YUM 05/06/08 Part1a
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YUM 05/06/08 Part1a

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    YUM 05/06/08 Part1a YUM 05/06/08 Part1a Presentation Transcript

    • Information herein is as of 4/22/08 This presentation will include forward-looking statements that reflect management’s expectations based on currently available data. However, actual results are subject to future events and uncertainties. The information in the presentation related to projections or other forward-looking statements may be relied on subject to the safe harbor statement posted on our Web site: www.yum.com.
    • Today’s Agenda Welcome . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Tim Jerzyk Opening Remarks . . . . . . . . . . . . . . . . . . . . . . . . . . David Novak Driving Sustained Global Growth . . . . . . . . . . . . . Rick Carucci YRI Growth Strategy . . . . . . . . . . . . . . . . . . . . . . . . Graham Allan BREAK Taco Bell . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Greg Creed Pizza Hut . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Scott Bergren KFC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Gregg Dedrick LUNCH : KFC, Pizza Hut & Taco Bell Food Innovation
    • Today’s Agenda U.S. Brands Breakout Sessions/Q&A #1 . . . . . Leadership Team BREAK: Move to 2nd Breakout Session U.S. Brands Breakout Sessions/Q&A #2 . . . . . Leadership Team BREAK: Beverage/Dessert Innovation Q&A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . David Novak Rick Carucci Closing Remarks . . . . . . . . . . . . . . . . . . . . . . . . . David Novak Restaurant Tours at KFC and Taco Bell
    • Driving Shareholder Value thru Significant Share Buybacks $ (million) $981 Q1 '04 Q1 '05 Q1 '06 Q1 '07 Q1' 08 $1.0 Bn $1.4 Bn $0.6 Bn $1.1 Bn
    • Not Your Ordinary Restaurant Company Build Leading Brands Build Leading Brands in China in China in Every in Every Significant Category Significant Category Drive Drive Aggressive International Aggressive International Expansion and Build Expansion and Build Strong Brands Strong Brands Everywhere Everywhere Dramatically Improve Dramatically Improve U.S. Brand Positions, U.S. Brand Positions, Consistency and Returns Consistency and Returns Drive Drive Industry-Leading, Long-Term Industry-Leading, Long-Term Shareholder and Franchisee Shareholder and Franchisee Value Value
    • Not Your Ordinary Restaurant Company Build Leading Brands Build Leading Brands in China in China in Every in Every Significant Category Significant Category Drive Drive Aggressive International Aggressive International Expansion and Build Expansion and Build Strong Brands Strong Brands Everywhere Everywhere Dramatically Improve Dramatically Improve U.S. Brand Positions, U.S. Brand Positions, Consistency and Returns Consistency and Returns Drive Drive Industry-Leading, Long-Term Industry-Leading, Long-Term Shareholder and Franchisee Shareholder and Franchisee Value Value
    • Global Consumer Leader in Shareholder Payout 3-Year Annual Average 2005 – 2007 8.8% 7.7% 7.3% 5.9% 5.2% 5.2% 4.6% 4.3% Source: Thomson Financial Data Payout = (Dividends + Repurchase) / Average Market Capitalization
    • Significant Shareholder Payouts Through Meaningful Meaningful Dividend Dividend AND Significant Adding Significant Adding Share Shareholder Share Shareholder Buybacks Value Buybacks Value
    • Quarterly Dividend Growth ~4x Today… initial $0.25 dividend 27% increase, from $0.15 to $0.20 $0.19 per share Doubled $0.15 $0.10 30% Increase 15% Increase Initiated $0.05 $0.00 4 7 7 8 6 5 5 6 '0 '0 '0 '0 '0 '0 '0 '0 1 3 3 3 1 1 1 3 Q Q Q Q Q Q Q Q Note: split-adjusted (May 2007 2-for-1 stock split) quarterly dividend
