By LI Ye
During a 2021 investor event, Yum China, the largest restaurant group in China, made coffee a significant part of its portfolio.
Since 2014 KFC has sold coffee in China. In 2021, the market had become relatively stable, with Starbucks dominating the higher end and Luckin Coffee leading the lower end.
Both ends of the market
Yum China’s strategy involved using KFC to penetrate the coffee market in lower-tier cities. Kcoffee offers a range of coffees priced below 22 yuan (US).
Kcoffee shops are typically adjacent to KFC restaurants, and some share internal spaces. The staff at Kcoffee are often KFC restaurant employees rotating duties between the two establishments.
Yum China reported a 50 percent year-on-year growth in Kcoffee sales in the second quarter of 2023.
Lavazza is Yum's high-end coffee brand with faux-Italian coffee, and “old Italy” store decor. Positioned in the 30-40 yuan range, Lavazza targets consumers with low price sensitivity and faces intense competition.
Expensive for a reason
With its stores almost all in expensive districts of big cities, Lavazza adopts a large-store model similar to Starbucks. Yum China has emphasized the importance of optimal locations, unique store formats and profit.
There is no guarantee that Lavazza’s strategy will be successful in the short term or produce expected returns, and it may not succeed at all.
In any case, Yum China envisages approximately 1,000 stores within the next five years.
