Pizza Hut Is the World's Leading Casual Dining Chain
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Information herein is as of 4/22/08 ThisThis presentationpresentation willwill includeinclude forward-lookingforward-looking statementsstatements thatthat reflectreflect management’smanagement’s expectationsexpectations basedbased onon currentlycurrently availableavailable data.data. However,However, actualactual resultsresults areare subjectsubject toto futurefuture eventsevents andand uncertainties.uncertainties. TheThe informationinformation inin thethe presentationpresentation relatedrelated toto projectionsprojections oror otherother forward-lookingforward-looking statementsstatements maymay bebe reliedrelied onon subjectsubject toto thethe safesafe harborharbor statementstatement postedposted onon ourour WebWeb site:site: www.yum.com.www.yum.com. Today’s Agenda WelcomeWelcome .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. TimTim JerzykJerzyk OpeningOpening RemarksRemarks .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. DavidDavid NovakNovak DrivingDriving SustainedSustained GlobalGlobal GrowthGrowth .. .. .. .. .. .. Rick Carucci YRIYRI GrowthGrowth StrategyStrategy .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. GrahamGraham AllanAllan BREAKBREAK TacoTaco BellBell .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. GregGreg CreedCreed PizzaPizza HutHut .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. ScottScott BergrenBergren KFCKFC .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. GreggGregg DedrickDedrick LUNCHLUNCH :: KFC,KFC, PizzaPizza HutHut && TacoTaco BellBell FoodFood InnovationInnovation Today’s Agenda U.S.U.S. BrandsBrands BreakoutBreakout Sessions/Q&ASessions/Q&A #1#1 .. .. .. .. .. LeadershipLeadership TeamTeam BREAK:BREAK: MoveMove toto 2nd2nd BreakoutBreakout SessionSession U.S.U.S. BrandsBrands BreakoutBreakout Sessions/Q&ASessions/Q&A #2#2 .. .. .. .. .. LeadershipLeadership TeamTeam BREAK:BREAK: Beverage/DessertBeverage/Dessert InnovationInnovation Q&AQ&A .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. DavidDavid NovakNovak RickRick CarucciCarucci ClosingClosing RemarksRemarks .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. DavidDavid NovakNovak RestaurantRestaurant ToursTours atat KFCKFC andand TacoTaco BellBell Driving Shareholder Value thru Significant Share Buybacks $ (million) $981 Q1 '04 Q1 '05 Q1 '06 Q1 '07 Q1' 08 $0.6 Bn $1.1 Bn $1.0 Bn $1.4 Bn Not Your Ordinary Restaurant Company BuildBuild Leading Leading Brands Brands inin China China inin Every Every SignificantSignificant Category Category DriveDrive AggressiveAggressive International International ExpansionExpansion and and Build Build StrongStrong Brands Brands EverywhereEverywhere DramaticallyDramatically Improve Improve U.S.U.S. Brand Brand Positions, Positions, ConsistencyConsistency and and Returns Returns DriveDrive Industry-Leading,Industry-Leading, Long-Term Long-Term ShareholderShareholder and and Franchisee Franchisee ValueValue Not Your Ordinary Restaurant Company BuildBuild Leading Leading Brands Brands inin China China inin Every Every SignificantSignificant Category Category DriveDrive AggressiveAggressive International International ExpansionExpansion and and Build Build StrongStrong Brands Brands EverywhereEverywhere DramaticallyDramatically Improve Improve U.S.U.S. Brand Brand Positions, Positions, ConsistencyConsistency and and Returns Returns DriveDrive Industry-Leading,Industry-Leading, Long-Term Long-Term ShareholderShareholder and and Franchisee Franchisee ValueValue Global Consumer Leader in Shareholder Payout 3-Year Annual Average 2005 – 2007 8.8% 7.7% 7.3% 5.9% 5.2% 5.2% 4.6% 4.3% Source: Thomson Financial Data Payout = (Dividends + Repurchase) / Average Market Capitalization Significant Shareholder Payouts Through MeaningfulMeaningful DividendDividend AND SignificantSignificant AddingAdding ShareShare ShareholderShareholder BuybacksBuybacks ValueValue Quarterly Dividend Growth ~4x $0.25 Today… initial 27% increase, dividend $0.20 from $0.15 to $0.19 per share Doubled $0.15 $0.10 30% 15% Increase Initiated Increase $0.05 $0.00 7 '04 '0 '07 '08 1 '05 Q3 Q Q3 '05 Q1 '06 Q3 '06 Q1 Q3 Q1 Note: split-adjusted (May 2007 2-for-1 stock split) quarterly dividend Driving Sustained Global Growth Driving Sustained Global Growth New Growth Vehicles Improving Competitive Positioning Huge Unit Growth Opportunity Favorable Global Earnings Portfolio Sales Layers Leveraging Our Assets Growth-Oriented Earnings Portfolio Operating Profit Operating Profit Mix % Growth Profit ’02 ’07 Target Impact China 10 24 20 % + 5% YRI 21 30 10 % + 3% U.S. 69 46 5 % + 2% + 