YUM China Conference 2012 Website

China Investor Conference September 12 – 13, 2012

Forward Looking Statements

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: www.yum.com.

Strengthening an Industry Leader

Vincent Huang

Celebrating the 4,000th store

1987 1st store 2004 1,000 stores

2007 2,000 stores

2010 3,000 stores 2012 4,000 stores

548 766

979 1243

1557 1822

2140

2497

2872

3244

3701

412 538 575 639 735 783 876

1010 1135 1291

1468

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

store count comparison

KFC: #1 QSR brand in China

Store count gap widening vs. competition

Enjoy first mover advantage in lower-tier cities

1829 1872

969

499

T1/T2 cities T3+ cities

McD

McD

Store count

T1-T2 cities T3-T6 cities

Rooted in China… most evident in lower-tier cities

• An aspirational and iconic brand, yet affordable

• Premier site of best trade zones

• First chance to experience Western food and culture

• Ideal place for rewarding children, friends gathering, a break from shopping

A Winning Formula to Take KFC Brand Deep Within China

Daypart / Service extensions (e.g. Delivery, 24 hours)

“New Fast Food” (vs. conventional model)

Position brand as “Rooted in China”

KFC heritage (fried chicken)

A preferred QSR brand deeply rooted in China

Today

5+ Years ago

10+ Years ago

Day One

A series of strategic brand building blocks over the years

The “New Fast Food” business model

• Great tasting and safe food; high-quality and speedy

(what “conventional” fast food offers)

• Balanced in nutrition; healthy life style

• Rooted in China, continuous innovations

• Main meals – Colonel’s original recipe – Zinger – Dragon twister – Curry pork rice

Build signature products in every category


• Snacks & sides – Hot wing – New Orleans wing – Popcorn chicken – Seafood star

• Beverages & desserts – 9 lives juice – Coffee float – Egg tart



• Breakfast – Puff pastry sandwich – Congee – Dough stick – Soy milk

Offer meaningful menu variety to broaden brand appeal

• Roasted products • Non-poultry choice • Destination beverages & desserts • Irresistible local flavors

• Corn salad • Juice • Chinese veggie appetizer • Veggie soup

Offer balanced choices and encourage healthy eating

16 16 16 16

Continuous consumer education on healthy eating

• Thematic advertising, tray mats, booklets, packaging

• Sponsorship for studies on health and nutrition

Promote regular exercise with grass-root sport events

Teens KFC 3on3 Basketball

Championship

176,800 participants from 500 cities in 2012

Teens Fitness Dance Program

1.8 million students joined from 4,200 schools in 2012

Good Morning Program

18 18 18

Winning over competition on “New Fast Food” image

Data source: Brand Image Tracking in 47 cities, 2012 Q1+Q2

*Significant difference 95% confidence level

(Top 2 box %) KFC McD chicken expert 57* 39 food taste 59* 49 menu variety 56* 47 innovative 55* 40 balanced choice 43* 33 promote regular exercise 41* 33 rooted in China 53* 35

Open 24 hours to serve various customer needs

• Breakfast

• Weekday lunch

• Afternoon break

• Dinner special

• Overnight

• Delivery

• More and more people eat breakfast out of home with spending 3-5 yuan

• KFC 6 yuan breakfast value combo, competitive to Chinese QSR and convenient stores

• Other successful breakfast products

KFC Breakfast: High Quality, Nutritious, Affordable

Becoming a preferred place for workday lunch

• Shorter meal time around 30-40 min. and price-sensitive

• KFC 15 yuan weekday lunch value combos, an everyday affordable option

• Offer both Western and Chinese choices

22 22 22

A convenient and comfortable place for afternoon break

• Afternoon tea time habit is becoming more popular – Coffee shops, bakery & retail, casual

dinning…

• KFC “Build your own tea sets” at 9 yuan received very positive response

• Developing more destination

beverages and desserts

Dinner: Offer abundant food choices for a relaxing time

• Home meal replacement for young couples, or a quick meal before evening activities

• Have more time to enjoy good food vs. lunch

• Less price-sensitive

• Initial positive results from Dinner Special

Overnight: KFC is the best place to go

• Many people out at midnight, especially in regions with warmer climate

• So convenient to find a KFC in large cities, the only place open in small cities

