Business

Yum China CEO Joey Wat told CNBC that the Chinese consumer has been growing more rational for years.  
Housing costs in top-tier cities such as Shanghai and Beijing have grown even more expensive in recent years, putting pressure on consumers’ disposable income, according to Wat.
Yum China has used a barbell strategy to attract diners looking for deals and those seeking higher-quality fare.

A KFC restaurant in Wuhan, China.
Source: Yum China

While economists and investors fret over China’s low consumer confidence and sluggish growth, Yum China CEO Joey Wat says the Chinese consumer is growing more rational — and has been for years.  
Weighed down by investors’ concern about the broader Chinese economy, shares of Yum China have fallen 27% over the past year, dragging its market value down to $17.51 billion. For comparison, Licensor Yum Brands, which spun off the Chinese unit in 2016 and has a global footprint, has seen its own stock rise 8%, giving it a market value of $38.87 billion.

Despite Wall Street’s worries, Yum China’s sales are growing. In the fourth quarter, the company’s revenue climbed 19% to $2.49 billion, fueled by new store openings. Its same-store sales rose 4% for the period, topping StreetAccount estimates of 3.3%. Wat pointed to the restaurant industry’s strong recovery from the Covid-19 pandemic, but also acknowledged a bigger consumer shift.
“I think the Chinese consumer has become more rational over the last few years,” she told CNBC.
Housing costs in top-tier cities such as Shanghai and Beijing have grown even more expensive in recent years, putting pressure on consumers’ disposable income, according to Wat. But in lower-tier cities, such as Chengdu, Yum China is seeing stronger sales growth because housing is cheaper and consumers have more cash to spend.
Cities in China are often classified into tiers based on factors such as population and gross domestic product, although there’s no official ranking system.
“We have a really good business model, not only in a top-tier city, but all the way to the tier five, tier six city,” Wat said.

Joey Wat, CEO of Yum China Holdings Inc., during a Bloomberg Television interview in Xi’an, China, on Sept. 15, 2023.
Qilai Shen | Bloomberg | Getty Images

The overwhelming majority of Yum China’s current footprint is made up of KFC locations, but the company also runs Pizza Hut restaurants and Lavazza coffee shops. China is KFC’s largest market and Pizza Hut’s second largest.
While some diners in China have been cutting back, others are upgrading their spending, shifting from instant coffee to KFC’s sparkling coffee, for example.
“There’s a consumption upgrade happening in the long term and in a subtle way,” Wat said.
At KFC, Yum China has used a barbell strategy to attract diners looking for deals and those seeking higher-quality fare. For example, the company sells a chicken breast sandwich for less than $2, as well as a Wagyu beef burger.
Yum China uses a similar strategy at Pizza Hut. Only about 30% of Pizza Hut’s sales in China come from actual pizza. The chain is introducing cheaper pizza options to appeal to the deal-hunting diner and build market share within the pizza category.
One of Pizza Hut China’s other popular entrees is steak, helping it stand out from the competition.
“In a top-tier city, you can have some choices of steakhouses,” Wat said. “Go to tier two, tier three, tier four city, and Pizza Hut might be the only choice.”
Yum China has built about half of its new stores in lower-tier cities in recent years, in the hopes of attracting consumers with more disposable income. The company has a footprint of more than 14,600 restaurants, making it the largest restaurant company in China. By 2026, the company wants to have more than 20,000 locations.
The World Bank and the International Monetary Fund are both forecasting that China’s economic growth will slow in 2024, citing weakness in the country’s real estate sector and softer global demand. Beijing is set to reveal its annual GDP target at a parliamentary meeting that kicks off Tuesday.Don’t miss these stories from CNBC PRO: More

Auction house Christie’s just sold a painting for more than $100 million, although the artwork, the buyer and the seller were officially kept a secret.
Art dealers familiar with the transaction told CNBC the painting was Mark Rothko’s “No. 6 (Violet, Green and Red),” painted in 1951.
It was sold by Russian billionaire and collector Dmitry Rybolovlev, who purchased the piece for a reported 140 million euros in 2014.
Citadel CEO Kenneth Griffin bought the piece from Rybolovlev last month.

Christie’s auction house in New York.

A version of this first article appeared in CNBC’s Inside Wealth newsletter with Robert Frank, a weekly guide to the high-net-worth investor and consumer. Sign up to receive future editions, straight to your inbox.
Auction house Christie’s just sold a painting for more than $100 million, although the artwork, the buyer and the seller were officially kept a secret.

