Yum! Brands Build Leading Brands Across China: Joaquin Pelaez 裴华庆 Yum! Brands China Division 百胜餐饮集团中国事业部 Spun off from Pepsi in 1997 1 The largest restaurant company in the world in terms of restaurant units 37,000 stores 1 million employees Over 110 countries Rapid Growth Yum!Restaurants China Mature Steady Growth Yum! Growth High Return Yum! U.S. Division Highly Franchised International Refranchising Yum Has a Powerful Global Portfolio 2 China-First of YUM’s Four Key Strategies Leading Brands 1. Build Across China in Every Significant Category Aggressive 2. Drive Expansion and Build Our Brands in International Markets Improve U.S. 3. Dramatically Brand Positions, Consistency and Returns Industry-Leading, 4. Drive Long-Term Shareholder and Franchisee Returns China Business Fastest growing geography in Yum Sales: USD $5.0 Billion (2010) Contributes 38% to Yum’s global profits (2010) Over 500 suppliers and with very few exceptions everything is locally sourced Over USD 1.9 Billion food material purchase in China 3 Yum! China . . . well positioned Build Shareholder Value Portfolio of winning brands Long-term competitive advantage, getting stronger Unit Growth SSSG High Returns China - A Big Growth Opportunity for Restaurant Industry GDP/Personal income growth among top in the world Over 18 million people enter cities each year Restaurant chain market share low (in contrast to U.S.) High purchase intent for western brands 4 Big Opportunity Deserves a Big Goal “To become the best restaurant company not only in China but the world” ---- Yum Restaurants China Team Mission Statement At Pepsi spin-off (October 1997) Building A Unique Portfolio YUM! China Restaurant Categories QSR Casual Dining Delivery QSR Chinese East Dawning 1987 1990 2001 2005 5 Strong Profit Growth . . . ~38% of Yum! profits Yum China Operating Profit ($ million) . . .Driven By Significant and Profitable Unit Growth 504 509 507 Mainland China New Restaurant Openings Another 500+ Year 471 353 378 364 262 268 174 89 ’00 ’01 ’02 ’03 ’04 ’05 ’06 ’07 ’08 '09 '10 6 KFC: the Leading QSR Brand by Wide Margin In over 650 cities Unmatched reach & frequency, yet plenty of room for growth Increasing brand development rate KFC as well positioned in China as McDonald’s was in the U.S. Strong unit economics enable expansion Widening the Gap 3,246 Mainland China Western QSR # of Restaurants 1,300 976 565 '03 ‘10 7 KFC Shanghai KFC DT1 8 KFC interior KFC DT2 9 Brand Ready to Grow Even Bigger Multiple proteins Multiple day-parts Delivery Community involvement KFC Beef 10 KFC Shrimp Burger Brand Ready to Grow Even Bigger Multiple proteins Multiple day-parts Delivery Community involvement 11 KFC Purple Rice Congee KFC Sesame Cake 12 KFC Dough Stick KFC Soy Milk 13 KFC Egg Tart Regular KFC Egg Tart Blueberry 14 KFC Sweet Dough Stick KFC Popcorn Chicken 15 KFC Beverage Innovation Brand Ready to Grow Even Bigger Multiple proteins Multiple day-parts Delivery Community involvement 16 Brand Ready to Grow Even Bigger Multiple proteins Multiple day-parts Delivery Community involvement KFC 3 on 3 – basketball It is bigger than US little league! 17 KFC Campus Aerobics Competition How does KFC differ from KFC in America? 18 KFC China: It is Chinese in taste, lots of variety and makes a commitment to food safety. It fits the lifestyle of the Chinese consumer. A disciplined growth-oriented culture Strong focus in store level execution excellence 19 A disciplined growth-oriented culture Disciplined innovation in new products KFC New Orleans Roasted Chicken Burger 20 KFC New Orleans Roasted Chicken Pizza Hut, Dual Channels Brand Building Home Delivery Brand Casual Dining Brand More than just pizza, a unique western casual dining experience Best delivery brand with everyday affordable value 21 Pizza Hut the Leader in Casual Dining Mainland China Restaurants 522 95 ’02 '10 Pizza Hut the Leader in Casual Dining 22 120+ units Expanded menu Pizza Hut Delivery an Emerging Growth Brand Strong SSS growth Growing category Entering new cities East Drawing New Growth Brand – Chinese QSR 20+ units On TV in Shanghai Strong transaction growth 23 27.2% ownership of Little Sheep A Strategic Partnership Leading Brand in Chinese ―Hot Pot‖ 460+ units today in China Philanthropy/ Community Programs 24 First Light Foundation 1st Phase: (2002 – 2012) Four year scholarship plus work experience in KFC stores A total donation of RMB 38,000,000 ($5.6million) and 7,000 recipients nd 2 Phase: (2009 – 2016) A total donation of RMB 40,000,000 ($5.9million) and 8,000 recipients Public Donation Campaign –―Nutrition for Needy Mountain Kids‖ Part of Yum global ―World Hunger Relieve‖ program Raised over RMB10,000,000 ($1.5milliion) in past two years Provide 11,000 children with one year daily nutrition enhancement food 6,500,000 consumers participated in the donation campaign 25 College Student Environmental Protection Award Providing financial support to outstanding environmental protection projects developed by college students A disciplined growth-oriented culture All the people are trained on a few core of programs that embody or values and principles: 7 Habits ABR training Making better decisions The individual success of our people is viewed as the success of the team, therefore good times and not so good times are shared by everyone A very strong feeling of being part of something bigger that Yum 26 A disciplined growth-oriented culture Fact based quest for knowledge A disciplined growth-oriented culture Break-through & risk taking mindset 27 A disciplined growth-oriented culture Crisis-like sense of urgency Localize, Localize, Localize Localize tastes and menu offer Localize supply chain and distribution Local business partnerships Localized management and talent 28 World-class infrastructure and longterm competitive advantage Unmatched Food Innovation Capabilities Highly Developed Supply Chain Management Unequaled Talent & Experience World Class Distribution Business Self owned Logistic Network 58 29 State of the Art Logistic Centers 11 Logistics Centers (LC) 5 Satellite Logistics Centers (SLC) 1 Consolidation Center (East China) We are building Consolidation Centers in Beijing and Guangzhou Delivery to > 3000 Restaurants and Receiving from > 500 Suppliers 59 A Huge Opportunity — Best growth market of 21st Century — China Population Urban 600 million Total 1.3 billion U.S. Total Population 300 million 30 What Do Companies need to learn before they come to China? Understand the competitive landscape WHO? HOW? WHERE? What Do Companies need to learn before they come to China? Understand the culture differences and ways of doing business What makes it in the West or in other countries may not work in China 31 What Do Companies need to learn before they come to China? Have a competitive and proven business model Whatever model makes it in other countries, may not prove competitive in the China environment What Do Companies need to learn before they come to China? Localize as much you can Management, Employees, Raw materials, Insights etc. 32 What Do Companies need to learn before they come to China? Fully understand your consumer and consumer base What Do Companies need to learn before they come to China? The China consumer demand innovation and rapid change, be prepared to invest on innovation and to adapt to a relentless pace to keep up with the market 33 谢 谢! 34