1、powertheofYum! Brands 2009 Annual Customer Mania Report building the definingglobal company that feeds the worldFinancial Highlights (In millions, except for per share amounts)Year-end 2009 2008 % B/(W) changeCompany sales $ 9,413 $ 9,843 (4) Franchise and license fees and income 1,423 1,461 (3) Tot
2、al revenues $ 10,836 $ 11,304 (4) Operating profit $ 1,590 $ 1,517 5 Net income Yum! Brands, Inc. $1,071 $ 964 11 Diluted earnings per common share $2.22 $ 1.96 13 Cash flows provided by operating activities $ 1,404 $ 1,521 (8) Average US Sales per System Unit (a) (In thousands) Year-end 2009 2008 2
3、007 2006 2005 5-year growth (b)KFC$ 960 $ 967 $ 994 $ 977 $ 954 1%Pizza Hut 786 854 825 794 810 Taco Bell1,229 1,241 1,120 1,176 1,168 3%(a) Excludes license units. (b) Compounded annual growth rate. ContentsDear Partners .1Winning Big in China! .23Building Strong Brands Everywhere .45Improving US B
4、rand Positions .68Driving Long-Term Shareholder Value. 9Becoming the Defining Global Company .10-12 About the pAper used for this reportTheinksusedintheprintingofthisreportcontainanaverageof25%-35%vegetableoilsfromplantderivatives,arenewableresource.Theyreplacepetroleumbasedinksasanefforttoalsoreduc
5、evolatileorganiccompounds(VOCs).Thecoverandfirst12pagesofthisreportwereprintedusingFSC-certifiedpapermadewith50%recycledcontentincluding24%post-consumerwaste.David C. Novak Chairman & Chief Executive Officer Yum! Brands, Inc.The substance starts with the power of Yum! Brands to deliver consistently
6、strong results, even in tough economic and macro environments like we faced in 2009. Thats why Im especially pleased to report we achieved 13% Earnings Per Share (EPS) growth, marking the eighth consecutive year that we exceeded our annual target of at least 10% and achieved at least 13%. We grew wo
7、rldwide system sales 1% prior to foreign currency translation and once again strengthened our claim as the number one retail developer of units outside the United States as we opened over 1,400 new restaurants, the ninth straight year weve opened more than 1,000 new units. We also improved our world
8、wide restaurant margins by 1.7 percentage points, and operating profits grew by 9% prior to foreign currency translation and special items. For the first time we generated over $1 billion in net income and we generated $1.4 billion of cash from operations. Importantly, we continued to be an industry
9、 leader with Return On Invested Capital (ROIC) of 20%. We achieved all of our goals with the exception of our same store sales, driven in large part by a weak global economy, significant unemployment and consumer confidence. However, our overall performance proved once again the resilience of our gl
10、obal portfolio of leading brands to deliver consistent double digit EPS growth. As a result, our share price climbed 17% for the full year. Over the longer term, we are gratified we have returned nearly $8 billion to shareholders through dividends and share repurchases since our spin-off from PepsiC
11、o in 1997. But the best thing about business is the unfinished business. And, Im happy to tell you we are even more excited about the opportunities we have to continue building shareholder value. Our growth will continue to come from executing four powerful and unique strategies.Dear Partners,Last y
12、ear in this letter I laid out our future-back vision to be The Defining Global Company that Feeds the World. I talked about how our goal is for Yum! Brands to lead the way in defining how to truly build a superlative global company, a company that sets the example others want to emulate. Given the f
13、act we are powered by restaurant brands that customers love around the world and already operate in over 110 countries and territories with over 1 million team members, I believed then and even more so now that we have everything it takes to make this goal a reality over time. As a matter of fact, w
14、e are absolutely determined to get this done by building a famous recognition culture where everyone counts, making our brands dynamic and vibrant everywhere, demonstrating we are truly a company with a huge heart and delivering results again and again. As you go through this report, my aim is to gi
15、ve you the substance behind our intentionality.12#1 Build Leading Brands Across China In Every Significant Category.Our experienced and tremendous local team led by our Vice Chairman of Yum! Brands and President of China, Sam Su, grew our profits a whopping 25% in 2009 on top of 28% in 2008. You don
16、t need to be a math major (and Im not!) to easily calculate thats over 50% growth in two years. The good news is that we achieved these results even though our same store sales were slightly negative as the consumer generally lagged Chinas relatively strong economic growth. We added a record 509 new
17、 units in Mainland China and now have nearly 3,500 restaurants that generated near record restaurant margins of 20% in 2009. In spite of this robust profit growth, some investors have asked: “Is Yum!s recent relatively weak same store sales performance in Mainland China an early indicator that somet
