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Business

Yum China says technology allows it to open stores without needing more staff


Pedestrians walk past a Pizza Hut restaurant and a KFC restaurant, both operated by Yum China, in Beijing, China, September 5, 2020.

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BEIJING – Yum China is spending more on technology, an investment that has allowed it to open more stores without having to hire more staff, CEO Joey Wat told CNBC in an interview Friday.

Yum China operates, among other brands, KFC and Pizza Hut stores in China. Its U.S.-listed shares rose 5.45% on Thursday after the company increased its net new store target for the year by 300 – and plans to return $3 billion to shareholders over the next three years .

“From 2016 to now, we have increased our number of stores by around 80%. However, our headcount has remained almost stable at (around) 430,000 people,” Wat said via video conference.

With technology, she said staff can be promoted to manage multiple stores and support the opening of new locations.

Yum China announced plans on Thursday to invest between $3.5 billion and $5 billion over the next three years to expand its store network, improve its supply chain and strengthen its digital capabilities. This year alone, the company plans to spend between $700 million and $900 million.

Wat said the company began investing in technology during the Covid-19 pandemic to improve visibility into its supply chain and inventory levels at a time when some stores may have to close due to coronavirus controls. lockdown.

Companies of Ali Baba has Walmart‘s Sam’s Club uses software to manage supermarket warehouses and inventory in China, to sell services such as one-hour grocery delivery.

Yum China is building more of its own logistics centers where it can integrate more technology into its supply chain and reduce carbon emissions, Wat said, noting that the company aims to eventually own 30% of its logistics centers instead. than having to rent them.

AI at work

As a result, store managers no longer need to order inventory: ingredients are automatically sent to the store using artificial intelligence-driven forecasts, Wat said.

This technology reduces labor and operating costs, as well as food waste, she said. Wat added that the current coverage of the logistics center also has the capacity to meet Yum China’s planned store openings in the short term.

The company has 33 logistics centers and plans to increase this number to at least 45 over the next three to five years.

Yum China also plans to use generative AI to help store managers better understand and analyze store data, Wat said, emphasizing that this is still at a “very, very early stage.”

She said the company was still evaluating what could be done internally and what needed external help.

Generative AI uses large models to create content that can resemble what a human could produce, but in a much shorter time frame.

Consumer trends

To achieve these technology investment and business growth goals, Wat did not say whether Yum China would hire more staff. “We will hire anyone we need,” she said.

She said the company hasn’t laid off anyone, not even during the three years of the pandemic.

China’s broader economic recovery from Covid-related lockdowns has slowed in recent months. The latest available data for young people aged 16 to 24 shows an unemployment rate of around 20% this summer, while the overall unemployment rate in cities is much lower, close to 5.2%.

General uncertainty about future incomes weighed on consumer spending.

Despite the expansion of its business, Yum China said it expects same-store sales this year to reach 90% of 2019 levels.

Wat noted that Yum China opened more than half of its stores after 2019 and that its stores are roughly distributed between the country’s largest cities and less developed areas.

She described summer business as a peak period for the company, particularly when it comes to local tourism, and said transactions remained “strong” in September after school started.

Yum China also has a local joint venture with Italian coffee brand Lavazza, which now has more than 100 stores in China.

Wat said that in addition to coffee, the company was exploring how to introduce more food products for the brand in China.


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