• Offer premium light meals

The largest food delivery brand in China

• Meet fast growing consumer needs in 190 cities – Improving living conditions and increasing family income – Busy life style – no time to cook or not good at cooking – Big party size

• Charge delivery fee

• Online ordering transactions: 55%+

A convenient and popular place for Chinese consumers

Commercial Residential Transportation & other

Sit down On-the-go Drive-through Delivery

Kids & family Family gathering, reward children

Teens Friend gathering

Adults Everyday

affordable meal place

Trade zones

Customers & key need states

Service formats

Continue to drive sales growth from all dayparts

SS WPSA (RMB mm)

59 64 72

38 4144

6469

7316

2535

0

50

100

150

200

250

May YTD 2010 May YTD 2011 May YTD 2012

Del/24/BFDinnerAfternoonLunch

177 199

224

Summary

• The #1 QSR brand in China

• Growing faster than competition and well penetrated into lower tier cities

• Positioning as “New Fast Food” to become a welcome part of consumer’s life

• Recent key initiatives in leveraging assets and

growing sales from all dayparts

Pizza Hut Dine-In Expanding a Casual Dining Powerhouse

Candy Chan

The Western Restaurant “right next door” for Chinese consumers

700+ stores 160+ cities 30 provinces

2011 New Openings: 114

Hai Nan

Hei Long Jiang

Ji Lin

Liao Ning

He Bei

Shan Dong

Fu Jian

Jiang Xi

An Hui Hu Bei

Hu Nan

Guang Dong

Guang Xi

Shanghai

He Nan

Shan Xi

Inner Mongolia

陕西

Ning Xia

Gan Su

Qing Hai

Si Chuan

Gui Zhou

Yun Nan

Tibet

Xin jiang

Jaing Su

浙江

Beijing

East

North

Northeast

Southwest

Northwest

South

System Sales Growth %

Multiple years of record growth

2009 2010

2011 2012

Q2 YTD

13

22

32

35

Pizza & More: Anchor of success for the brand

Building the Best WCDR Menu

20%+ menu changes, twice a year

Enhance ‘pizza expert’ position thru

innovations or promotions

Protein Variety: Steak, anyone?

Rice and Pasta, in case you don’t feel like Pizza today

Drinks that deserve a spotlight of their own

Desserts for a perfect finishing touch

Leverage Assets to capture different dayparts

Tea Time

Afternoon Tea

Breakfast

Working Day Lunch

Lunch Break at Pizza Hut Happy Restaurant : 3-course meal at a great price

Served by the best Operations Team in China

WPSA Margin

Chinese consumers love Pizza Hut: great success even in lower tier cities

Tier 4-6 vs. Tier 1-3

1,000th store is not a distant goal

Picture of beautiful asset

Pizza Hut Home Service Developing Leading Delivery Brand

Candy Chan

Food Delivery Market continues to grow as lifestyles change

Base: All contact respondents

Food Delivery Market Penetration

Base: P3M Food Delivery Users In SH

Food Delivery Usage (Times per quarter)

Times

10%

20%

30%

40%

50%

2010 2011

35%

49%

11

15

• 140 stores • 13 cities

The Best Delivery Brand: Professional, Rich Varieties, Affordable

Meaningful variety to cater to local Chinese needs

Chinese menu items gaining in popularity

Weekly Units Sold

0

50

100

150

200

250

300

Chinese Rice Rice Noodle

2011

Q2YTD2012

Transaction momentum stronger than ever

17%22% 24%

40%

0%

10%

20%

30%

40%

50%

2009 2010 2011 Q2YTD2012

TransactionGrowth Rate

Chinese Consumer habits changing rapidly: Rapid growth of e-Commerce and Media Digitalization

• Media Consumption shifting to digital

• We reach customers in an “e-way”

- Search Engines

- Video Streaming Websites

- Social Media

- SMS

- Taobao, Sina Weibo

7.3

2.4

6.9

3.6

0

2

4

6

8

10

12

2009 2011

Data source：CMMS (46 cities)

Traditional

e-Media

Our online ordering has increased dramatically over the last two years

Over 50% are e -orders

App s ta rted in 2012

40%+

• Convenience • Higher check average • Lower order-taking costs

•53

Consumers love what we have to offer, PHHS, a brand with bright future

“With this pricing, it’s very competitive compared to QSR like KFC or McD’s. 。”– YA, WQSR User, Nan Jing

“I can have either Chinese or Western. I can even order Rice!