    • Driving Sustained Global Growth
    • Driving Sustained Global Growth New Growth Vehicles Improving Competitive Positioning Huge Unit Growth Opportunity Favorable Global Earnings Portfolio Sales Layers Leveraging Our Assets
    • Growth-Oriented Earnings Portfolio Operating Profit Operating Profit Growth Profit Mix % Impact Target ’02 ’07 24 20 % + 5% China 10 30 10 % + 3% YRI 21 46 5% + 2% U.S. 69 + 10% Shifting Towards Higher Growth Businesses Note: Operating profit mix % excludes corporate allocation
    • Earnings Portfolio Driven by Global Growth % of Total Operating Profit 2017 F 2007 30% 24% 40% U.S. China China China 46% U.S. U.S. 30% 30% YRI YRI Note: Excludes corporate allocation
    • New Unit Growth: Global Opportunity Restaurants Traditional per million people Restaurants 60 (‘000) U.S. 18 Mainland 2.6 China (MLC) 3 2 YRI 12 U.S. MLC YRI
    • Select Growth Markets: 2 Billion People Population Yum! Restaurants Per (million) Restaurants Million People India 1,130 173 0.2 Indonesia 234 620 2.6 Brazil 190 69 0.4 Russia 141 140 1.0 Nigeria 135 0 0 Vietnam 85 46 0.5 Germany 82 123 1.5 France 63 166 2.6 2,060 1,337 0.6 Subtotal Note: Traditional units as of Q1 2008
    • Unit Growth Acceleration: U.S. Yum! U.S. Total Units* Avg Annual +275 +626 +551 +512 Increase 20,037 14,921 9,408 3,148 403 '60 ’70 ’80 ’90 ’00 * Taco Bell, Pizza Hut and KFC
    • Unit Growth Acceleration: China Yum! Mainland China Total Units Avg Annual +232 +24 Increase 2,558 241 1 ’87 ’97 ’07
    • Unit Growth Acceleration: YRI Total Units Avg Annual +14 +121 Increase (Select Growth Markets) 12,354 10,418 8,649 Select Growth Markets ’97 ’02 ’07 ’12 F
    • Strong International Competitive Position Total Units (000s) Other Top 10 53,598 U.S. QSR* 15,199 20,061 14,528 13,774 17,272 INTERNATIONAL U.S. *Subway, Wendy’s, Burger King, Sonic, Arby’s, Jack in the Box, Domino’s, Papa John’s, Hardee’s, Popeye’s Source: Piper Jaffray restaurant benchmark book (September 2007)
    • Competitive Position: Two Scale Players International Marketing Spending ($ million) $1,700 $800 Average of Other Top 10 $40 U.S. QSR Concepts Note: Company estimates
    • Power of Competitive Positioning Scale Advantage Marketing Spend Higher Brand Awareness Purchasing Power Greater Cost Efficiencies Talent Base Stronger Leadership A Virtuous Cycle
    • Yum! Position Strengthening vs. McDonald’s Outside U.S. Total Units Outside the U.S. 2002 2007 CAGR 11,798 15,400 +5% 17,617 17,515 Flat Difference (5,819) (2,075) Note: Excludes corporate allocation
    • Expanding Lead in South Africa 2002 2007 341 479 McDonald’s 89 110 Advantage: KFC +252 +369
    • Taking the Lead in Middle East 2002 2007 293 462 McDonald’s 338 450 Advantage: KFC (45) +12
    • Expanding Lead in Indonesia 2002 2007 181 300 McDonald’s 105 105 Advantage: KFC +76 +195
    • New Growth Vehicles East Dawning Pizza Hut Home Service Taco Bell International Pizza Hut Delivery
    • Summary: Sustaining Global Growth Strong and Even Better Earnings Growth Model Long Runway for Global Unit Growth Improving Competitive Position Incremental Growth Potential from New Concepts
    • Achieving Explosive Growth Around the World
    • Key Messages • Strong and diverse business with consistent track record • Category leading brands with huge upside • Exciting potential in key growth markets • High returns for shareholders
    • Another strong year in 2007… Profit ($MM) $480 12% $407 12% $372 9% $337 2004 2005 2006 2007 Notes: 2004 profit and growth do not include impact from expensing stock options Growth rates exclude Fx and the impact of the extra week in 2005
    • … built on record openings and healthy growth in unit volumes Same Store Sales Growth New Openings 852 6% 785 780 4% 2% 2005 2006 2007 2005 2006 2007
