Pizza Hut 2008 Annual Report Download - page 6

#1
bUild leading brands across cHina in
every signiFicant category.
With KFC and Pizza Hut, we have 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. We are even creating our own Chinese quick service restaurant
chain, East Dawning, tailored to the local favorites based on the amazing insight that
Chinese people’s favorite cuisine is, believe it or not, Chinese food!
While the China economy has at least temporarily declined from it’s robust double
digit growth to what is projected to be 6% growth in 2009, we continue to believe
we are in the rst inning of a nine inning ball game with a business that has already
achieved tremendous scale (3,000+ units) and nearly a half billion dollars in prot.
In fact, there is no question we are uniquely and competitively positioned to capitalize
on what we believe will be and remains the biggest growth opportunity for the
restaurant industry in the 21st century.
Consider this, there are 300 million people in the U.S. and there are already
over 600 million cell phone users in China out of a general population of 1.3 billion.
There has been double digit personal income growth the past four years with over
18 million people entering the cities each year. The market share for chain restaurants
is less than 3% in China with plenty of room to grow. There is high purchase intent of
Western brands and consumer demand for quality is growing sharply.
Furthermore, China is our highest returning international business with a cash
payback on investments of approximately two years which is why we are investing
our own capital to be primarily company owned and operated. As we have built
the business, we’ve put in place a world class infrastructure to give us a long-term
competitive advantage. We uniquely own our own food distribution system that has
allowed us to expand KFC into more than 500 cities in China and make Pizza Hut
available in nearly 100 cities. We have one of the largest real estate and construction
teams of any retailer in the world that opened over 500 traditional restaurants in
2008 as we generated 7% same store sales growth in China. We have also developed
target manufacturing capability for our proprietary dessert line of egg tarts and pizza
dough making. And we continue to grow our people capability ahead of the business
by recruiting and retaining talent with highly sought after and well paying jobs. In fact,
our China executive team and store operations are best in class in the Yum! world.
4