Brian Bittner: Thanks. As it relates to the operating environment, I realize it’s a very competitive and promotional environment, which I think is driving a lot of the pressure to your average check. But at the same time, it is also helping you drive traffic growth. Your same-store traffic was up 4% in the quarter, which is impressive. And I’m curious where this traffic is coming from? Is it new customers, or is it coming from loyalty customers? Just more frequency from existing customers? Can you unpack where the traffic growth is coming from? And Andy, as it relates to the average check declines, how long do you expect average check to be a headwind to your same-store sales?
Andy Yeung: Thank you, Brian. So I will take these questions. First of all, I would like to point out that the overall ticket average aligned to be well with our strategic goal, which is to drive incremental traffic to our store. As you mentioned, we have seen pretty impressive things of transaction growth, both at KFC and Pizza Hut, which demonstrate that our sales is working and the strength of our business. If you look at KFC for example, we experienced a 4% increase in same-store traffic and Pizza Hut, 8%. So that’s good. Now when we talk about TA, the ticket average, it’s very important for us to look at the comparisons are influenced by a mix of factors, including delivery mix, product mix and also order size in the post-COVID recovery.
So — however, I think it’s worthwhile to look at the longer trends — long-term trends because it will provide a clear perspective on our strategy there. For example, for KFC the overall TA was RMB42 in the quarter, very healthy. With — that is a sequential increase from RMB39 in the fourth quarter due to how they impact obviously. It’s also higher than the RMB39 in the first quarter 2019. And so again, like we are committed to manage the TA at KFC through a balanced approach over the long-term. Our strategy has [indiscernible], focusing on value for money, introducing new products and also launching promotional campaigns to meet customer demand. Now we also have reduced the delivery fees to capture more smaller-ticket size delivery order.
And also after the pandemic reopening, we definitely see some strong rebound in our sales in breakfast, coffee and ice cream item as we’ve mentioned before. At the same time, we also have mentioned our high-ticket items like whole chicken beef burger continue to do well going the sales at double-digit rates in the quarter. So this is a balanced approach positions us well to enhance customer value and then also expand our market reach. Now on Pizza Hut side, as the brand continued to grow its network beyond 2,000 stores. We are transforming the business from a remarkably [ph] premium casual dining business into a more mass market operation. So we are realigning our market positioning with our pricing at Pizza Hut. We have expanded both our price range and also product mix, offering more pieces and other items below RMB50.
We are also providing more options for consumers, such as our recently launched burger making Pizza Hut products more suitable for smaller party size. Now this approach, I think, should help us to expand our addressable market segment. We are glad to see that our strategic pricing strategy has been successful in driving transaction growth in the quarter. So — but while we are driving the ticket average lower at Pizza Hut, our focus remains the same: driving incremental sales and focusing profit and margins. Thanks.
Joey Wat: Thank you.
Brian Bittner: Thanks.
Joey Wat: I mean our KFC and Pizza business both are very big. So I just find it helpful maybe to highlight one or two things in the category to show the growth. Although when it translates to total number, it might not be that big, because our base is big. So Brian, to give you an example, other than what Andy just said, our coffee business for KFC, KCOFFEE, number of cups of coffee actually grew by 30%. I mean it does not show it in a big number, but for Coffee, it’s brilliant. So we sold about $50 million cups of coffee for the quarter one alone, 30% growth, which is brilliant, very promising category. And we only have 100 [indiscernible] and as I mentioned earlier, we intend to grow it very aggressively. And Pizza Hut, one highlight here is the lower price pizza, which is something that we mentioned in the previous quarter earning release.
The pizza price below RMB50, we have seven choices in that category for the price lower than RMB50 now. And this small group of pizza, and we, of course, intend to launch more at this price point. It gave us double-digit sales growth for Pizza Hut. Well, the TC growth, which is the question you asked, of course, it’s even better. So that gives you a sense of how focused we are on driving the transactional growth. Thank you.
Brian Bittner: Thank you.
Operator: Thank you. The next question comes from Chen Luo from BofA. Please go ahead.
Chen Luo: Good morning, Joey and Andy. My question is on the competition side. So in the past two quarters, competition has always been a key investor concern. So we also noticed that in the recent few months, our promotional intensity has increased. So based on our observation, compared with our last earnings call, do we think competition has actually further intensified or still largely stable at the moment? Thank you.
Joey Wat: Well, honestly, competition has always been very intense throughout decades. We will continue to learn and evolve and grow with our competitors. But I just want to highlight again and again that it’s good to see competitors up their game and increase the investment in the industry. Last year, 2023, the industry actually grew at 20%, although it was rarely reported in the mass media. And then for this year, or the year before the 2023, the industry always grow at a very nice number, like double-digit or much faster than the GDP growth of 5% or whatever the GDP growth is. So naturally, they attract both domestic and international investors to continue to invest in this industry. So it’s really not the best thing at all.
