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YUM Monday MASTER File webcast


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  • 1. Today’s Agenda Welcome . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Tim Jerzyk Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . David Novak China Division Growth Strategy . . . . . . . . . . . . . Sam Su BREAK Division “Trade Show” . . . . . . . . . . . . . . . . . . . . . Division & Brand Senior Management Tour of Muhammad Ali Center
  • 2. 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:
  • 4. Consistent Double-Digit EPS Growth +15% +15% +14% +13% +13% +13% +11% Target Target at least at least 10% 10% ’02 ’03 ’04 ’05 ’06 ’07 ’08 F Note: Prior to special items. 2005 growth rate is also prior to the impact of expensing stock options.
  • 5. Significant Share Buybacks Adding Shareholder Value Average Diluted Shares Share Buybacks (million) ($ million) 12% 611 1,410 597 reduction 1,056 983 564 569 541 ’04 ’05 ’06 ’07 ’04 ’05 ’06 ’07 Avg $34 $20 $25 $25 Price* *Rounded and split adjusted
  • 6. Driving Shareholder Value Same-Store-Sales Growth New Unit Growth High Return on Invested Capital
  • 7. Same-Store-Sales Growth Brand Vision for Sales Layers • More Balanced Options • New Dayparts • Everyday Value • Contemporary Beverages & Destination Desserts • New Proteins • Contemporary Assets Leveraging 35,000 Restaurant Assets
  • 8. Asset Leverage Opportunity 2007 Average Unit Volume ($ million) 2.0 2.0 1.9 1.5 1.1 1.0 0.8 Top 10% System Top 10% System Top 10% System System Company Company Company
  • 9. High-Return Unit Growth – China China Division 506 New Restaurants en Driv 409 ty i Equ 396 357 302 297 ’02 ’03 ’04 ’05 ’06 ’07 Strategic Advantage Largest Nationwide Development Capability
  • 10. High-Return Unit Growth – YRI YRI Division Traditional New Restaurants 852 811 780 785 Company 749 720 6% 94% Franchise Driven ’02 ’03 ’04 ’05 ’06 ’07 Strategic Advantage 700+ Franchisees . . . across 110+ Markets
  • 11. Increasing Return on Invested Capital 18% ROIC • Extensive Equity Investment in Mainland China • Broad-based YRI Franchise Growth • Substantially Increased U.S. Franchise Ownership • Increased Asset Leverage through Sales Layers
  • 12. The Dynasty Model Our Goal Our Goal Be the Best in the World at Building Great Brands and Running Great Restaurants! Our Passion Our Formula for Success Our Passion Our Formula for Success Customer Mania . . . People Capability First . . . put a YUM on customers’ faces satisfied customers and profitability follow around the world How We Lead How We Lead (with intentionality) 1. Step Change Thinkers 2. Know How Builders 3. Action Drivers 4. People Growers How We Grow How We Grow Build Drive Aggressive, Dramatically Drive Industry- Leading Brands in International Expansion Improve U.S. Brand Leading, Long-Term China in Every and Build Strong Brands Positions, Consistency Shareholder and Significant Category Everywhere and Returns Franchisee Value
  • 13. A Winning Culture how we win together (hwwt)2 believe in all people we are customer maniacs go for breakthrough build know how take the hill teamwork recognize! recognize! recognize!