Great!“ FA, PHHS user , TJ

“I was a bit surprised to find Rice Noodle and Hot Veggie. But am

pleasantly surprised at the good quality of such.“ - FA, PHHS User,

Shang Hai

I always thought it’s the same brand…Oh now I realize that the two brands are related by independent. PH Delivery is focused on Delivery…No wonder it’s very professional. (WQSR User, FA, Nan Jing)

•54

Made significant improvement to business model

Investment mode $ $$ $$$

# of PHHS units

•55

Pizza Hut Home Service brand will further expand nation wide

Little Sheep Enhancing A Great Brand

Angela Loh

Little Sheep: Today’s discussion

• Part of Yum!’s #1 Growth Strategy

• A growing, mainstream Chinese category

• Brand with a strong foundation

• Strong category leader

• A bright future – Extend the brand – Even stronger business model

Drive Aggressive INTERNATIONAL

Expansion and Build Strong Brands Everywhere

Dramatically Improve U.S.

Brand Positions, Consistency and

Returns

Drive Industry-Leading,

Long-Term SHAREHOLDER &

FRANCHISEE Value

Build Leading Brands in

CHINA in Every

Significant Category

Yum! Brands Strategies

What is HOT POT?

• DIY Cooking

• Hot Pot = Metal Pot + Soup Base + Fresh Raw Ingredients

Why Consumers Love the Concept?

• Rich flavor • Lots of varieties, balanced choices • Personal preferred taste • Fun DIY cooking, convenient • Great social gathering with friends & families • Value for money

Hot Pot Category: P3M Penetration %

6762

57 59 61 61615859

63

0

10

20

30

40

50

60

70

80

90

100

Total Tier 1 Tier 2 Tier 3 Teens YA OA FA Male Female

Base 1637 952 341 344 237 655 352 393 824 813

Hot Pot – A Growing, Mainstream Category

Hot Pot U&A Study - Feb,2012. 12 cities in China tier 1, tier 2, tier 3

Hot Pot – A Growing, Mainstream Category

152

318

0

50

100

150

200

250

300

350

2007 Today

US $ Billion

Data source: catering service sales data sourced on National Bureau of Statistics of China and with 2007-2009 data calculated Hotpot category sales data sourced on industry report

China Catering Service $300 Bn+ Industry

Hot Pot Category

• Catering Share: 8% - 10%

2x

Little Sheep: A Strong Foundation

• Founded in 1999 • First store in Baotou, Inner Mongolia • IPO in HK in 2008 • Cover 140+ cities in China, plus HK, Macau • 27 stores in the US, Canada, Japan

350

~450

First unit open 1999

Units

Base: P3M Hotpot users Data source: BIT survey on Jan 2012 in 12 cities

(Base=1000) Top of Mind Brand

Awareness

P3M Visit Brand

Most Often Brand

Most Favorite Brand

% % % %

Little Sheep 32 42 29 33

Hai Di Lao 8 14 8 10

Xiabu Xiabu 4 6 4 2

Dong Lai Shun 2 6 1 3

Category Leading Brand Equity

A Bright Future: Extend the Brand

• Build Big Brand… using Yum! China signature approach – Broaden menu – Satisfy consumer changing needs – Optimize service model

• Proven track record extending big brands

– KFC “Rooted in China, Integrated in life” – Pizza Hut Dine In “Complete Western casual dining

experience” – Pizza Hut Home Service: Not just pizza delivery, but home meal replacement

A Bright Future –Signature Menu

• Hot pot expert: with secret recipe • Lamb expert: Majority sourced from Inner Mongolia • Variety: 120+ dishes - meat, seafood, vegetables, starches