18、hing is wrong with the business or Yum! is growing too fast?” We believe the answer is definitively NO! Let me explain.For a little more perspective, let me step back to 2005, a year we saw same store sales decline 3%. That year we opened up 379 new restaurants and made $211 million. I remember some
19、 people questioned our pace of development then and the state of our business as a result of our negative same store sales. Since 2005, we have added over 1,800 restaurants and have tripled our profits to over $600 million in the China division. We have 3,400 KFCs with $1.4 million average unit volu
20、mes with margins of over 20%. We also have 500 casual dining Pizza Huts with average unit volumes of $1.2 million and margins of 19%. Given these incredible unit economics, we can open up new restaurants with cash paybacks within 2-3 years. Our single biggest advantage is we have arguably the finest
21、 operating team in the world that knows how to satisfy customers and make money. In fact, over 70% of our restaurant general managers have at least a college education and as I like to say, the rest of them are just plain smart! This tremendous store level operating capability, combined with the fac
22、t weve put in a world class infrastructure, including our own food distribution system along with one of the largest real estate and construction teams anywhere in the world, has given us a huge competitive advantage, allowing us to confidently expand KFC into more than 650 cities and Pizza Hut into
23、 over 100 cities.Our conclusion is our foundation has never been stronger. Today, just like in 2005, China is predicted to be the fastest growing major economy in the world. In fact, it is expected to grow its middle class from around 300 million today to 500 million people in 2020. Like Ive said in
24、 the past, we will no doubt have some bumpy years, but I wouldnt trade our long-term position in China with any consumer company in the world. Our strategy is to leverage our undeniable strength and compete and lead in every significant category that emerges in China. With KFC and Pizza Hut, we have
25、 already established two of the most loved brands in the fast food and casual dining category and we are now successfully developing Pizza Hut Home Service, making pizza available with very efficient, low investment pizza carryout units. We are even creating our own Chinese quick service restaurant
26、chain, East Dawning, tailored to the local favorites based on the amazing insight that Chinese peoples favorite cuisine is, believe it or not, Chinese food! Consistent with this belief, we took a 27% stake in Little Sheep, a Chinese hot pot concept, that already has more than 375 units and tons of p
27、otential.The way we look at it KFC can be every bit as big as McDonalds is in the US, ultimately reaching 15,000+ units; Pizza Hut Casual can equal the casual dining leader in the US, Applebees, achieving 2,000+ units; Pizza Hut Home Service can match delivery category leader Dominos in the US, achi
28、eving 5,000+ units. And East Dawning is attacking the Chinese equivalent to the hamburger category in the US, so who knows how high is up? I always liken our China opportunity to the days when Colonel Sanders, Glen Bell, Dan Carney and Ray Kroc started KFC, Taco Bell, Pizza Hut and McDonalds, creati
29、ng category leading brands in the US. Clearly, just like the founders of the brands I just mentioned, we are the pioneers on the ground floor of a booming category in a growing mega market. Having said this, we are constantly monitoring our returns and fully intend to remain true to our commitment t
30、o never build ahead of our people capability and unit economics. Our goal is to build a quality long-term business the right way.25%Profit Growth in 2009China Division Ongoing Growth Model: 15%+ Operating Profit Growth34Yum! Restaurants International, which operates in over 110 countries and territo
31、ries outside the US and China, continues to deliver on this strategy as it delivered 5% system sales and profit growth both excluding foreign currency translation which negatively impacted our reported profits by 11 percentage points in 2009. We treasure this divisions high return franchising model
32、with over 90% of our new restaurants built by franchisees who generate over $650 million in franchise fees, requiring minimal capital on our part. Driven by this franchisee development machine, we opened nearly 900 new restaurants in over 75 countries. Thats the tenth straight year we have opened mo
33、re than 700 new units and our pipeline remains strong as we go into 2010.Just like in China, our infrastructure represents a stand-out competitive advantage. Here, I always tip my hat to the foresight of PepsiCo which, prior to our spin-off, invested nearly 40 years and billions of dollars to establ