  • 14. Yum!: A Defining Global Company People Focused Culture: Where everyone makes a difference Breakthrough Results with Breakthrough Innovation Giving to Others: World Food Program 16
  • 15. Build Leading Brands Across China
  • 16. YUM’s #1 Growth Strategy Build Leading Brands Build Leading Brands Across China Across 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
  • 17. Building a Portfolio of Category-Leading Brands Western Western Western Home Chinese Other New Other New Casual Casual QSR Delivery QSR Concepts Concepts Dining Dining ? East Dawning
  • 18. Strong Profit Growth in a Scale Business China Division ($ million) 26%+ 26%+ 5-Year CAGR 5-Year CAGR $375 $290 $205 $120 ’02 ’04 ’06 ’07
  • 19. Yum! China Huge Huge Restaurant Restaurant Opportunity Opportunity Portfolio of Brands Portfolio of Brands to Capture Opportunity to Capture Opportunity Big Investments Big Investments In Support Capability In Support Capability
  • 20. A Huge Opportunity — Best growth market of 21st Century — China Population Urban 500 million Total 1.3 billion U.S. Total Population 300 million
  • 21. Biggest Growth Opportunity for Restaurant Industry in 21st Century Double-digit GDP/personal income growth last 4 years Over 18 million people enter cities each year Restaurant chain market share < 3% U.S. Chain Brands = 60% of U.S. QSR market High purchase intent for Western brands Consumer demand for quality growing sharply
  • 22. Big Opportunity Deserves a Big Goal “To become the best restaurant company not only in China but the world” Yum Restaurants China Team Mission Statement At Pepsi spin-off (October 1997)
  • 23. Yum! China Huge Huge Restaurant Restaurant Opportunity Opportunity Portfolio of Brands Portfolio of Brands to Capture Opportunity to Capture Opportunity Big Investments Big Investments In Support Capability In Support Capability
  • 24. Building Leading Brands in Multiple Key Categories YUM! China Restaurant Categories QSR Casual Delivery QSR Chinese Dining East Dawning 1987 1990 2001 2005 1987 1990 2001 2005
  • 25. KFC the Leader in QSR #1 QSR “Life is tastier with KFC” AUV = $1.3 million
  • 26. KFC Well Positioned to Capture Huge Opportunity The leading QSR brand by wide margin In over 450 cities Reach & frequency at all-time high Yet plenty of room for growth As well positioned in China as McDonald’s was in the U.S. Strong unit economics enable expansion
  • 27. KFC’s Positioning: Go Beyond Traditional QSR Go Beyond the Traditional Traditional QSR Maintain the core (QSCV) Core QSR strengths QSCV Offer variety Focus on few products to generate volume Focus on product taste Focus on product consistency (industrialize) Offer balanced choices Encourage balanced meals & Value drivers (“up size”) regular exercise Educate consumer on Eat a lot of same product healthy life style frequently
  • 28. KFC Leads in Major Food-Related Measures… Top 2 box% KFC Chicken expert 67* Food expert 61* Good taste 73* Food variety 66* Interesting new products 65* Data source: BIT March 2008 *Significant difference versus nearest competition, N=1900 in 47 cities 95 confidence level
  • 29. … and in Many Brand Imagery Attributes Top 2 box% KFC The leading QSR brand in China 65* A brand I can trust 71* The QSR brand I like most 63* Deeply rooted in China 61* Data source: BIT March 2008 *Significant difference versus nearest competition, N=1900 in 47 cities 95 confidence level
  • 30. Building a Big Brand at KFC Community Involvement In-Store Experience Menu designed for Broad Appeal Rooted in China integrated into their life
  • 31. KFC Menu Design Strategy The chicken expert, but not chicken only Different cooking platform to enhance variety Meaningful side items to support balanced choices Variety for different day parts, including breakfast Products adapted to local tastes Innovation Key to KFC’s Menu in China. . .
  • 32. KFC Innovation in Chicken, Other Proteins Chicken Fish Series Sandwiches
  • 33. KFC Innovation in Snacks, Soups & Salads Soups, Salads Snack Variety
  • 34. KFC Innovation in Desserts, Beverages Hot & Cold Drinks Desserts
  • 35. Beyond Menu, KFC’s In-Store Experience Second to None Passionate crew brings Customer Mania to life Up-to-date interior design Dedicated hostess program in every store Chicky program, a big hit with Kids Birthday parties Kids fun club - educational content
  • 36. Community Involvement That’s Deeply Rooted Hostess as “community ambassador” Community events / Festival celebration Chicky program KFC National Youth 3-on-3 Basketball Tournament Largest grass-roots sports program in China history Encourage healthy lifestyle Charity program a critical part of brand building First Light Foundation
  • 37. KFC Brand Ready to Grow Even Bigger • New sales layers • Multiple proteins • Multiple day parts • Delivery • New cities
  • 38. Strong Growth for Pizza Hut Casual Dining Casual Dining Restaurants 351 254 204 155 119 95 ’02 ’03 ’04 ’05 ’06 '07
