Pizza Anyone?

While expatriates in China have been chowing down on turkey, mash potatoes and stuffing these past few days, many Chinese have been enjoying another American favorite—pizza!

When I first came to China, the conventional wisdom was that pizza would never catch on here. I was told that the Chinese don’t particularly like dairy products, including the cheese that is an essential ingredient on those pies.

But, China continues to surprise, and I began noticing pizza becoming the food of choice for our Chinese staff when organizing office parties. It seemed that pizza was everyone’s favorite.

Twenty years after the first Pizza Hut store was opened, the pizza industry is thriving in China. While pizza restaurants do not quite have the popularity of venues like McDonald’s and KFC, their influence has been growing as existing establishments expand and new players enter the market. China offers a wide range of pizza products and service levels, from fast food and delivery to upscale casual dining.

Yum! Brands, Inc. (parent company of KFC, Pizza Hut and Taco Bell) entered China with KFC in 1987. With 3,000 KFC locations in 650 cities throughout China, KFC has been the dominant force in China’s fast food industry. A new KFC opens almost every day in the country.

On the back of its experience with KFC, Yum! introduced Pizza Hut to China in 1990, and the brand has come to dominate the industry. Pizza Hut is now the number one pizza brand, with nearly 500 Pizza Hut casual dining restaurants in over 120 cities, plus 106 Pizza Hut home delivery service units.

In addition, Pizza Hut has recently introduced Pizza Station, a fast-food pizza establishment offering fast and convenient service, both eat-in and take-away. Pizza Hut’s ability to offer a wide range of product and service levels has been a large factor in its success because it appeals to many segments of the highly stratified China market. Innovations such as the introduction of pizza delivery in 2001 have been important to the company’s growth.

U.S. consumers might be surprised to learn that, in China, Pizza Hut is regarded as a trendy place to eat, attracting wealthy customers and often requiring reservations. As a result of their appeal, Pizza Hut outlets in China are at least twice as profitable as their counterparts in the United States. The profitability and growth of Pizza Hut helped Yum! to increase its overall profits from China by 33 percent in the second quarter of 2010, as compared to just 10 percent growth in the U.S. With 25 percent of its profits already coming from China, Yum! predicts that China will overtake the U.S. as its largest market within a few years.

The second largest pizza chain in China is The Pizza Company, a brand owned by Minor Food Group. Minor has 1,000 restaurants across 13 Asian countries and is the fastest-growing, multi-branded restaurant operator in North China. The Pizza Company was launched in 2001, and only entered China in 2005. Yet, it has 244 outlets today across China and other Asian and Middle Eastern Countries. Like Pizza Hut, it offers dine-in restaurants, take-away outlets, and delivery units.

Another up and comer in the Chinese pizza market is Papa John’s, the world’s third-largest and fastest-growing pizza chain, with more than 3,000 delivery and carry-out pizza restaurants worldwide. Papa John’s entered China in 2003 and had 155 restaurants across 32 cities as of September 2010. The chain plans to double that number to 300 over the next three years. China is Papa John’s second-largest market after the U.S., accounting for 20 percent of its sales in 2008. With Pizza Hut the clear industry leader, Papa John’s is relying heavily on delivery services (especially free delivery) and franchising to close the gap.

Many smaller pizza companies from all parts of the world also seem to have caught China fever. Peppes Pizza, a Norwegian company, has four locations in Beijing and Shanghai. Spanish Telepizza is forming a 50-50 JV with the bakery chain Christine to open delivery outlets in China. Taiwan’s 98 Pizza also has a presence in China.

Who would have thought that pizza would become a staple of the Chinese fast food and casual dining industry, going against the grain of thousands of years of culinary history? So much for conventional wisdom where China is concerned!

Note: I would like to thank my nephew, Jeff Perkowski , who did the research and helped me to write this article. Jeff is a senior at the University of Virginia and has spent the last three months interning with JFP Holdings. We have enjoyed having Jeff with us here in Beijing. I’m sure that he’ll be back!

No comments yet... Be the first to leave a reply!