Daojia Food Club has greatly helped its entry into the takeaway market.

First, Yum China owns two major catering brands, KFC and Pizza Hut, and its numerous stores can bring it a customer source advantage. KFC and Pizza Hut under Yum China are far ahead of other domestic catering brands, and their offline stores are opening more and more. Yum China's second quarter financial report this year showed that it has 7,685 stores, including 5,301 KFCs and 2,122 Pizza Huts. With the strong user base of KFC and Pizza Hut, plus other offline stores, Yum China has laid a great customer source advantage foundation for further gaining market share.

Secondly, Daojia Food Club, which was previously acquired by Yum China, will contribute to its establishment of an independent food delivery business. Daojia Food Club, which was previously acquired by Yum China, is positioned as a mid-to-high-end food delivery platform, focusing on the mid-to-high-end market in major cities such as Beijing, Shanghai, Guangzhou and Shenzhen. In addition, with its many years of experience in the food delivery industry, it has been able to remain standing after experiencing the price subsidy war between Meituan Waimai and Ele.me, which shows its tenacious vitality. Therefore, with Daojia Food Club's experience in the mid-to-high-end food delivery business, it may be able to increase Yum China's bargaining chips in establishing food delivery.

Third, YUM China's ZTO Express has a vertically independent logistics and delivery team, which has certain barrier advantages. It is reported that although KFC and Pizza Hut have connected to Ele.me and Meituan Waimai, the final catering delivery is still provided by YUM China's independent delivery team ZTO Express. Therefore, ZTO Express is a vertical delivery team. Compared with the mixed delivery service of Ele.me and Meituan Waimai, it may help YUM China enter the vertical catering delivery market. In addition, the vertical delivery service can also allow YUM China to form a relatively independent service barrier in the fierce competition for the takeaway market.

In addition, Yum China's third quarter financial report this year shows that the sales of takeaway business increased from 12% in the first quarter of this year to 14%, which shows that the takeaway business is becoming a growth point for Yum China. Therefore, in addition to trying to get rid of the constraints of Ele.me and Meituan Waimai on its business, the growth of the takeaway business also allows Yum China to see the significant potential market. Moreover, with the support of offline stores, as well as some traffic from Daojia Food Club and ZTO Express, and the low penetration rate of the takeaway market, Yum China does have considerable advantages in establishing an independent takeaway business.

However, what is more questionable than Yum! Brands' plan to establish an independent food delivery business is the possible problems behind Yum China's move.

With tigers in front and soldiers behind, Yum China will face a tough battle

With the rapid rise of Internet food delivery companies, the market space left for traditional catering companies is gradually shrinking. Therefore, in addition to connecting to Internet food delivery platforms to maintain customer base, these traditional catering companies have another way to survive by establishing their own food delivery platforms. However, in reality, traditional catering companies are facing a dilemma. On the one hand, if they keep their complacent attitude, it seems that it is only a matter of time before catering companies are "overwhelmed" by the food delivery industry; on the other hand, if they join the army of self-built food delivery platforms, it means that they will have to move forward with heavy burdens in the fierce market competition.

For Yum China, establishing an independent food delivery platform means investing a lot of manpower, material resources, and financial resources. In addition to the investment of funds, what is more important is whether the industry model can be taken in the right way, otherwise it is easy to accelerate death in the initial attempt "performance". After all, it is difficult to determine whether it can win by digging for wealth in the "routines" that the two existing food delivery platforms are already familiar with. The key is how to lay a solid foundation for survival in the early stage.

Judging from the current situation, with the market share of Ele.me and Meituan Waimai, it is actually too early for Yum China to seek long-term survival in the gap and become a "powerful" competitor like Ele.me and Meituan Waimai. However, given its unique advantages in catering brands, it is not impossible to win with the powerful reshuffle function of the Internet.

In general, Yum China's establishment of an independent food delivery service can reduce its dependence on other food delivery platforms, enhance its own advantages as a catering giant, and also gain a share of the food delivery market, seeking long-term development in the fierce catering market. Even though the food delivery market is now divided into two parts, there are still many variables in the current food delivery market, and many catering companies are also salivating over the food delivery market. Yum China's ambition to develop the food delivery market also represents the ambition of other traditional catering companies to seek reform.

Therefore, in the process of seeking business expansion, Yum China may be able to cut into the high-end takeout market by taking advantage of its customer source advantage, build a unique takeout platform for high-end catering, differentiate itself from the other two major takeout platforms, and also form its own unique advantages and establish industry barriers. At present, it seems that Yum China, which has just entered the takeout market, may further occupy more market share on the basis of its original takeout business, and on this basis, expand to other mid-to-high-end catering fields or all-round catering delivery fields. Whether it can eventually become a strong competitor to the two major takeout platforms depends not only on whether Yum China's takeout move is right, but also on whether the market will buy it.

Liu Kuang, uses Zen to comprehend the Internet, WeChat public account: liukuang110

As a winner of Toutiao's Qingyun Plan and Baijiahao's Bai+ Plan, the 2019 Baidu Digital Author of the Year, the Baijiahao's Most Popular Author in the Technology Field, the 2019 Sogou Technology and Culture Author, and the 2021 Baijiahao Quarterly Influential Creator, he has won many awards, including the 2013 Sohu Best Industry Media Person, the 2015 China New Media Entrepreneurship Competition Beijing Third Place, the 2015 Guangmang Experience Award, the 2015 China New Media Entrepreneurship Competition Finals Third Place, and the 2018 Baidu Dynamic Annual Powerful Celebrity.