Yum China Holdings, Inc. · NYSE:YUMC
Yum China — Shareholder Meeting (May 2023)
30 slides from Yum China's shareholder meeting presentation, May 11, 2023
Slide 1: Shareholder Engagement May 2023
Shareholder Engagement May 2023
Slide 2: Cautionary Statement on Forward-Looking Statements & Non-GAAP Measures
Cautionary Statement on Forward-Looking Statements & Non-GAAP Measures This presentation contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. We intend all forward-looking statements to be covere
Slide 3: Yum China 2023 Shareholder Engagement Agenda
Yum China 2023 Shareholder Engagement Agenda I • Executive Compensation II • Sustainability III • Corporate Governance 3
Slide 4: Executive compensation decision-making requires thoughtful consideration due to Yum China's unique position
Executive compensation decision-making requires thoughtful consideration due to Yum China’s unique position Yum China is unique: • Incorporated in Delaware and listed on both New York Stock Exchange (NYSE) and Hong Kong Stock Exchange (HKEX) • Substantially all of its operations in China in over 1,8
Slide 5: Yum China demonstrated exceptional resilience in adverse times for three consecutive years
Yum China demonstrated exceptional resilience in adverse times for three consecutive years since the onset of the COVID-19 pandemic 2020 • Same store sales during the Chinese New Year holiday period declined by 40-50% YoY compared to the comparable period in 2019 • Approximately 35% of stores were c
Slide 6: Business environment of China and U.S. in 2020–2022 differed significantly due to COVID-19
The business environment of China and U.S. in 2020 – 2022 differed significantly due to pacing of COVID-19 outbreaks and public health measures adopted COVID-19 Restrictions The U.S. markets generally returned to normal in Lifted in 2022. Most States COVID-19 severely impacted China for three years.
Slide 7: China and U.S. retail and restaurant industry performance varied in 2020-2022
China and U.S. retail and restaurant industry performance largely varied in 2020- 2022 under different COVID-19 responses 1 2 YoY Growth Rate of Retail Sector YoY Growth Rate of Restaurant Industry CAGR (2019-2022) CAGR (2019-2022) China China +2% China -2% US U.S. +10% U.S. +7% 16.6% 18.6% 12.5% 10
Slide 8: Yum China demonstrated strong performance against industry volatility
Yum China demonstrated strong performance against industry volatility in China and delivered positive growth and exceptional shareholder value during 2020-2022 Financial Performance 2019 – 2022 vs. 2022 vs. • Despite the volatile market situation, the Company managed to grow and 2022 2021 2019 maint
Slide 9: Transformational initiatives to capture future growth opportunities
In addition to managing challenges posed by the pandemic, Yum China also implemented transformational initiatives to capture future growth opportunities Responsiveness to Emerging Customer Needs • Successfully adapted operations to capture off-premise sales. o Delivery sales of KFC and Pizza Hut gre
Slide 10: 2023 Q1 achievements
2023 Q1 achievements stands as a testament of Yum China’s successful execution of the strategies to fortify the competitive positions and to capture business opportunities Highlights of outstanding results achieved in Q1 2023: • Record first quarter performance - revenue ($2.92 billion) and operatin
Slide 11: Executive Compensation Practices for 2022 – Rationale and Considerations
Executive Compensation Practices for 2022 – Rationale and Considerations 11
Slide 12: Modification made to 2020 annual PSUs
Necessary modification was made to 2020 annual PSUs to ensure adequate recognition of executive team for their exceptional leadership during the three-year performance period Background Before Modification • The PSU program introduced to the entire leadership team, including all NEOs, for the first
Slide 13: One-time Lavazza grant to NEOs in 2022 as part of ESOP
One-time Lavazza grant to NEOs in 2022 as part of an employee share ownership plan (ESOP) to incentivize key employees of Yum China and Lavazza Group to join forces in accelerating the growth of the Lavazza coffee concept in China. Vesting subject to stringent criteria Purpose • Yum China set up a J
Slide 14: Temporary change in proportion of performance-based LTIs
Temporary change in the proportion of performance-based LTIs: 2022: 30% PSU; 2023: 50% PSU • In light of the continued volatility and uncertainty which made setting three-year absolute performance goals very difficult and the need for the retention of key executive talent, CC determined in early 202
Slide 15: 2022 Short Term Incentive program adjustment
