Daojia acquisition to enhance Yum's delivery capacity

Logos of KFC, owned by Yum Brands Inc, are seen on its delivery bicycles in front of its restaurant in Beijing, Feb 25, 2013. [Photo/Agencies]

Yum China Holdings Inc said it will acquire a controlling stake in food delivery company Daojia, to expand delivery services for its KFC and Pizza Hut chains in the country.

The transaction is expected to close by the end of this month, the company said.

Daojia, founded in 2010, is an online food delivery service provider focusing on orders in large cities. "The transaction is to accelerate digital and delivery growth by enhancing know-how and expertise in this growing segment," according to Yum.

"Digital and delivery are long-term strategic drivers of our business, and I am pleased to build on our technological know-how and capabilities in this high-growth area," Yum China Chief Executive Micky Pant said in a statement.

According to Yum China, the fast-food company has a leading restaurant delivery network in China, with more than 4,400 of its 7,663 restaurants offering delivery services as of the end of its first quarter of this year. Deliveries accounted for around 12 percent of Yum China's sales in the first quarter, the company said.

Yum China is a licensee of Yum Brands Inc on the Chinese mainland and has exclusive rights to KFC, Pizza Hut and Taco Bell. Yum China also owns the Little Sheep and East Dawning restaurant brands.

Yum has been under significant competitive pressure in recent years from delivery service platforms. By investing in Daojia, Yum China will boost its presence and enhance its service experience, said Jason Yu, general manager of Kantar Worldpanel China.

"Yum China will have to continue to utilize other platforms, as Daojia is a minor player in the delivery market," Yu said.

Leading fast-food giants have been competing in China to enhance their services. McDonald's Corp has upgraded its digital services in more than 1,000 restaurants in the country. By the end of this year, nearly 1,600 McDonald's restaurants will complete these upgrades.