In an interview with CNBC, CEO Guillaume Cerutti said Christie’s sold a painting in January in a private sale with a price “in excess of $100 million,” though the auction house declined to provide details.
Art dealers familiar with the transaction told CNBC the painting was Mark Rothko’s “No. 6 (Violet, Green and Red),” painted in 1951. It was sold by Russian billionaire and collector Dmitry Rybolovlev, who purchased the piece for a reported 140 million euros in 2014.
Kenneth Griffin, the hedge fund billionaire and Citadel CEO, bought the piece from Rybolovlev last month. Griffin, a major collector of nine-figure artworks, declined to comment through a spokesperson.

Ken Griffin, CEO of Citadel, at CNBC’s Delivering Alpha on Sept. 28, 2022.
Scott Mlyn | CNBC

The mysterious nature of the sale, with few publicly available details, highlights the rapid growth in recent years of private sales — a little-noticed and secretive corner of the auction world. In a private sale, a work is brought for a possible sale to an auction house, which reaches out to its top clients and brokers a deal. Private sales have surged since the Covid-19 pandemic, as more and more collectors prefer discreet transactions outside the public eye.
Last year, Christie’s racked up $1.2 billion in private sales, up 49% from pre-pandemic levels and adding to its $5 billion in public auction sales. Auction house Sotheby’s reported $1.2 billion in private sales, up from $1.1 billion in 2022.

Mark Rothko, No. 6 (Violet, Green and Red).

Private sales are especially effective for coveted masterpieces and can often eclipse top prices at auction. Last year, the most expensive work Christie’s sold at public auction was a $74 million Monet water lily painting, yet Cerutti said it sold a work in a private sale for an undisclosed higher price.
He said private sales do especially well during periods of economic uncertainty. Last year, total sales at the major auction houses were down 19%, according to ArtTactic.
“[Private sales] are the perfect market to be contracyclical,” he said. “When the market is more difficult with auction, the sellers or the consigners may feel that there is a risk for them of not selling the object and therefore, when an object doesn’t sell, it becomes more difficult to sell it in the coming years. When the market is more challenging, generally private sales do better.”
Cerutti also said clients like it “because it’s quick and confidential.” It’s also a way for Christie’s to “approach the best collectors in the world.”
The $100 million sale could also be a positive sign for the broader art and collectibles market as Christie’s gears up for its spring sales. Its auction of “The Collection of Sir Elton John,” with more than 900 items from the musician’s former Atlanta home, totaled $20.5 million — more than twice the estimate.
The top lot was Banksy’s “Flower Thrower Triptych” that sold for $1.9 million. A Rolex Daytona wristwatch with a leopard-print dial sold for $176,400, and a pair of silver platform boots went for $94,500 — more than 19 times the low end of estimates. John’s beloved 1990 Bentley Continental went for $441,000, far above its low estimate of $25,000.
Christie’s said more than 450,000 collectors and fans browsed the sales online in the weeks leading up to the auctions. The live auction attracted nearly one million views from around the world, the auction house said.
Sign up to receive future editions of CNBC’s Inside Wealth newsletter with Robert Frank. More

Major League Pickleball and the Professional Pickleball Association have completed their long-awaited merger agreement.
The agreement comes after months of drama, hostility and negotiations between the competing pickleball leagues as they now join forces to determine the future of professional pickleball.
The consolidation will also bring a $75 million investment from a group that includes private equity firm SC Holdings, D.C. Pickleball Team owner Al Tylis, PPA Tour owners Tom Dundon and the Pardoe Family as well as a roster of existing MLP team owners.

Lacy Schneemann of the Florida Smash returns a shot during a group play Major League Pickleball match against BLQK at Pickle & Chill in Columbus, Ohio, on Oct. 15, 2022.
Emilee Chinn | Getty Images

Major League Pickleball and the Professional Pickleball Association have completed their long-awaited merger agreement and infused new capital into the sport, the leagues announced Thursday.
The deal will unite the two largest pickleball organizations into a holding company, but the PPA Tour and MLP will retain their own distinct brands and formats. It wasn’t immediately clear what the new company will be named.