2022 Short Term Incentive (STI) program adjustment was deemed necessary to align the organization on key priorities to protect the business in view of fast-changing operating environment Actual Weight Target* Score Result Background Original KPIs • In the first half of 2022, the highly transmissible
Slide 16: Yum China 2023 Shareholder Engagement Agenda
Yum China 2023 Shareholder Engagement Agenda I • Executive Compensation II • Sustainability III • Corporate Governance 16
Slide 17: Sustainability Strategy
Sustainability Strategy - Provide safe and nutritious food that is economically, socially and environmentally sustainable Creating A Responsible Ecosystem Contribute to FOOD PEOPLE ENVIRONMENT UN 2030 SDGs We CARE about our customers We CARE about our people We CARE about our environment with safe &
Slide 18: Our ESG performance has been highly recognized externally
Our ESG performance has been highly recognized externally rd th th 3 Year Industry Best 5 Year 5 Year Industry Best Score MSCI ESG Top Employer in China One of the only three Member of DJSI World ‘AA’ rating Industry best for the companies from th Top 1% 5 consecutive year mainland China 18
Slide 19: Three environmental sustainability priorities
We advance three environmental sustainability priorities and focus on both Financial and ESG impact Leverage 4R Principles • Reduce • Reuse • Recycle Climate Circular Supply Chain • Replace Action Economy Collaboration 19
Slide 20: Climate Action - Net-zero value chain GHG emissions by 2050
Climate Action - A holistic transformation strategy in place to drive towards net-zero value chain GHG emissions by 2050 BY 2035 BY 2050 63% Reduce absolute scope 1 and 2 GHG emissions (from 2020) NET-ZERO Reduce scope 3 GHG emissions from purchased 66.3% goods per ton of goods purchased (from 2020)
Slide 21: Climate Action - Significant progress in 2022
Climate Action - Significant progress in 2022 with improved transparency 2,400MWh 100% 15% Average restaurant electricity Renewable Energy annual Renewable Energy for two consumption reduction as consumption expected via DPV* restaurants via (v)PPA** compared to 2021 2022 Sustainability Report 2021
Slide 22: Climate Action - Suppliers' GHG emissions management
Climate Action - To build scalable approach for suppliers’ GHG emissions management ‘3E’ Method Our Plan Engage 2022 Since 2023 Promote the joint participation of suppliers 8 Suppliers Top 40 Suppliers in GHG emissions Roll-out reduction - Abatement pilots in - Majority of Scope3 Poultry, Packaging
Slide 23: Yum China 2023 Shareholder Engagement Agenda
Yum China 2023 Shareholder Engagement Agenda I • Executive Compensation II • Sustainability III • Corporate Governance 23
Slide 24: Board Refreshment
Board Refreshment • Annual election of all directors • Board Refreshment ➢ Election of Christina Xiaojing Zhu • President and CEO of Walmart China • Prior to joining Walmart Group in May 2020 • President of Fonterra* Greater China from August 2016 to December 2019 • Managing director and vice presid
Slide 25: Director Nominees' Qualifications and Skills
Director Nominees’ Qualifications and Skills Regional Executive Information Public Company Industry (China/Asia Leadership Technology Board Pacific) Fred Hu √ √ √ √ Joey Wat √ √ √ √ Peter A. Bassi √ √ √ Edouard Ettedgui √ √ √ √ Ruby Lu √ √ √ √ Zili Shao √ √ √ William Wang √ √ √ √ Min (Jenny) Zhang √
Slide 26: Board Diversity
Board Diversity Our director nominees have experience, qualifications and skills across a wide range of public and private companies spanning many different industries, possessing a broad spectrum of experience both individually and collectively. Our director nominees bring a diverse mix of regional
Slide 27: Share Issuance up to 20% of Outstanding Shares
Share Issuance up to 20% of Outstanding Shares • Shareholder approval required for issuance of common stock, or securities Proposal convertible into common stock, representing 20%+ of stock or voting power prior to NYSE issuance rule • Proposal will give • Exception for public issuance for cash auth
Slide 28: Appendix
Appendix 28
Slide 29: Highlights of our Achievements in 2022
Highlights of our Achievements in 2022 Climate Action Circular Economy Supply Chain Env. Impact ENVIRONMENT • Near-term SBTs approved • ~19,000 tons of packaging reduced* • 100% RSPO-certified palm oil st • 1 TCFD Report published • Rolled out Food Bank Program to PH • 100% FCS-certified paper napki
Slide 30: Circular Economy - Explore opportunities to create 'zero-waste' restaurants
Circular Economy - Explore the opportunities to create 'zero-waste' restaurants Exploit Less Recycle More Circular Economy Packaging Waste Recycling • ~19,000 tons of packaging reduction • 3,518 tons of UCO converted into biodiesel since 2019 • Piloted reusable shipping boxes st • 1 restaurant chain