  • 39. Pizza Hut the Clear Category Leader in Casual Dining Complete casual dining experience Few Western competitors In over 80 cities Developing at rapid pace Highly profitable business Proven economics beyond top-tier cities
  • 40. A Unique Western Casual Dining Brand For most Chinese, a first experience with western dining Pizza varieties - Pan, Thin & Crispy, Stuffed Crust Expertise and innovation well beyond Pizza Sautéed Pasta, Risotto Regional cuisine – from Italy, from other origins Complete meals -- appetizer, soup, salad, drinks, dessert
  • 41. A Premium Casual Dining Experience Escape from the ordinary Upscale décor package “5-Star” feel In-store activities – e.g., country festivals Fun, special moments Tea Time afternoon day part
  • 42. Pizza Hut Home Service an Emerging Growth Brand Pizza Hut Home Service First in China to offer pizza delivery Already a proven business model Over 50 units today Entering new cities
  • 43. Delivery Brand with Everyday Affordability Functionally focused Simplifying consumers’ daily routine New traditional dough Fast bake time Non-pizza menu to enhance varieties
  • 44. Delivery with Differentiated Service Easy ordering Well-trained Call Center staff Online ordering Delivery time promise Neat, professional drivers
  • 45. East Dawning: Our First Foray into Chinese QSR East Dawning
  • 46. Bold Intentions to Build the Leading Chinese QSR Brand East Dawning 14 units today Strong SSS growth Improving AUVs Inaugural TV launched
  • 47. A Promising Future East Dawning KFC graduate Higher frequency Balanced in nature Moving beyond Shanghai
  • 48. East Dawning – The Choice of Chinese QSR East Dawning Chinese Fast Food Meets KFC’s Standards
  • 49. Yum! China Huge Huge Restaurant Restaurant Opportunity Opportunity Portfolio of Brands Portfolio of Brands to Capture Opportunity to Capture Opportunity Big Investments Big Investments In Support Capability In Support Capability
  • 50. Making Bigger Investment in China Unmatched Support Capabilities Development Logistics Enabling Rapid Growth in Our Food Safety/Quality High-Return Brands Food Innovation Manufacturing Call Center / Online Ordering
  • 51. Unrivaled Development Capability Today . . . 600+ Development professionals on the ground Extensive people development programs Technical know-how and execution Incentive programs drive superior results Database of 450+ cities 2,500+ investment decisions in our database
  • 52. Penetrating Beyond the Big Cities KFC – % of New Builds by Tier Tier 3,4,5,6 51% Tier 1,2 50 % 48 % 49% 2005 2006 2007
  • 53. New Opportunities in Non-Traditional Units • Today, over 25 Drive-Thru units • Entering new destinations – Airports, Bus & Train Stations
  • 54. Operating Our Own Logistics Since Day One Today, A Powerful Advantage Distribution Centers: 11 Satellite DC: 5 Processing: 2
  • 55. World Class Logistics Infrastructure Multiple Brands, Three Temperatures (Dry, Chilled, Frozen)
  • 56. Investing in Logistics to Support Future Growth World-class distribution system Support world-class restaurant operation Food safety, ensure cold temp chain Network plan for future store, volume growth Increased efficiency with scale
  • 57. Food Safety and Quality a Top Priority Our Food Safety approach cited as strong model for China Collaborating with government at many levels Credibility with consumers and regulatory officials Supplier commitment to our standards growing As a whole, the industry is moving in the right direction
  • 58. Food Product Innovation a Core Value for China Brands focused on developing new sales layers Multiple categories: Proteins, Snacks, Desserts, Drinks Launched 80+ new products annually across our brands Over 170 products in our pipeline at any time Team understands local palate, unique food culture Intent to make breakthroughs in big payoff area: Chinese Fast Food
  • 59. Manufacturing When it Makes Sense Targeted support for portfolio of growing brands Pizza Dough Commissary Egg Tart Commissary Destination Dessert
  • 60. Call Center, Online Ordering to Strengthen the Brand Experience Investing in technology, services to make Brands more accessible Multiple national call centers, across China Well-trained staff ready to take customer orders Online ordering for added convenience Capabilities scalable for multiple brands
  • 61. Yum! China Huge Huge Restaurant Restaurant Opportunity Opportunity Portfolio of Brands Portfolio of Brands to Capture Opportunity to Capture Opportunity Big Investments Big Investments In Support Capability In Support Capability
  • 62. Sustainable Competitive Advantages Entering 3rd decade in Mainland China, first in market Talented, tenured team… on the ground in Shanghai Portfolio of category-leading Brands Top tier Development team (600+ people) Own major distribution network Food Innovation, Food Safety systems “best in class” Targeted manufacturing where it makes sense
  • 63. Mainland China Market Potential 20,000+ Restaurants
  • 64. Yum! China Q&A Yum! China Leadership Panel Sam Su President, Yum! China Lily Hsieh Chief Financial Officer Angela Loh Chief Marketing Officer Joaquin Pelaez Chief Support Officer