Yum China Holdings, Inc. · NYSE:YUMC
Yum China — Investor Day (2017)
57 slides from Yum China's investor day presentation, 2017
Slide 1: Joey Wat and Johnson Huang, Yum China
Joey Wat | President & Chief Operating Officer, Yum China Johnson Huang | General Manager of KFC, Yum China
Slide 2: Cautionary Language Regarding Forward-Looking Statements
Cautionary Language Regarding Forward-Looking Statements Forward-Looking Statements. Our presentation may contain “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 stateme
Slide 3: Agenda
Agenda Business Overview by Joey Wat Pizza Hut Update by Joey Wat KFC Update by Johnson Huang 3
Slide 4: Understanding evolving consumer needs is fundamental to YUMC's success
Understanding evolving consumer needs is fundamental to YUMC’s success Food Services Value For Money 4
Slide 5: Urban middle class is the fastest growing segment in China
Urban middle class is the fastest growing segment in China. High labor force participation drive consumption growth Urban households annual income growth trend High labor force participation rate and women’s share of labor force Percent CAGR % Women’s share of the labor force (%) 50 6% Affluent Cana
Slide 6: Catering industry still growing at double digits, driven by O2O food delivery
Catering industry is still growing at double digits in China, driven by O2O food delivery (at >50% CAGR) in the past two years Catering Industry Annual Sales O2O Food Delivery Sales RMB bn RMB bn 5,000 Market 180 kick-off 4,500 160 4,000 3,500 140 3,000 120 2,500 100 2,000 80 1,500 60 1,000 40 500 2
Slide 7: China's restaurant sector is highly fragmented, chain prospects promising
China’s restaurant sector is highly fragmented, and prospects for chain restaurants remain promising Restaurant Market: Chain vs. Independent Restaurants 100% 90% 80% 47% 70% 58% 64% 65% 73% 60% 91% 50% 40% 30% 53% 20% 42% 36% 35% 27% 10% 9% 0% USA UK HK Taiwan China World Chained Restaurants Indepe
Slide 8: Key success factors for YUMC
Key success factors for YUMC Replicable Food! Food! Food! Lifestyle Culture & talent development model Loyalty Operation Scale Infrastructure Attractive unit economics Scalability World class shared services 8
Slide 9: Employee engagement and customer satisfaction build shareholder value
Employee engagement and customer satisfaction are keys to building shareholder value in the long term Employee Customer Shareholder Engagement + Satisfaction = Value 9
Slide 10: Employee engagement is centered around three principles
Employee engagement is centered around three principles 我们遵循三个原则为员工代言 FAIR CARE PRIDE 公平 关心 自豪 10
Slide 11: Pizza Hut Business Update
Pizza Hut Business Update Joey Wat | President & COO of Yum China Pizza Hut Update by Joey Wat
Slide 12: Pizza Hut is the largest western CDR in China
Pizza Hut is the largest western CDR in China 1st store opened in Beijing in 1990 Over 80 million pizzas served annually “Most Preferred Western Casual Dining Restaurant” – Nielson (2016) 12
Slide 13: Successfully expanded to over 2,100 stores in 475 cities
Successfully expanded to over 2,100 stores in 475 cities 2,143 2,081 1,903 373 1,572 1,263 985 1,770 761 638 558 495 2008 2009 2010 2011 2012 2013 2014 2015 2016 3Q2017 Pizza Hut Casual Dining (PHDI) Pizza Hut Home Service (PHHS) Averaging ~80 stores a year over its 27 year history Note, from 2008 ~
Slide 14: Sales stabilized; focus on revitalization of the brand
Sales stabilized in the past few quarters, focus now is on revitalization of the Brand Same-store sales growth (y/y) 1 System sales growth (y/y) 1 4% 10% 2% 9% 2% 0% 0% 8% 0% 7% 7% 7% 7% -2% 6% -4% -3% -4% 4% -6% -8% 2% -10% -10% 0% 0% -12% -12% -1% -14% -2% 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 1Q16 2
Slide 15: Biggest challenge of the brand is being outdated
Biggest challenge of the brand is being outdated PIZZA HUT IN 2017 “暖男备胎” “My Reliable Backup Boyfriend” 15
Slide 16: Four levers to turn strategy into execution
Four levers to turn strategy into execution I. Fix Fundamentals II. Enhance Digital Capabilities Product innovation & update New super APP launch Menu rationalization Member privilege upgrade Service and engagement IV. Experiment New Models III. Optimize Delivery Network Store image upgr
Slide 17: Series of new products to bring excitement and value
I Series of new products to bring excitement and value 17
Slide 18: New October menu features innovative & healthy products
I New October menu features innovative & healthy products Italian Thin Pizza Thin, Chewy, Trendy, and Flavorful Roasted Vegetables Flavorful and Healthy 18
Slide 19: Relaxing ordering experience and simplified menus
I With a relaxing ordering experience and simplified menus 19
Slide 20: Creative and fun content through diverse channels
I Creative and fun content through diverse channels Durian Player, Play with FUN 20
Slide 21: Celebrity endorsements to revamp brand image
I Celebrity endorsements to revamp brand image 21
Slide 22: Increasing outreach to other key customer groups
I Increasing outreach to other key customer groups Build kids market Interact with students 22
Slide 23: Operational focus on improving customer service
I Operational focus on improving customer service Simplify service process Engage with customers Enable digital Improve management & crew experience retention 23
Slide 24: A win and scale approach to fix fundamentals
I A win and scale approach to fix fundamentals “Scale” – Roll-out “Win” – Pilot 24
Slide 25: Many tests conducted in the pilot stores
I Many tests conducted in the pilot stores 上海佛罗伦萨餐厅