The agreement comes after months of drama, hostility and negotiations between the competing pickleball leagues as they now join forces to determine the future of professional pickleball.
The consolidation will also bring a $75 million investment from a group that includes private equity firm SC Holdings, D.C. Pickleball Team owner Al Tylis, PPA Tour owners Tom Dundon and the Pardoe Family as well as a roster of existing MLP team owners.
“Today is an exciting day for everyone involved or interested in the world of pickleball,” said PPA Tour founder and CEO Connor Pardoe. “MLP and the PPA Tour working as partners creates a sustainable, viable, and healthy ecosystem for all key participants in which the best players in the world can play in both of the thrilling pickleball formats, ensuring that we’re promoting the highest-quality, most exciting events.”
The merger will bring together more than 150 professional pickleball players, including many top-ranked players in the world. As part of the deal, the players have signed new multiyear contracts, with many of them set to participate in an expanded calendar that combines PPA Tour and MLP events throughout the year.
The PPA Tour features individual bracket-style tour, while MLP is a team-based format.

Combined payouts under the new unified organization are expected to increase nearly 250% this year compared to last year, according to the release.
Several players told CNBC after the closing of the merger was announced that they still haven’t been paid for past tournaments.
“I will believe it when they start paying,” one player said.
The combined organization is expected to be a boost to the professional sport, as it will provide players, fans and sponsors the benefits of a streamlined schedule.
“Commercially, this unification positions us to be even better partners, as sponsors, broadcast partners, venue operators, equipment manufacturers, and others will benefit from the combined, expanded 2024 schedule of PPA and MLP events,” said Bruce Popko, CEO of MLP.
It has been a bumpy ride. The merger agreement was first announced in September 2023 but was stalled after a bitter falling out between the two organizations that led to a competitive arms race for players.
In August, as the merger appeared to be in jeopardy, the leagues initiated an all-out spending spree to try and lure the top professionals to their respective leagues by offering them huge contracts. They were then forced to back track and ask players to take pay cuts, a result of their big spending.
In the weeks that followed, MLP underwent a major shake-up as its founder Steve Kuhn resigned and newly appointed CEO Julian DePietro and Commissioner Brooks Wiley both departed.Don’t miss these stories from CNBC PRO: More

Recent changes to Medicaid programs, aimed at closing a health coverage gap in the U.S., have left behind some Americans — particularly people of color.
In 2022, 10% of Black Americans were uninsured, compared with 6.6% of white Americans, according to a report from KFF.
“The biggest driver of the racial coverage gap is the states that have not expanded Medicaid under the Affordable Care Act,” said Jenn Wagner, a director at the Center on Budget and Policy Priorities.

Skynesher | E+ | Getty Images

Recent changes to Medicaid programs, aimed at closing a health coverage gap in the U.S., have left behind some Americans — particularly people of color.
Among the non-elderly population in the U.S. — those under age 65 — insured rates rose during the Covid pandemic, with 3.4 million Americans enrolling in health coverage between 2019 and 2022, according to a report by KFF. That shift was due in part to the Medicaid and health care marketplace provisions put in place as a result of the Affordable Care Act, the report said.

But as the global health crisis waned and Medicaid coverage expansions faced delays in some states, insured rates fell and Black Americans remained disproportionately uninsured compared with white Americans, according to KFF, formerly known as Kaiser Permanente.
In 2022, 10% of Black Americans were uninsured, compared with 6.6% of white Americans. Black people were 1.5 times more likely to be uninsured than their white peers in 2022, the report said. People who identified as American Indian or Alaskan Native were 2.9 times more likely than their white counterparts to be uninsured, while Hispanic Americans were 2.7 times more likely to be uninsured.
“The biggest driver of the racial coverage gap is the states that have not expanded Medicaid under the Affordable Care Act,” said Jenn Wagner, a director at the Center on Budget and Policy Priorities. “Those states have a higher population of Black individuals who are unable to access Medicaid coverage because they don’t fit into one of the eligibility categories within that state.”
Medicaid, a joint program between the federal government and states, offers health insurance to low-income adults and children. The Affordable Care Act passed in 2010, included a provision to expand Medicaid coverage to people at lower income levels who may not be covered by private insurers. But not all states have expanded the coverage requirements, according to KFF.
In those states that haven’t expanded Medicaid, uninsured adults who don’t meet the requirements for coverage but still fall under the poverty line are left with little option.