    • Several key elements in consistent results • Strength of local management – 15 Business Management Units – Local teams – $375MM of G&A in 2007 • Tradition of in-market innovation • Local relevance • Culture of discipline and urgency • Balanced portfolio
    • Well balanced portfolio Developed Developing Markets Markets Total Units 57% 43% 12,173 ’07 Growth (23) 486 463 System Sales 63% 37% $13B ’07 Growth /1 5% 18% 10% Population /2 750M 4.3B 5.1B GDP per Capita /2 $30K+ <$3K $8K /1 Ex Fx /2 Data excludes US and China
    • Significant franchise base driving majority of growth New Unit Openings Units 12,173 852 11,710 785 6% 13% 6% 15% Equity 85% 87% 94% 94% Franchise 2006 2007 2006 2007
    • KFC is already a global powerhouse… YE 2007 Units 2007 Net Builds Africa 500 38 Americas 1,539 17 Asia 2,459 111 Australia/New Zealand 654 9 Europe 1,272 111 Middle East 462 50 Total 6,886 336
    • …and is bigger than McDonald's in many parts of the world YE 2007 Units South Africa 479 110 Malaysia 402 176 Indonesia 300 105 Caribbean 246 154 Ecuador 76 15 UAE 67 51 Other 5,316 16,028 Total 6,886 16,639
    • KFC is positioned around Taste all around the world • Global cohesion is significant development • Respect for local culture – Menu – Marketing • Credible, resonant and relevant point of difference • Filter for new products and consumer communication
    • Committed to making KFC a modern brand everywhere Contemporary Assets Menu Innovation Youthful Communication Big Brand Marketing Initiatives
    • Actively pursuing major sales layers Beverages
    • Actively pursuing major sales layers Breakfast
    • Actively pursuing major sales layers Non-Fried
    • Actively pursuing major sales layers Seafood
    • PH competes in two growing channels Dine-in Delivery/Takeaway International International Market Size ($B) Market Size ($B) 48 GR CA % 1 29 +1 22 R AG C 14 % 10 + 2002 2007 2002 2007 Note: Data from Euromonitor, excludes the US and China
    • Pizza Hut is the world’s leading casual dining chain International Units 1,966 ~200 164 150 116 PH Dine-In TGI Friday's Chili's Outback Applebee's Countries 100+ 38 24 20 17 Note: PH Dine-In excludes China. International units for other brands are an estimate based on publicly available information and may include China.
    • Our strategy is to strengthen our casual dining offer Pizza Pasta Appetizers Desserts
    • Our strategy is to strengthen our casual dining offer Tea Time Day Part Value Layers Assets Branded Service
    • Hot is the cornerstone of our delivery positioning
    • We are also testing a new delivery brand – PHD Focused on delivery fundamentals • Right locations • Speed and value • Simple menu and operations
    • Taco Bell is an exciting opportunity for YRI Current Status • 15 markets today • Meaningful scale in Central America • Open in Monterrey, Mexico • Launching in 3 other markets in ‘08
    • YRI targeting big growth markets like India Current Status • 33 KFC’s • 137 Pizza Huts • 3 PHD’s • Taco Bell to be launched
    • Building a great business in Russia Current Status • 118 Rostik/KFC’s • Partner is great concept leader with proven record • Senior operations leader is a YUM employee • Aggressive unit growth plans
    • Europe still has huge growth potential, especially for KFC • France still breaking records • Germany much stronger • Spain doing well • Poland growing fast • Big plans in CIS countries
    • Opportunities abound in many other parts of the world Southeast Asia Middle East Latin America Africa
    • YRI generates high cash flow… Capital Expenditure EBITDA US$ MM’s US$ MM’s 654 537 189 118 2006 2007 2006 2007