Slide 26: Super App as a platform for a full digital ecosystem
II Super App as a platform for a full digital ecosystem. Over 3 million downloads in 2 months Delivery K-gold Member’s Day Exclusive offer Gift Card Member count at 30mn by Aug 2017 26
Slide 27: Rapid growth in membership and digital payments
Pizza Hut is catching up with rapid growth in membership II and digital payments MEMBERS MEMBER SALES MOBILE PAYMENT Loyalty member count Member sales % of system sales Mobile payment as % of company sales ~ 30mn 35% 19% 7% ~ 3mn 5% 1Q16 3Q17 1Q16 3Q17 1Q16 3Q17 27
Slide 28: Membership and digital engagement: Just one more visit
II Membership and digital engagement: Just one more visit CRM Digital experience Aggregator cooperation • Member exclusive promotions • Launch Super App 2.0 to • Joint marketing campaigns on and experiences enhance service experience aggregator’s platform 28
Slide 29: Pizza Hut has expanded delivery stores footprint
III Pizza Hut has expanded delivery stores footprint… Current business model Over 2,000 stores offering delivery today Number of stores offering delivery >2000 1696 373 2008 2009 2010 2011 2012 2013 2014 2015 2016 3Q2017 PHHS PHDI 29
Slide 30: Leading to significant sales growth
III … leading to significant sales growth Delivery sales growth Delivery sales as % of company sales (Rmb mn) 25% 900 21% 20% 17% 16% 14% 12% 0% 1Q16 1Q17 2Q16 2Q17 3Q16 3Q17 1Q 2Q 3Q 2016 2017 2016 2017 30
Slide 31: Pizza Hut delivery integration for seamless consumer experience
III Pizza Hut delivery integration to provide a seamless consumer experience across multiple channels Unify the brand • Logo / Menu / Packaging / Marketing / Organization Short term challenge • Store network optmization • One brand with consistent image and message Strategy for long term • Standardi
Slide 32: Accelerate remodels to rejuvenate brand image
I V Accelerate remodels to rejuvenate brand image 32 32
Slide 33: Target ~30 Bistro stores in ~10 cities by end of 2017
IV Target to have ~30 Bistro stores in ~10 cities by the end of 2017 33 33
Slide 34: Ph+ model stores in high-end commercial complexes
IV Ph+ model stores in high-end commercial complexes 34 34
Slide 35: Still early stages of laying a foundation for future growth
Still in the early stages of laying a solid foundation for future growth FIX FUNDAMENTALS Innovate & upgrade Rationalize MENU PRODUCT taste Revamp SERVICES ENHANCE DIGITAL CAPABILITIES EXPERIMENT NEW MODELS OPTIMIZE DELIVERY NETWORK 35
Slide 36: KFC Update by Johnson Huang
KFC Update by Johnson Huang
Slide 37: 37
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Slide 38: Shanghai Oriental Tower lit up for KFC CHINA
Shanghai Oriental Tower lit up for KFC CHINA 38
Slide 39: Strong sales momentum in the past 4 quarters
Strong sales momentum in the past 4 quarters Same-store sales growth of KFC 12% 7% 4% 3% 1% 1% -1% 2016 Q1 2016 Q2 2016 Q3 2016 Q4 2017 Q1 2017 Q2 2017 Q3 39
Slide 40: Introducing several disruptive innovations in 2017
Introducing several disruptive innovations in 2017 40
Slide 41: Providing unique and rich products
Providing unique and rich products 41
Slide 42: Upgrading to fresh and premium ingredients
Upgrading to fresh and premium ingredients Avocado Burger 42
Slide 43: Successful launch of Cremia and seasonal ice-cream flavors
Successful launch of Cremia and seasonal flavors of ice-cream with good value Cremia Matcha Strawberry Mango 43
Slide 44: Providing abundant value on top of food innovations
Providing abundant value on top of food innovations 44
Slide 45: Building a young and unconventional image
Building a young and unconventional image 45
Slide 46: Breakfast - one of the key growth drivers in 2017
Breakfast - one of the key growth drivers in 2017… 46
Slide 47: KFC delivery maintains strong growth momentum
KFC delivery maintains strong growth momentum Current business model Delivery as % of company sales 11% 2009 2010 2011 2012 2013 2014 2015 2016 YTD Aug 2017 47
Slide 48: Accelerate Penetration in High-speed Train Delivery
Accelerate Penetration in High-speed Train Delivery In over 20 stations with strong market share 48
Slide 49: Building a fun and credible coffee image
Building a fun and credible coffee image 49
Slide 50: Building on the latest trends to connect with kids
Building on the latest trends to connect with kids 50
Slide 51: 97 million members, 33% of sales contribution
97 million members * 33% of sales contribution * As percentage of system sales 51 51
Slide 52: Offering great promotions to members to increase stickiness
Offering great promotions to members to increase stickiness Exclusive value Free trial Member Tuesday Member life cycle 52
Slide 53: Promoting healthy lifestyle through direct engagement
Promoting healthy lifestyle through direct engagement K-Run club 3 x 3 basketball 53
Slide 54: Building upon our socially responsible brand
Building upon our socially responsible brand Children Youths Communities KFC Little Migratory One Yuan KFC First Light KFC KFC Community Birds Fund Donation Program Fund Angel Restaurant Caring Program 54
Slide 55: Enhancing store image through restaurant remodeling
Enhancing store image through restaurant remodeling Year to date, 378 stores remodeled 55
Slide 56: Unique store designs capturing local history and vibe
Unique store designs capturing local history and vibe 56
Slide 57: Revamped brand image to Young, Stylish & Trustworthy
Revamped brand image to Young, Stylish & Trustworthy… 2 Young/ 3 1 Energetic Interesting Trustworthy 4 7 Happy Warm hearted 6 5 Fashionable Stylish 57 57