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Thu 6th Oct 2016 - Update: Pizza Hut and KFC trading in the UK, Costa, McDonald’s
Yum! Brands reports Third Quarter growth for KFC and Pizza Hut in the UK: Yum! Brands has reported that its 900-plus KFC business in the UK grew sales by 5% in the Third Quarter to 3 September with year-to-date sales up 2% – the UK division accounts for 9% of global KFC sales. Meanwhile, its Pizza Hut business in the UK grew sales by 2% in the Third Quarter with year-to-date sales up 4% – the UK accounts for 7% of global Pizza Hut sales. Globally, KFC like-for-likes increased 4%, with US same-store sales growing 6% – system sales increased 7%. Taco Bell division like-for-like sales increased 3% and system sales increased 5%, while achieving a 21.7% restaurant margin. Pizza Hut sales were flat globally with like-for-likes down 1%. Chief executive Greg Creed said: “Yum! Brands delivered third-quarter core operating profit growth of 11% and EPS growth, excluding Special Items, of 9%. For the full year, we are raising our core operating profit growth guidance from at least 14% to at least 15%. In the third quarter, I was pleased with both KFC’s and Taco Bell’s performance, each of which returned to a focus on core menu items, but in ways that were distinctive, disruptive and relevant. Both brands had accelerating same-store sales growth, despite sluggish QSR industry trends, especially in the US. Excluding China, our brand divisions in aggregate delivered core operating profit growth of 11%, which was ahead of our expectations. System sales for the brand divisions excluding China grew 5% in constant currency, driven by KFC where system sales grew 7% with international emerging markets up an impressive 12%. We are excited about the momentum we are seeing in our base business as we embark on the next chapter of growth at our company. Sales were off to a good start in the first six weeks of the quarter in the China division. However, anticipated tougher laps in the second half of the third quarter were compounded by an international court ruling on claims regarding the South China Sea, which triggered a series of regional protests and negative sentiment against a few international companies with well-known Western brands. If not for this event, we believe the China division would have delivered its fifth consecutive quarter of positive same-store sales growth. The good news is the incident was short-lived and the sales impact continued to dissipate through August and September. Despite the protests, Pizza Hut Casual Dining continued its trend of quarterly sequential improvement. 2016 marks the beginning of a massive transformation for Yum! Brands. Step one is the formal separation of our China business, which will become one of China’s largest publicly-traded retail companies with meaningful growth opportunities supported by US governance. New Yum! Brands will become a unique and focused world-class franchisor with consistent, stable cash flow generation and an efficient cost structure that encourages growth.” 

Costa Coffee launches new promise with biggest campaign in history: Whitbread-owned Costa Coffee has launched its new promise “Never a Dull Cup” with its biggest campaign in history that premieres on Saturday (8 October) during the first X Factor live show. To mark the launch, Costa is turning the spotlight on its baristas, the “heroes of the company and the people who make that promise a reality”. In the showcase television spot, 170 Costa baristas are the enthusiastic audience for actor Javone Prince’s attempts to launch Costa’s new mission (despite some fairly unorthodox methods). The spot was originally created as a film for baristas up and down the country, but will roll-out across television, video-on-demand, cinema and digital media and be accompanied by outdoor, social, CRM and in-store activity. Throughout 2017, the campaign will look to extend into new product launches, digital innovation and further investment in-store – all aimed at making coffee “interesting, exciting and accessible to all”. Costa Coffee UK marketing director Caroline Harris said: “This is an exciting moment for Costa – the launch of our new promise, as well as the biggest campaign in the brand’s history, is just the start of what we have planned. I’m particularly delighted to see our baristas take centre stage in our new television commercial, as they really are the heroes of our business. In Costa’s 45-year history, our aim has always been to make better coffee available to more people and inspire them with the variety of coffee on offer.” As part of its recommitment to create exciting coffee experiences for our customers, Costa has launched nationwide flat white masterclasses for Costa Coffee Club members. In addition, the next limited edition Old Paradise Street blend, OPS 17, is available in stores for customers.

McDonald’s aims to source coffee from sustainable sources by 2020: McDonald’s plans to buy all of its coffee from sustainable sources by 2020, Bloomberg has reported. Currently, 37% of the company’s coffee comes from certified sustainable sources. To increase that figure, McDonald’s is working with Conservation International, a nonprofit that has worked with Starbucks to help the chain reach the milestone of using 99% “ethically sourced” coffee. The coffee industry is under pressure to adopt more sustainable farming methods, but the definition of sustainable remains pretty broad. International standard setters such as Fairtrade and Rainforest Alliances have created markers for sustainable certification. The coffee change-up is part of a wider effort at McDonald’s and in the fast-food industry more broadly toward more natural and ethically sourced ingredients. In the last year, the company has tested fresh beef patties, promised to cut antibiotics from its chicken supply, and replaced margarine with butter in its breakfast sandwiches. “A lot of people have assumptions about what McDonald’s food is,” McDonald’s corporate chef Jessica Foust told business Insider in July. “The industry in general is challenged because there’s a stigma in general about what [quick-service restaurant] food is, and that is very, very unfortunate. Personally, I don’t think that helps people eat well.”

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