In 2022, about half of Black Americans younger than 65 were insured through an employer or a private insurer, according to KFF, while nearly 40% were insured through Medicaid or another public option.
Black unemployment rates are consistently higher than the national average and higher than other groups, according to U.S. Bureau of Labor Statistics data, meaning fewer Black people have access to health insurance through employers. In January, Black unemployment ticked up slightly to 5.3%, according to the bureau, compared with a national average of 3.7% and a white unemployment rate of 3.4%.
“Most Black people are in a family with a full-time worker, but less likely than their white counterparts to have private coverage, which reflects that they’re more likely to be in low-income jobs that may not offer health coverage,” said Samantha Artiga, a director at KFF.
In states that don’t offer Medicaid expansion, 13.3% of non-elderly Black Americans are uninsured, according to KFF, compared with 7.3% of that population in states that have already adopted the expansion.
Adding to the disparity in uninsured rates, a separate provision of Medicaid that automatically reenrolled participants for coverage ended in March 2023, leaving millions of Americans to proactively reenroll themselves. Many, unaware of the changes, saw their coverage lapse.
“We’re seeing a lot of administrative barriers with the renewal process that are coming very clear,” Wagner said. “People are losing coverage, not because they’re determined ineligible or fall into the coverage gap, but because they didn’t get the form or the state didn’t process the timeline.”
Since March, at least 17.4 million people were disenrolled from Medicaid or the related Children’s Health Insurance Program coverage. More than 35 million people had their coverage renewed, while 41 million renewals are either pending or not yet due, according to KFF.
Community health centers such as West Oakland Health, founded by four Black women in 1967, are working to address the coverage gap. Robert Phillips, the chief executive officer of WOH, said the center noticed a downtick in patients immediately following the end of continuous enrollment.
“The drop in Medicaid patients was precipitous,” Phillips said.
Phillips and his staff began reaching out to their Medicaid patients, and he said patients have been returning as the centers alert them to the need to renew their coverage.
“It’s making us work extra hard,” Phillips said. “We want folks to know they’re still eligible for coverage and for those who just didn’t know because they got a notice saying that their coverage ended.”
WOH’s five locations in the East Bay Area of California serve minorities and low-income households seeking affordable health care. Most of the patients at WOH are Black and are covered under Medicaid, according to the company. More

“Dune: Part Two” arrives in theaters Friday and is expected to give a much-needed boost to the 2024 box office and theater operators.
Warner Bros. is projecting a conservative $65 million debut for “Dune: Part Two.”
There haven’t been any major blockbuster releases in 2024, leading to a domestic box office of $866.4 million through Sunday, a nearly 18% drop from the same period in 2023.

Timothee Chalamet stars as Paul Atreides in Denis Villeneuve’s “Dune: Part Two.”
Warner Bros. | Legendary Entertainment

LOS ANGELES — Movie theater operators are hoping that Warner Bros. and Legendary Entertainment’s “Dune: Part Two,” due out in theaters Friday, will be the much-needed oasis amid a drought of blockbuster content.
Since the start of the year, the domestic box office has tallied just $866.4 million in ticket sales through Sunday, a nearly 18% drop from the same period in 2023, according to data from Comscore. A boost at the beginning of the year could prove critical to a box office that’s still struggling to reclaim $10 billion in domestic annual ticket sales, a mark last seen before the Covid-19 pandemic.

“The arrival of ‘Dune: Part Two’ is coming at a point where the industry is looking for that momentum igniting blockbuster,” said Paul Dergarabedian, senior media analyst at Comscore.
So far in 2024, no film has generated more than $100 million in receipts. While surprise hits such as Sony’s “Anyone But You” alongside Paramount’s “Mean Girls” and “Bob Marley: One Love” have helped fill cinemas, the box office had few blockbuster holdovers from the holidays and limited new offerings in the new year.
Last year, the first quarter was buoyed by $263 million in ticket sales from Disney’s “Avatar: The Way of Water,” which hit theaters in December of the previous year. Similarly, 2022 had more than $200 million in residual sales from Sony and Marvel’s 2021 hit “Spider-Man: No Way Home.”
“We’re used to these peaks and valleys,” said Bill Barstow, who runs ACX Cinemas, a theater chain with six locations in five states. “And certainly, there’s no mystery to the last three years of the pandemic and then strikes and all the stuff that kind of kicks us. But then along comes something like ‘Dune.'”

