Pizza serving up bigger slice of fast-food market

With continuous growth in the number of stores and the gradual disappearance of the negative impacts of the pandemic, Yum China's sales have also skyrocketed. In the second quarter, Yum China's system sales increased 32 percent year-on-year, of which, sales of KFC and Pizza Hut increased by 32 percent and 30 percent, respectively.

Pizza has increasingly become a popular Western-style fast food in China. Top-tier cities such as Beijing, Shanghai, as well as Guangzhou and Shenzhen in Guangdong province, boast the highest number of pizza outlets in the country.

In addition, Shandong province, with more than 3,400 stores, and Jiangsu province, with some 2,700 stores, ranked among the top in terms of the number of pizza outlets nationwide, according to market research firm LeadLeo Research Institute.

"Most first and second-tier cities have seen nearly saturated pizza markets, and the mainstream way of Chinese consumers eating pizza is by ordering online. There exists significant business growth potential in smaller Chinese cities, and the penetration rate of pizza in China is expected to continue to increase," said Li Shu, an analyst at market research provider LeadLeo Research Institute.

"In the post-pandemic era, the pizza market is expected to recover rapidly, as consumers have been increasingly seeking high-quality food, and digitalized technologies will enable more efficient deliveries," she said.

Since 2009, in addition to some major foreign pizza retailers such as Pizza Marzano and Papa John's, more local Chinese pizza brands such as Champion Pizza and Big Pizza have emerged in China and are adding more market share. A segmented pizza market has begun to expand, with more varieties appearing in the market.

For instance, local Chinese pizza brand La Cesar was founded in Shenzhen in 2009, with the company first introducing durian-flavored pizza, thus increasing flavor options.

Later, more varieties of pizza, such as those with ingredients like crayfish and roast duck, emerged in China. In addition, some brands focus on providing smaller-sized pizzas suitable for solo dining, and other brands concentrate on making pizzas convenient to heat up by microwave oven at home.

Semi-cooked and quick-frozen pizza only require simple reheating, and can be delivered with extended quality guarantee times, which has also become increasingly popular in the country.

In 2022, sales of pizza reached 37.5 billion yuan ($5.1 billion) in China, fueled by the fast growth of the delivery segment. With the country's optimized COVID-19 response measures late last year, the market is set to accelerate its speed of recovery and witness rapid growth, and sales are expected to hit 79 billion yuan by 2027, according to projections by LeadLeo.

In China, the penetration rate of pizza is relatively low compared with the United States, Europe, Japan and South Korea. In 2022, there were 11.7 pizza stores for every 1 million people in China, while the figure was 29.5 in Japan and 30 in South Korea, LeadLeo found.

In the domestic market, evolving lifestyles and consumption patterns have resulted in the fast food market embracing growing business opportunities, driven by the increasing popularity of meal deliveries, especially since the pandemic.

"The mindset and behavior of young Chinese consumers indicate that convenient, ready-to-eat meals are foreseen to become a more prominent trend and fuel more types of businesses in China," said Zhu Danpeng, an independent food and beverage analyst based in Guangzhou.