Yum Brands to Add 700 China Outlets and Coffee in 2015

In 2014, Yum Brands—the parent company of KFC and Pizza Hut—faced tumbling sales in China, its biggest market. With same-store sales down 16% in the fourth quarter, the company searched for ways to win back customers as food scares, local competition, and shifting tastes hurt its once-dominant position. One strategy? A high-end Italian restaurant in Shanghai serving as a ‘laboratory’ to test new concepts, including coffee.

Yes, Yum planned to open 700 new outlets in China during 2015 and push more coffee drinks to take on Starbucks—part of a broader turnaround plan under new CEO Greg Creed.

The Shanghai Lab: Atto Primo

Atto Primo, located with views of Shanghai’s Bund and near some of the city’s most luxurious venues, wasn’t your typical KFC spin-off. Described as an ‘innovation lab’ by Yum, the upscale Italian eatery helped the company study evolving tastes among affluent Chinese diners. The venue, with crystal decor and 16th-century Italian-style murals, offered a far cry from the usual fast-food image—but served as a testing ground for recipes and concepts that could filter down to everyday Yum restaurants in China.

‘A high-end lab helps us explore changes in Chinese consumer taste,’ said Yum spokesperson Jonathan Blum. Analyst Ben Cavender noted such spaces allow companies to refine menus and gather feedback from more discerning customers—an important step toward regaining ground in the premium segment.

Brand Fatigue and Falling Sales

Despite being China’s biggest Western fast-food player, Yum struggled with ‘brand fatigue.’ Once seen as modern and safe, KFC had lost some of its shine. ‘Back then, KFC felt high-end and clean compared to other local options,’ said Shanghai architect Tang Yanan, now in his late 20s. ‘But now there are just too many choices.’

Food safety scandals and intensifying local competition further eroded trust. Euromonitor data showed Yum’s share of China’s roughly $129 billion fast-food market had been declining for years, even as McDonald’s managed slight growth through store upgrades and its own McCafé coffee push.

Kentucky Fried Chicken wasn’t alone: McDonald’s also faced trust issues, though its investment in store remodels and coffee helped cushion the blow. But both brands lost ground to nimbler local rivals offering cheaper, healthier, and more familiar meals.

Coffee as a Comeback Strategy

To fight back, Yum announced plans to expand its coffee offerings in China, directly challenging Starbucks. ‘We plan to introduce more coffee beverages to compete with Starbucks,’ said CEO Greg Creed. The push was part of a larger goal to revive sales and reconnect with Chinese consumers. The 700 new stores slated for 2015 were meant to bolster presence and introduce fresh concepts—including more coffee-focused menu items.

Analyst Michael Griffiths remarked, ‘Someone told Yum it needed to try different paths.’ Whether through coffee or new formats, the pressure was on to reverse years of decline and re-establish relevance in a vastly more competitive and discerning market.

Frequently Asked Questions

Why did Yum Brands want to open 700 new stores in China in 2015?

Yum aimed to reverse declining sales in China, its largest market, where same-store sales had dropped 16% in Q4 2014 due to food safety issues, strong local competition, and shifting consumer preferences. The 700 new stores were part of a broader growth and recovery strategy.

What was Atto Primo and why was it important to Yum?

Atto Primo was a high-end Italian restaurant in Shanghai operated by Yum Brands, used as an ‘innovation lab’ to test new menu items and concepts targeting more sophisticated Chinese diners. It helped Yum gather feedback and refine ideas for its broader restaurant network in China.

How was Yum competing with Starbucks in 2015?

Yum planned to launch more coffee beverages in China to challenge Starbucks. This included integrating coffee options into its existing chains and potentially developing new coffee-focused concepts as part of its strategy to regain market share and appeal to changing consumer tastes.

What challenges did Yum face in the Chinese market during that period?

Yum struggled with brand fatigue, food safety scandals, increased local competition, and changing consumer habits. These factors led to a significant drop in same-store sales and a shrinking market share in China’s fast-food industry.

Did McDonald’s face similar issues in China?

Yes, McDonald’s also dealt with food safety concerns and competition, but it partially offset these issues with store upgrades and the introduction of McCafé coffee, which helped it maintain slightly growing market share compared to Yum.

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