    • …and world class returns for shareholders ROIC 18% 18% 2006 2007
    • Summary • Strong base • Category leading brands • Huge growth potential • Great returns
    • The Bold Choice in QSR
    • Clear Brand Position The Bold Choice in QSR! Our Credibility Value Proposition We invented Mexican Fast Food The Last Affordable Fast Food Restaurant
    • Our Opportunity Turn Mexican QSR segment leadership… Mexican QSR Sales = $10.6B Balance Baja Fresh Taco Bell Del Taco Chipotle Source: NPD Crest
    • Our Opportunity …of a smaller segment of the QSR category… Total QSR Sales = $220B+ Pizza Mexican QSR Sales = $10.6B Burgers Balance Sandwich Baja Fresh Chicken Taco Bell Del Taco Chipotle Mexican Balance Source: NPD Crest
    • Our Opportunity …into clear #2 QSR share brand! QSR Market Share Rankings – YE 2007 #1 #2 #3 #4 #5 Source: NPD Crest
    • Our Opportunity …into clear #2 QSR share brand! QSR Market Share Rankings – YE 2007 Future #1 #2
    • Areas of Strategic Focus Build Sales Layers Accelerate the Create a New & Utilize Multiple System to Bold Service Paradigm Messages Choice Assets
    • Consumer Perceptions Improving QSR Attitudes About Taco Bell QSR Attitudes About Taco Bell Penn & Schoen Research Penn & Schoen Research 83 77 73 70 59 55 Early Dec ‘06 Late Mar ‘07 Mid Nov ‘07 Overall Northeast
    • Building Sales Layers Expanded Dayparts More Balanced Options New Product Layers Everyday Value Base Business Driven by Menu Pipeline News 2008
    • 3 V’s of Value Our Fundamental Organizing Principle
    • Why Pay More! Menu
    • Validated Vs. Internal and External Benchmarks Cheesy Double Beef vs. Why Pay More! Wins vs. BBVM McD’s Double Cheeseburger • Price Top Two Box 84% • Overall taste = • Quality of food for the Better Value money • Amount of food for the money • Portability Repeat Purchase of > 4 (over 3 ½ weeks)!! Source: Test Market Buyer Reaction Studies Performed by Restaurant Research Associates
    • Why Pay More! In Restaurants Beginning May 15th
    • A New Beverage Platform Just in Time For Summer —Coming May 15th
    • Key Insights • 9 Menu items reduced to 9 grams of fat or less • Popular products - approximately 15% of base menu mix • Fresco Menu Average reduction in fat grams – almost 40% • Fresco Menu Average reduction in calories – almost 20%
    • Our Biggest “Loser”: Ranchero Chicken Soft Taco Fat(g) Calories Base Fresco Base Fresco 14 4 270 170 71% 37%
    • Approach To Dieting Differs By Gender Taste First, Fat First, Taste Fat Second! Second! “If it doesn’t “Looking good is taste good, hard work” I won’t eat it”
    • Trial Remains The Challenge Trial Repeat 69% 60% 27% 54% 15% 5% Cheesy G CBRB Fresco Cheesy G CBRB Fresco
    • Breakfast Remains a Big Opportunity
    • Strategic Marketing Tactics • Multiple Sales Layers • Doubling the Pipeline
    • Multiple Sales Layers Delivering Results W1 W2 W3 W4 Primary TV Secondary TV Better For You
    • Committed to More Than Doubling Product Pipeline • 11 product tests through April • At least 8 more post-summer
    • Committed to More Than Doubling Product Pipeline • 11 product tests Almost as through April as many tests • At least 2005 - 2007 8 more combined post-summer
    • You’ll Sample Some of these Great Products Abundant Value Quality Value Price Value
    • You’ll Sample Some of these Great Products Abundant Value Quality Value Price Value
    • Asset Transformation Is Necessary Other Holdover Functional Bold
    • Challenging in Context of Priorities Equipment/ System New Asset Refresh Technology Capital Unit Growth to Support Growth Grilled to Order 3% Annually Functional POS to Bold Frutista Freeze Ops Improvements Other BOH, tbd
    • Requires Breakthrough Thinking
