yum monday master file webcast
DESCRIPTION
TRANSCRIPT
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
This presentation will include forward-lookingstatements 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.
This presentation will include forward-lookingstatements 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 safe harbor statement posted on our Web site: www.yum.com.our Web site: www.yum.com.
Information herein is as of 4/22/08
Power of Yum!
GLOBAL PORTFOLIO
GLOBAL GROWTH
GLOBAL CASH GENERATION
Consistent Double-Digit EPS Growth
Note: Prior to special items. 2005 growth rate is also prior to the impact of expensing stock options.
+13% +13%
+15%
+13%+14%
+15%
+11%
’02 ’03 ’04 ’05 ’06 ’07 ’08 F
Targetat least
10%
Targetat least
10%
Significant Share Buybacks
569
1,056 983
1,410
’04 ’05 ’06 ’07
611597
564
541
’04 ’05 ’06 ’07
Share Buybacks($ million)
Average Diluted Shares(million)
12%reduction
AvgPrice*
$20 $25 $25 $34
*Rounded and split adjusted
Adding Shareholder Value
Driving Shareholder Value
Same-Store-Sales Growth
New Unit Growth
High Return on Invested Capital
Same-Store-Sales Growth
• More Balanced Options
• New Dayparts
• Everyday Value
• Contemporary Beverages & Destination Desserts
• New Proteins
• Contemporary Assets
• More Balanced Options
• New Dayparts
• Everyday Value
• Contemporary Beverages & Destination Desserts
• New Proteins
• Contemporary Assets
Brand Vision for Sales LayersBrand Vision for Sales Layers
Leveraging 35,000 Restaurant AssetsLeveraging 35,000 Restaurant Assets
Asset Leverage Opportunity
2.0
1.1
1.9
1.01.5
0.8
Top 10%Company
System Top 10%Company
System Top 10%Company
System
2007 Average Unit Volume($ million)
2.0
System
302 297
357
409 396
506
’02 ’03 ’04 ’05 ’06 ’07
High-Return Unit Growth – China
China DivisionNew Restaurants
Largest Nationwide Development Capability
Equity Driven
StrategicAdvantage
’02 ’03 ’04 ’05 ’06 ’07
High-Return Unit Growth – YRIYRI Division
Traditional New Restaurants
749811
720780 785
852
94%
6%
700+ Franchisees . . . across 110+ Markets
Company
Franchise Driven
StrategicAdvantage
Increasing Return on Invested Capital
• Extensive Equity Investment in Mainland China
• Broad-based YRI Franchise Growth
• Substantially Increased U.S. Franchise Ownership
• Increased Asset Leverage through Sales Layers
18% ROIC
People Capability First . . .satisfied customers and profitability follow
Our PassionOur PassionCustomer Mania . . .
put a YUM on customers’ faces around the world
How We GrowHow We Grow
How We LeadHow We Lead(with intentionality)
1. Step Change Thinkers2. Know How Builders
3. Action Drivers4. People Growers
Our Formula for SuccessOur Formula for Success
The Dynasty ModelOur GoalOur Goal
Be the Best in the World at Building Great Brands and Running Great Restaurants!
Dramatically Improve U.S. Brand
Positions, Consistencyand Returns
Dramatically Improve U.S. Brand
Positions, Consistencyand Returns
Drive Aggressive,International Expansionand Build Strong Brands
Everywhere
Drive Aggressive,International Expansionand Build Strong Brands
Everywhere
BuildLeading Brands in
China in Every Significant Category
BuildLeading Brands in
China in Every Significant Category
Drive Industry-Leading, Long-Term
Shareholder andFranchisee Value
Drive Industry-Leading, Long-Term
Shareholder andFranchisee Value
A Winning Culture
how we win together
how we win together
(hwwt)2(hwwt)2
believe in all peoplebelieve in all people
we are customer maniacswe are customer maniacs
go for breakthroughgo for breakthrough
build know howbuild know how
take the hill teamworktake the hill teamwork
recognize! recognize! recognize!recognize! recognize! recognize!
16
Yum!: A Defining Global Company
People Focused Culture: Where everyone makes a difference
Breakthrough Results with Breakthrough Innovation
Giving to Others: World Food Program
Build Leading Brands Across China
Build Leading Brands Across China
Dramatically ImproveU.S. Brand Positions,
Consistency and Returns
Dramatically ImproveU.S. Brand Positions,
Consistency and Returns
Drive Aggressive International
Expansion and BuildStrong Brands
Everywhere
Drive Aggressive International
Expansion and BuildStrong Brands
Everywhere
Build Leading Brands Across China
in Every Significant Category
Build Leading Brands Across China
in Every Significant Category
Drive Industry-Leading, Long-Term Shareholder and Franchisee
Value
Drive Industry-Leading, Long-Term Shareholder and Franchisee
Value
YUM’s #1 Growth Strategy
Other NewConcepts
Other NewConcepts
WesternCasualDining
WesternCasualDining
Building a Portfolio of Category-Leading Brands
Home Delivery
ChineseQSR
East DawningEast Dawning
Western QSR
??