10% Shifting Towards Higher Growth Businesses Note: Operating profit mix % excludes corporate allocation Earnings Portfolio Driven by Global Growth % of Total Operating Profit 2017 F 2007 24% 30% 40% China U.S. China China 46% U.S. U.S. 30% 30% YRI YRI Note: Excludes corporate allocation New Unit Growth: Global Opportunity Traditional Restaurants Restaurants per million people (‘000) 60 U.S. 18 Mainland 2.6 China (MLC) 2 3 YRI 12 U.S. MLC YRI Select Growth Markets: 2 Billion People Population Yum! Restaurants Per (million) Restaurants Million People India 1,130 173 0.2 Indonesia 234 620 2.6 Brazil 190 69 0.4 Russia 141 140 1.0 Nigeria 135 0 0 Vietnam 85 46 0.5 Germany 82 123 1.5 France 63 166 2.6 Subtotal 2,060 1,337 0.6 Note: Traditional units as of Q1 2008 Unit Growth Acceleration: U.S. Yum! U.S. Total Units* Avg Annual +275 +626 +551 +512 Increase 20,037 14,921 9,408 3,148 403 '60’70’80’90’00 * Taco Bell, Pizza Hut and KFC Unit Growth Acceleration: China Yum! Mainland China Total Units Avg Annual +24 +232 Increase 2,558 241 1 ’87 ’97 ’07 Unit Growth Acceleration: YRI Total Units Avg Annual Increase +14 +121 (Select Growth Markets) 12,354 10,418 8,649 Select Growth Markets ’97 ’02 ’07 ’12 F Strong International Competitive Position Total Units (000s) Other Top 10 U.S. 53,598 QSR* 15,199 20,061 14,528 13,774 17,272 U.S. INTERNATIONAL *Subway, Wendy’s, Burger King, Sonic, Arby’s, Jack in the Box, Domino’s, Papa John’s, Hardee’s, Popeye’s Source: Piper Jaffray restaurant benchmark book (September 2007) Competitive Position: Two Scale Players International Marketing Spending ($ million) $1,700 $800 Average of Other Top 10 $40 U.S. QSR Concepts Note: Company estimates Power of Competitive Positioning ScaleScale AdvantageAdvantage Marketing Spend Higher Brand Awareness Purchasing Power Greater Cost Efficiencies Talent Base Stronger Leadership AA VViirrttuuoouuss CCyyccllee Yum! Position Strengthening vs. McDonald’s Outside U.S. Total Units Outside the U.S. 2002 2007 CAGR 11,798 15,400 +5% 17,61717,515 Flat Difference (5,819) (2,075) Note: Excludes corporate allocation Expanding Lead in South Africa 2002 2007 341 479 McDonald’s89 110 Advantage: KFC+252 +369 Taking the Lead in Middle East 2002 2007 293 462 McDonald’s338 450 Advantage: KFC(45) +12 Expanding Lead in Indonesia 2002 2007 181 300 McDonald’s105 105 Advantage: KFC+76 +195 New Growth Vehicles EastEast DawningDawning PizzaPizza HutHut HomeHome ServiceService TacoTaco BellBell InternationalInternational PizzaPizza HutHut DeliveryDelivery Summary: Sustaining Global Growth Strong and Even Better Earnings Growth Model Long Runway for Global Unit Growth Improving Competitive Position Incremental Growth Potential from New Concepts Achieving Explosive Growth Around the World Key Messages • Strong and diverse business with consistent track record • Category leading brands with huge upside • Exciting potential in key growth markets • High returns for shareholders Another strong year in 2007… Profit ($MM) $480 12% $407 12% $372 9% $337 2004 2005 2006 2007 Notes: 2004 profit and growth do not include impact from expensing stock options Growth rates exclude Fx and the impact of the extra week in 2005 … built on record openings and healthy growth in unit volumes New Openings Same Store Sales Growth 852 6% 780 785 4% 2% 2005 2006 2007 2005 2006 2007 Several key elements in consistent results • Strength of local management – 15 Business Management Units – Local teams – $375MM of G&A in 2007 • Tradition of in-market innovation • Local relevance • Culture of discipline and urgency • Balanced portfolio Well balanced portfolio Developed Developing Markets Markets Total Units 57% 43% 12,173 ’07 Growth (23) 486 463 System Sales 63% 37% $13B ’07 Growth /1 5% 18% 10% Population /2 750M 4.3B 5.1B GDP per Capita /2 $30K+ <$3K $8K /1 Ex Fx /2 Data excludes US and China Significant franchise base driving majority of growth Units New Unit Openings 12,173 852 11,710 785 13% 6% Equity 15% 6% Franchise 85% 87% 94% 94% 2006 2007 2006 2007 KFC is already a global powerhouse… YE 2007 Units 2007 Net Builds Africa 500 38 Americas 1,539 17 Asia 2,459 111 Australia/New Zealand 654 9 Europe 1,272 111 Middle East 462 50 Total 6,886 336 …and is bigger than McDonald's in many parts of the world YE 2007 Units South Africa 479 110 Malaysia 402 176 Indonesia 300 105 Caribbean 246 154 Ecuador 76 15 UAE 67 51 Other 5,316 16,028 Total 6,886 16,639 KFC is positioned around Taste all around the world • Global cohesion is significant development • Respect for local culture – Menu – Marketing • Credible, resonant and relevant point of difference • Filter for new products and consumer communication Committed to making KFC