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Yum China outlines its drivers of resiliency and strategies for growth

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SHANGHAI, China – Yum China Holdings, Inc. yesterday hosted its 2021 virtual investor day. At the event, Yum China’s Chief Executive Officer Joey Wat and other members of the Yum China management team shared the Company’s drivers of resiliency and strategies for long-term growth.

Joey Wat commented, “Yum China has been demonstrating its resiliency and agility during the pandemic. Our core brands KFC and Pizza Hut responded quickly to the situation and delivered solid results over the past 18 months. As we manage risks in the short term, we see plenty of opportunities to grow quickly. We are accelerating our store network expansion to reach our 20,000 store milestone. We will drive growth from our core brands, as well as emerging brands such as Lavazza, which we aim to grow to 1,000 stores by 2025. We will widen our strategic moat by investing in digitalization and supply chain, our key growth enablers. We are committed to and confident in achieving sustainable long-term growth.”

Yum China: Investor Day Highlights

KFC: Resilient Business with Rapid Store Expansion

KFC’s resiliency is reflected in its solid results during the pandemic. The brand has been relentlessly focusing on good food, an online and offline seamless customer experience and operational excellence. As the customer base continues to grow, KFC is aggressively innovating to include more menu options, such as juicy whole chicken, beef burgers and fruity tea. The brand is also driving vigorous growth in off-premise sales and launching packaged foods to capture the at-home consumption trend. Building on its vast membership of over 305 million members, KFC is leveraging digital tools to engage members more effectively. Looking forward, KFC will continue to expand its store network by utilizing distinct store models to increase store density in existing cities and further penetrate into lower tier cities.

Pizza Hut: We are Back!

Pizza Hut’s revitalization program has significantly improved fundamentals and yielded great results in first half 2021 with system sales and operating profit growth. The brand will focus on sharpening its 4-pillar strategy to make the business more resilient going forward. Foremost is strengthening its leadership in the pizza and steak categories with great value for money. Second, driving sales via multiple channels, including not just dine-in and delivery, but also takeaway and packaged foods. Third, improving the digital experience for customers while broadening its member base. Finally, accelerating new store openings by focusing on smaller store formats such as the satellite model, which has proven successful and is delivering a healthy payback period of approximately 2 to 3 years.

Make Coffee a Meaningful Part of Yum China

Rapid same-store sales growth at COFFii & JOY and the early success of Lavazza reaffirm the Company’s belief in the potential of the coffee market in China. COFFii & JOY is positioned to attract younger consumers with its artisanal coffee and small store format. Lavazza offers a premium and authentic Italian coffee experience. Yum China and the Lavazza Group, the world-renowned family-owned Italian coffee company, will accelerate the expansion of the store network in China through their joint venture, targeting to open 1,000 Lavazza stores by 2025. The joint venture is also expected to be Lavazza’s exclusive distributor in mainland China to introduce more products from Lavazza’s portfolio.

Digitally Transforming Store Operations

Digital and technology initiatives have been supporting business growth. Our digitalization along with automation, the Internet of Things and artificial intelligence (AI) work together to enhance food safety, replace manual work and improve overall store efficiency. The “Super Brain,” an end-to-end AI-enabled system, integrates data from store operations and aids the decision making of restaurant general managers. Yum China will continue to invest in digital to drive operational excellence and create a seamless experience for customers.

Next Generation Supply Chain

Yum China’s proprietary and world-class supply chain is one of its key growth enablers. The network of 33 logistics centers and consolidation centers deliver to stores across more than 1,500 cities and is ready to support further expansion. Yum China is actively using automation and intelligent technologies to make step-change improvements in supply chain traceability and productivity. To keep pace with business needs, Yum China has earmarked $1 billion of investment over the next five years for: 1) expanding the logistics network to 45 to 50 logistics centers and consolidation centers, 2) supply chain digitalization, and 3) sustainability initiatives.

Capital Allocation Plan

The Company plans to increase capital expenditures to approximately $5 billion to $6.5 billion in the aggregate over the next five years to support organic growth. Most of the capital expenditures will be allocated to accelerate growth in our core brands, remodel stores, scale up our emerging brands and enhance supply chain and digital infrastructure.

Long Term Potential

Over the long term, Yum China sees the potential to achieve high single-digit to double-digit percentage system sales growth, operating profit growth and earnings per share growth, all measured before foreign exchange impact and special items.

Webcast and Presentation Materials

A webcast of the virtual Investor Day as well as the presentation materials will be available at https://2021investorday.yumchina.com.