Top 10 movies titles so far in 2024

“Wonka” (Warner Bros.) — $81.3 million
“Mean Girls” (Paramount) — $72.1 million
“Bob Marley: One Love” (Paramount) — $71.1 million
“Migration” (Universal) — $66.2 million
“The Beekeeper” (Amazon MGM) — $63.1 million
“Anyone But You” (Sony) — $62.1 million
“Aquaman and the Lost Kingdom” (Warner Bros.) — $47.6 million
“Argylle” (Universal) — $41.6 million
“Madame Web” (Sony) — $35.3 million
“Night Swim” (Universal) — $31.8 million

Source: Comscore

“It’s been a long slog of a winter at the box office, unsurprisingly so after numerous strike-induced delays crushed an already underwhelming studio slate in recent months,” said Shawn Robbins, chief analyst at BoxOffice.com. “‘Dune: Part Two’ represents the turn of the tide.”
While Warner Bros. is projecting a conservative $65 million debut for the much anticipated sci-fi sequel, box office analysts foresee a haul between $70 million and $80 million, especially as moviegoers are likely to gravitate toward premium large format screenings, which are pricier than regular tickets.
“We’ve had sold out ‘See It First’ showings in all of our IMAX locations and guest response is already extremely positive,” said Jeff Whipple, vice president of advertising, marketing and public relations at Larry H. Miller Megaplex Theatres, which operates 15 locations, predominately in Utah.
“Utah movie fans know that ‘Dune: Part Two’ is a big movie that needs to be experienced on the biggest screen possible,” he noted, adding that Megaplex locations are seeing strong advanced ticket sales for premium auditoriums such as IMAX, Dolby Atmos and D-Box motion screens.
The draw of these higher-priced tickets is leading some exhibitors to think the film could outperform projections.
“I think Warner Bros. has been conservative,” said Tim Handren, CEO at Santikos Entertainment, a regional cinema chain with 27 theaters in eight states. “Warner Bros. has done an absolute fantastic job marketing this movie.”
“They are geniuses in marketing,” ACX Cinemas’ Barstow echoed. “They just know how to build awareness.”
The film’s cast has been heavily promoting the film for weeks, participating in junkets, video interviews and appearing on late night shows. Even the stars’ premiere outfits have been making headlines, driving more awareness of the film’s release.

Timothée Chalamet and Zendaya attend the World Premiere of “Dune: Part Two” in Leicester Square in London, England, on Feb. 15, 2024.
Gareth Cattermole | Getty Images Entertainment | Getty Images

Alongside industry veterans such as Christopher Walken, Stellan Skarsgard, Javier Bardem, Josh Brolin and Dave Bautista, “Dune: Part Two” features four of the biggest young stars in Hollywood: Zendaya, Timothée Chalamet, Florence Pugh and Austin Butler.
Early ticket sales for the weekend are ahead of Universal’s “Oppenheimer,” which opened at $82.4 million, but below “Jurassic World Dominion,” which debuted at around $145 million, according to data from Fandango.
Cinema operators, while focused on the film’s opening weekend haul, are perhaps more interested in the longevity of “Dune: Part Two” at the box office.
While there are several new releases in March, which will help pad the overall domestic box office haul, “April is not nearly as strong,” Handren pointed out.

Highly anticipated film openings of 2024

March

“Dune: Part Two” (March 1)
“Imaginary” (March 8) 
“Kung Fu Panda 4” (March 8)
“Ghostbusters: Frozen Empire” (March 29)

April

“The First Omen” (April 5)
“Godzilla x Kong: The New Empire” (April 12)

May

“The Fall Guy” (May 3)
“Kingdom of the Planet of the Apes” (May 10)
“Imaginary Friends” (May 17)
“Furiosa: A Mad Max Saga” (May 24)
“The Garfield Movie” (May 24)

Titles like “Dune: Part Two,” which have a real shot at remaining in theaters with limited drops in ticket sales week after week, can help keep the box office afloat until the summer movie season begins in early May.
The film also offers exhibitors a chance to tease upcoming movies to audiences with those all-too-familiar previews before the film starts.
“I think ‘Dune’ opens up the entire world for us for summer,” Barstow said.
Disclosure: Comcast is the parent company of NBCUniversal and CNBC.Don’t miss these stories from CNBC PRO: More

Listen to this story. Enjoy more audio and podcasts on More

Listen to this story. Enjoy more audio and podcasts on More

Listen to this story. Enjoy more audio and podcasts on More