A Bright Future – New Service model

A Bright Future: Even Stronger Business Model

• Leverage Yum! China’s world-class restaurant support know-how – Operations

– Development

– Food innovation

– SCM

– Logistics

Integration Underway: Synergies, Enhanced Capability

A Bright Future

• Turning the most successful Hot Pot restaurant brand in the world… …into a significant part of Yum! China’s

business portfolio

Little Sheep

Building Competitive Advantage Across China

Don Miller

China: Big Opportunity for Restaurant Industry

• GDP/Personal income growth remain among best globally

• Middle class large and growing

• Government efforts to raise living standard for low income

• Government creating new retail opportunities thru designated development zones

• Restaurant chain market share remains low

• High purchase intent for world-class brands with high standards

Profitable Development, New Breakthrough Pace

Mainland China New Restaurant Openings

New step change 700 in 2012

New Breakthrough Founded on Proven Capability

• Development team on the ground in every province (except Tibet)

• 1,000+ Development professionals

• Extensive people development programs

• Advanced technical know-how and strong execution

• Database of 770+ cities

• Rich catalog of learning 4,700+ new build decisions – 3,900+ data points on QSR

– ~700 data points on Casual Dining

Government Plan in Next 5 Years 20+ New City Clusters

Significant Growth Opportunity Remains

300+ million today

Growing Consuming Class

Shopping Malls, Hypermarts

Rapid Retail Sector

Growth

Airports, Railway, Mass Transit

New Transport

Infrastructure

Category-Leading, Powerhouse Brands

Penetration far beyond top tier, coastal cities

KFC - Strong Unit Economics

Today Average Unit Volume ($ million)

$1.4 - $1.5

Average Transactions (‘000) 340+

Cash Margin 20% - 22%

Cash Investment ($000) $560

KFC – New Units

Strong Returns – Sales 2.5X Investment

Note: FX rate US$ = 6.3454 RMB

KFC: Unit %, Tier 3 & Below

KFC – A Balanced Mix of Tiers, Large and Small

Today, Half of Units in Lower Tier Cities

Pizza Hut Dine-In - Strong Unit Economics

Pizza Hut Dine-In – New Units

Strong Returns – Sales Are 2.5X Investment


$1.4 - $1.5


Cash Margin 23% - 26%


Note: FX rate US$ = 6.3454 RMB

Pizza Hut Re-accelerating Pace in Lower Tiers

Disciplined approach: Adjusting pace as necessary

Pizza Hut: Unit %, Tier 3 & Below

Pizza Hut – Also Growing Well Beyond Top Tier

Unrivaled Strength Entering New Cities

• Strong consumer acceptance in new cities – Despite lower level of disposable income

• Direct competition in new cities virtually non-existent

• Capability ready day one - Operations, SCM, logistics

• Relatively lower costs versus top tier – labor, rental

• New city unit economics best across our portfolio

Robust New City Pace

200+ New Cities, last 3 years KFC & Pizza Hut combined

100 in Past 12 months

黑

吉

皖

湘

豫

蒙

贵

苏

琼

云

YiNing T5

YanAn T4

XiChang T4

LouDi T4

YinKou T3

LuanNan T5

ChuZhou T4

LeCong T5

QingXian T4

LingXiang T5

Entering New Cities, Both Coastal and Inland

KFC – New Entry City Unit Economics


$1.4 - 1.5


Cash Margin 25%+


New Cities last 12 months

Lower cost structure – Labor, Rent Note: FX rate US$ = 6.3454 RMB Sales data used for Y12 P7 YTD

Pizza Hut Dine-In – New Entry City Unit Economics

New Cities last 12 months


$1.5 - $1.6


Cash Margin 29%+


Note: FX rate US$ = 6.3454 RMB Sales data used for Y12 P7 YTD

Lower cost structure – Labor, Rent

Building Know-How in New Business Models

• Transportation sites

• Delivery (to home or office)

• Drive-thru

• Late night (24 Hours)

• Hypermarkets, shopping malls

24 Hours

Taking our brands to an increasing variety of trade zones

Discipline and Rigor For Every Unit Decision

• Continuous market mapping and trade zone identification

• Detailed site selection process, one unit at a time

• Disciplined multi-step project approval

• Cross-functional governance for final new unit approval

• Rigorous construction and opening process ensure standards

• Feedback from post-opening analysis, every store

Record Milestones in 2012

5,000+ Units by YE

700 New Units

+ 300 Remodels

1,000 New Assets

Summary

• Development remains a key growth driver

• World class Development capability

• Taking our Brands across all of China

• Not limited by our own resources

YUM China Conference 2012 Website

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