KFC-owner Yum sales plunge as China Covid cases surge

By Annabelle Liang, Business reporter

The owner of KFC and Pizza Hut said sales plunged by 20% in the first two weeks of March as a surge of new Covid cases spread across China.

Yum China said “the situation has rapidly deteriorated” as regional lockdowns have been put in place to stem the outbreak. More than 1,100 of its stores are temporarily closed or offering takeaway and sales are “still trending down”.

China’s lockdowns are among its biggest since the beginning of the pandemic. They include the Jilin province – home to companies such as carmakers Toyota and Volkswagen – as well as technology hub Shenzhen as the number of new infections of the Omicron variant of Covid rise.

Yum China said: “Entering March, the situation has rapidly deteriorated with the highly transmissible Omicron variant causing outbreaks across China, including economically important regions of Guangdong, Shanghai, Shandong and Jilin.”

Toyota, Volkswagen and iPhone-maker Foxconn have been forced to close operations in affected regions due to lockdowns.

Although Foxconn said on Wednesday it was able to restart some production in Shenzhen after putting in place a closed loop system on its campus. It means that Foxconn employees working in the space cannot move outside the group.

Foxconn said: “This process, which can only be done on campuses that include both employee housing and production facilities, adheres to strict industry guidelines and closed-loop management policies issued by the Shenzhen government.”

There are concerns the restrictions could have an impact on global supply chains. But Yum China’s chief executive Joey Wat, said: “Our robust supply chain management has shielded us from material business disruptions.”

Restaurateur Birol Dincli, who owns three steakhouses in Shenzhen’s Futian district, expects the situation to be even worse this time around compared to when the Covid pandemic began in 2020.

All restaurants in the Futian business district have been ordered to close. But they are also barred from offering takeaway or delivery services during the lockdown, said Mr Dincli.

“What you see is a ghost city,” he told the BBC. “Everything is shut.”

Although the lockdown in Shenzhen is set to end on 20 March, Mr Dincli reckons it will go on for much longer. He has asked some of his 30 employees to return to their hometowns to wait out the surge.

“In 2020, we faced the same problem so they are understanding. We motivate them to just wait and (be on) standby,” he said.

“Let’s see what will happen and then we will keep going.”

All 24 million residents of the north-eastern Jilin province were placed under quarantine orders on Monday. People are banned from moving around and anyone wanting to leave the province must apply for police permission.

In the Jilin city of Changchun, residents must stay at home. Only one person from each household is allowed to leave to buy food and other necessities every two days.

Some 12.5 million people living in Shenzhen – dubbed China’s Silicon Valley – are also living under a five-day lockdown.

Businesses in many of the affected regions have closed or are having their employees work from home.