34、ish the global network weve turned into a 13,000 unit powerhouse. The reality is it would take the same time and commitment for others to reach our size and scale, and frankly, we dont expect most US competitors to have significant international businesses for a long time. As it stands, unlike the U
35、S where streets are lined with competition, we only face McDonalds and Dominos as major global competitors.Meanwhile, we are off and running, widening our competitive advantage, getting stronger and more diversified every year. What excites me most is that theres no doubt our calculated investments
36、in high potential markets are definitely paying off. Five years ago we were just starting to make headway in France. Today France has the highest average unit volumes in the world and now the rest of Continental Europe has a proven model to follow. Five years ago, we were nowhere in Russia. Today we
37、 have over 150 co-branded KFCs with our unique partnership with the leading Russian chicken chain, Rostiks, giving us the kind of scale it took us ten years to build in China. Five years ago, KFC was just a dream in India. Today, we have 72 units, strong sales, good margins and are on the verge of r
38、apid expansion. Five years ago all we could talk about was our checkered history with KFC in Brazil. Today, we have an outstanding local franchise partner committed to growing the business. Five years ago, South Africa was our only prospect in Africa. Today we are building on our rapidly growing Sou
39、th African 600 unit infrastructure and just opened up in Nigeria with more countries in the wings. Five years ago, we just received our license to operate in Vietnam, a country I was surprised to learn has 80 million people. Today we have over 80 franchise units. Five years ago, we were talking abou
40、t Taco Bells potential as a global brand. Today, Im pleased to say that we have entered 5 new countries in the past two years, with India opening its first Taco Bell in early 2010. Even more importantly, Ive had the great privilege to see our teams in action and there is no question under the outsta
41、nding leadership of our YRI president, Graham Allan, our local people capability is dramatically stronger in our international markets. I share all this with you to convey just how far we have come. YRI made $491 million in operating profit in 2009 and together with China, accounts for over 60% of o
42、ur operating profits compared to just 20% when we started our company. According to Business Week, we are one of only five companies in the world to have two of the top global brands with KFC and Pizza Hut. With the benefit of increasing global prosperity, the development of massive, under-penetrate
43、d markets, and aggressive franchisee-led growth, you can see why we genuinely believe YRI is our division with the greatest long-term potential. With only 13,000 units, we have barely scratched the surface reaching a combined population of 5 billion people.#2 Drive Aggressive international Expansion
44、 & Build Strong Brands Everywhere.900New Restaurants in 2009 outside of China and the US International Division Ongoing Growth Model: 10% Operating Profit Growth56Theres no question 2009 was a very disappointing year for our US business. Overall our same store sales declined 5% as we grew profits on
45、ly 1%, led primarily by a restructuring initiative we took the prior year which yielded a $65 million decrease in our general and administrative expenses. Nevertheless, we remain confident were taking the right steps to deliver stronger brand positioning, higher returns and consistent growth perform
46、ance to tap the inherent sales opportunity and ultimate value in our 18,000 restaurants. And the good news is we have the marketing strength to do so with category leading brands along with outstanding unit economics on a stand-alone basis. We also have a system that generates a steady earnings stre
47、am of over $700 million in franchise and licensing fees. As we go forward, our strategy is to better leverage our large US restaurant asset base and all our restaurants around the world with what we have coined “incremental sales layers” in these five areas:1) More options for consumers across our m
48、enu 2) More contemporary beverage options & unique desserts 3) Expanded dayparts, especially breakfast 4) Broader protein offerings 5) Contemporary assetsEvery December we host our annual investor meeting. In 2009, we intentionally chose to highlight the fact that “85% of our profits are generated i
49、n China, Yum! Restaurants International and Taco Bell US.” In particular, we wanted to drive home the fact Taco Bell is our big US growth engine, accounting for over 60% of our US profits and consistent net unit growth with lots of potential. While Taco Bell is coming off a year when same store sale
50、s were down 1%, we had very strong profits and significantly improved our operating margins.You might be surprised to learn Taco Bell is already the second most profitable brand in the US, one of the many reasons why we are so bullish about this brands future. This success is driven by the uniquenes
