Yum China Posts 4% Revenue Growth Amid Fierce Delivery Price War and Falling Investor Confidence

Yum China’s sales continued to grow despite ongoing economic uncertainties in China and the lingering impact of the U.S.-China trade tensions. For the most recent quarter, the company reported a 4% year-on-year increase in revenue to $2.8 billion and a 1% rise in net income to $215 million. With nearly 17,000 KFC and Pizza Hut outlets across the country, Yum China has shown resilience amid a broader slowdown in consumer spending. However, its Hong Kong-listed shares fell by 6% immediately following the earnings report, and while the decline was partially reversed, the stock was still down by 3% by the end of the day [1].

Investors appeared to be reacting to concerns around the sustainability of the current food delivery model, which is dominated by a brutal price war among major platforms. Companies such as Meituan, Alibaba-owned Ele.me, and newly entered JD.com have been offering massive subsidies to both merchants and consumers, leading to a surge in delivery orders. According to reports, daily transactions on these platforms increased from 100 million to 250 million between the start of the year and mid-July. This aggressive competition has raised questions about its long-term viability, with HSBC analysts noting that a potential end to subsidies could negatively impact Yum China’s earnings [1].

In a post-earnings call with analysts, Yum China CEO Joey Wat identified the “intense delivery platform competition” as the “biggest dynamic” of the quarter. The company has been expanding into lower-tier cities and promoting affordable offerings such as coffee and smaller-sized menu items to attract lower-income consumers. However, the growing reliance on delivery has also driven up labor costs, with the cost of labor increasing by 0.9 percentage points to 27.2% in the quarter. CFO Adrian Ding attributed this to rising rider costs, which have surged alongside delivery volumes [1].

Yum China has not yet disclosed the exact share of delivery subsidies it pays versus the platform operators, but Ding indicated that large-scale operators like Yum China benefit from more favorable subsidy arrangements. The company also reaffirmed its guidance for stable margins, a forecast that incorporates the ongoing delivery subsidy dynamics [1].

The broader market has shown signs of fatigue with the price war. Shares in both Meituan and JD.com have dropped by about 25% over the past six months, while Alibaba’s shares are down from their March peak despite a 10% increase over the same period. In response to growing concerns, China’s State Administration for Market Regulation summoned Meituan, Alibaba, and JD.com in July to encourage “rational competition” and to foster a “healthy ecosystem.” By mid-August, all three companies agreed to a truce in their price war [1].

The current environment highlights a broader debate in China about “involution,” a term used to describe unproductive competition that leads to diminishing returns. Officials and business leaders have criticized the trend as a form of “irrational consumption,” with growing concerns about its impact on investor sentiment and long-term profitability for major companies like Yum China [1].

Source: [1] Yum China’s sales keep growing, but a fierce food delivery price war may be weighing on investor sentiment (https://fortune.com/asia/2025/08/08/yum-china-q2-earnings-food-delivery-meituan-alibaba-jd/)