    • The Bold Choice Collection In Every DMA Flex 2 Five M 2 Bold Ty07 Prototype Next 2 Ten K 2 Bold
    • Delivering Brand Promise Thru Hospitality Optimal Labor Accurac Speed
    • Today No One Can Do Both Speed Accuracy 1 Wendy’s Chick-fil-A 2 Checkers Krystal 3 Taco Bell Bojangles’ 4 McDonald’s El Pollo Loco 5 Long John Silver Burger King 6 Burger King Hardee’s 7 Arby’s Del Taco 8 Bojangles’ Whataburger 9 Taco John’s Checkers 10 Chick-fil-A McDonald’s
    • Summary • Clear Business Turnaround Underway • Strategic Clarity to Deliver Future Performance –Build Sales Layers and Employ Multiple Messages –Develop a System of Bold Choice Assets –Create a New Service Paradigm
    • PURE HUT: A VISION THAT GOES BEYOND PIZZA . . . America’s Favorite Pizza
    • PURE HUT: A VISION THAT GOES BEYOND PIZZA . . . Restaurant Quality Pasta
    • PURE HUT: A VISION THAT GOES BEYOND PIZZA . . . Award Winning Chicken
    • ATTACKING BARRIERS AND OPPORTUNITIES Changing The Commodity Game Knocking Down Barriers Affordable Value Delivering More Than Just Pizza (i.e. Pasta) Food The Way You Want To Eat Today Redefining The Category . . . Only at Pizza Hut
    • HOW LAYERING WORKS
    • HOW LAYERING WORKS
    • AFFORDABLE & TASTES GREAT Value For Many
    • AFFORDABLE & TASTES GREAT Value For One
    • AFFORDABLE & TASTES GREAT Value For One Quality At a Value Price Point
    • NOW DELIVERING RESTAURANT QUALITY PASTA Tuscani Pasta
    • AWARD WINNING CHICKEN Complete Chicken Solution
    • AWARD WINNING CHICKEN WingStreet Brand Enables Revitalize Assets WingStreet Lite! Cityscape WS for Small Towns
    • THE WAY YOU WANT TO EAT TODAY The Natural Premium Ingredients The ‘Pure’ Positioning
    • Assets: Upgrading To A New Standard! Dine-In Delivery Metro Rural Small Town Suburban Urban 4,000+ Stores Vision: 3,000+ Stores Everywhere!
    • SERVICE: A CRITICAL FOUNDATION
    • ALL REALIZED IN OUR ONGOING 2 BUSINESS MODEL Dine In Delivery Killer Products Window # Window # Multi-Tier Media Topic C Cont. Topic B Cont. Topic A Cont. Topic C Cont. Topic B Cont. Topic A Cont. Topic D Topic D Vibrant Stores Delivery Dine-In Unexpected Service Fast, On Time Focus on guest HMR Experts Consistent Service
    • Brand Positioning Menu Vision Winning Operations Platform Dynamic Asset Strategy Built on a Foundation of HWWT2 2 and Franchise Partnership Pact
    • Brand Positioning Menu Vision Winning Operations Platform Dynamic Asset Strategy Built on a Foundation of HWWT2 2 and Franchise Partnership Pact
    • Brand Positioning Menu Vision Winning Operations Platform Dynamic Asset Strategy Built on a Foundation of HWWT2 2 and Franchise Partnership Pact
    • Brand Positioning Menu Vision Winning Operations Platform Dynamic Asset Strategy Built on a Foundation of HWWT2 2 and Franchise Partnership Pact
    • Brand Positioning Menu Vision Winning Operations Platform Dynamic Asset Strategy Built on a Foundation of HWWT2 2 and Franchise Partnership Pact
    • Brand Positioning Menu Vision Winning Operations Platform Dynamic Asset Strategy Built on a Foundation of HWWT2 2 and Franchise Partnership Pact
    • Brand Positioning Menu Vision Winning Operations Platform Dynamic Asset Strategy Built on a Foundation of HWWT2 2 and Franchise Partnership Pact
    • Brand Positioning Menu Vision Winning Operations Platform Dynamic Asset Strategy Built on a Foundation of HWWT2 2 and Franchise Partnership Pact
    • Brand Positioning Menu Vision Winning Operations Platform Dynamic Asset Strategy Built on a Foundation of HWWT2 2 and Franchise Partnership Pact
    • Brand Positioning Menu Vision Winning Operations Platform Dynamic Asset Strategy Built on a Foundation of HWWT2 2 and Franchise Partnership Pact