Strong Profit Growth in a Scale Business
$120
$205
$290
$375
’02 ’04 ’06 ’07
China Division($ million)
26%+5-Year CAGR
26%+26%+55--Year CAGRYear CAGR
Yum! China
HugeRestaurantOpportunity
HugeRestaurantOpportunity
Portfolio of Brandsto Capture Opportunity
Portfolio of Brandsto Capture Opportunity
Big InvestmentsIn Support Capability
Big InvestmentsIn Support Capability
PopulationUrban 500 million
Total 1.3 billion
A Huge Opportunity
China
— Best growth market of 21st Century —
U.S. Total Population
300 million
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
“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)
Big Opportunity Deserves a Big Goal
Yum! China
HugeRestaurantOpportunity
HugeRestaurantOpportunity
Portfolio of Brandsto Capture Opportunity
Portfolio of Brandsto Capture Opportunity
Big InvestmentsIn Support Capability
Big InvestmentsIn Support Capability
Building Leading Brands in Multiple Key Categories
CasualDining
CasualDiningQSR Delivery QSR
Chinese
East DawningEast Dawning
Restaurant Categories
1987 1990 2001 20051987 1990 2001 2005
YUM! China
KFC the Leader in QSR
“Life is tastier with KFC”AUV = $1.3 million
#1 QSR
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
KFC’s Positioning: Go Beyond Traditional QSR
Core QSR strengths QSCV
Focus on few products to generate volume
Focus on product consistency (industrialize)
Value drivers (“up size”)
Traditional QSR
Maintain the core (QSCV)
Offer variety
Focus on product taste
Offer balanced choices
Encourage balanced meals & regular exercise
Go Beyond the Traditional
Eat a lot of same product frequently
Educate consumer on healthy life style
61*Food expert
67*Chicken expert
65*Interesting new products
66*Food variety
73*Good taste
KFCTop 2 box%
Data source: BIT March 2008 *Significant difference versus nearest competition,N=1900 in 47 cities 95 confidence level
KFC Leads in Major Food-Related Measures…
65*The leading QSR brand in China
71*63*61*
A brand I can trustThe QSR brand I like most Deeply rooted in China
KFCTop 2 box%
… and in Many Brand Imagery Attributes
Data source: BIT March 2008 *Significant difference versus nearest competition,N=1900 in 47 cities 95 confidence level
Building a Big Brand at KFC
Community Involvement
In-Store Experience
Menu designed for Broad Appeal
Rooted in Chinaintegrated into their life
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. . .
KFC Innovation in Chicken, Other Proteins
ChickenSandwiches Fish Series
KFC Innovation in Snacks, Soups & Salads
SnackVariety
Soups, Salads
KFC Innovation in Desserts, Beverages
Desserts Hot & Cold Drinks
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 KidsBirthday parties
Kids fun club - educational content
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
• New sales layers
• Multiple proteins
• Multiple day parts
• Delivery
• New cities
KFC Brand Ready to Grow Even Bigger
Strong Growth for Pizza Hut Casual Dining
95119
155
204
254
351
’02 ’03 ’04 ’05 ’06 '07
Casual Dining Restaurants
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
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 PizzaSautéed Pasta, Risotto
Regional cuisine – from Italy, from other origins
Complete meals -- appetizer, soup, salad, drinks, dessert
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
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
Delivery Brand with Everyday Affordability
Functionally focused
Simplifying consumers’ daily routine
New traditional dough
Fast bake time
Non-pizza menu to enhance varieties
Delivery with Differentiated Service
Easy ordering
Well-trained Call Center staff
Online ordering
Delivery time promise
Neat, professional drivers
East Dawning: Our First Foray into Chinese QSR
East DawningEast Dawning
Bold Intentions to Build the Leading Chinese QSR Brand
East DawningEast Dawning14 units today
Strong SSS growth
Improving AUVs
Inaugural TV launched
A Promising Future
KFC graduate
Higher frequency
Balanced in nature
Moving beyond Shanghai
East DawningEast Dawning
East Dawning – The Choice of Chinese QSR
Chinese Fast Food Meets KFC’s Standards
East Dawning
Yum! China
HugeRestaurantOpportunity
HugeRestaurantOpportunity
Portfolio of Brandsto Capture Opportunity
Portfolio of Brandsto Capture Opportunity
Big InvestmentsIn Support Capability
Big InvestmentsIn Support Capability
Making Bigger Investment in China
Unmatched Support Capabilities
Development
Logistics
Food Safety/Quality
Food Innovation
Manufacturing
Call Center / Online Ordering
Enabling Rapid Growth in Our High-Return
Brands
Unrivaled Development Capability
Today . . . 600+ Development professionals on the ground
Extensive people development programsTechnical know-how and execution
Incentive programs drive superior results
Database of 450+ cities
2,500+ investment decisions in our database
Penetrating Beyond the Big Cities
2005 2006 2007
KFC – % of New Builds by Tier
50 % 48 % 49%Tier 1,2
Tier 3,4,5,6 51%
New Opportunities in Non-Traditional Units
• Today, over 25 Drive-Thru units
• Entering new destinations
– Airports, Bus & Train Stations
Operating Our Own Logistics Since Day One
Distribution Centers: 11
Satellite DC: 5
Processing: 2
Today, A Powerful Advantage
World Class Logistics Infrastructure
Multiple Brands, Three Temperatures (Dry, Chilled, Frozen)
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
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
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
Pizza Dough Commissary Egg Tart Commissary
Targeted support for portfolio of growing brands
Manufacturing When it Makes Sense
Destination Dessert
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
Yum! China
HugeRestaurantOpportunity
HugeRestaurantOpportunity
Portfolio of Brandsto Capture Opportunity
Portfolio of Brandsto Capture Opportunity
Big InvestmentsIn Support Capability
Big InvestmentsIn Support Capability
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
Mainland China Market Potential
20,000+ Restaurants20,000+ Restaurants
Q&AQ&AYum! ChinaYum! China
Yum! China Leadership PanelYum! China Leadership Panel
Sam SuSam Su President, Yum! ChinaPresident, Yum! China
Lily HsiehLily Hsieh Chief Financial OfficerChief Financial Officer
Angela Angela LohLoh Chief Marketing OfficerChief Marketing Officer
Joaquin Joaquin PelaezPelaez Chief Support OfficerChief Support Officer