Pizza Hut 2011 Annual Report Download - page 5

Over half our operating profit is now generated in China and the
72 other emerging countries in which we operate throughout the
world. Yum!’s strongest businesses are located where the highest
growth is expected to occur in the years ahead. This is a very
powerful combination.
We view China as the best restaurant growth opportunity of the 21st
century. Our brands further strengthened their category-leading
positions with a record 656 new restaurants and extraordinary
same store sales growth of 19% this past year. KFC now has 3,701
restaurants in over 700 cities throughout the country, and continues
to expand into new cities as well as increase its penetration levels
in existing markets. Pizza Hut Casual Dining now has 626 units and
is successfully expanding in lower-tier cities. Its strategy to offer
tremendous variety, everyday value and refresh 25% of its menu twice
per year has consistently driven sales and profit growth. It’s important
to note that China new unit returns are the best in our business, with
cash paybacks within 3 years.
The macroeconomic environment continues to
work in our favor in China. Rising incomes are
making our brands even more affordable for an
increasing number of people. In fact, the consuming
class is expected to double over the next 10 years,
going from 300 million to at least 600 million
people, as significant urbanization continues. With
this tailwind, our new-unit development pace should
continue at a high rate, and same store sales should
continue to grow.
Our strategy in China is to have leading brands in every significant
category. KFC is the clear leader in western quick service restaurants.
Pizza Hut is far-and-away the western casual dining leader. We’re
developing Pizza Hut Home Service to capture the growing off-
premises market and now have 135 units. We’re also building East
Dawning to be the premier mainstream Chinese food quick service
restaurant concept.
And I’m pleased to say on February 1, 2012, we acquired Little Sheep,
a leading casual-dining concept in China, with approximately 450
system restaurants. This acquisition advances our strategy to have
leading brands in every significant category in China. We are looking
forward to strengthening Little Sheep’s operational model and
increasing its market leadership position. We’re very excited about
the long-term potential of this brand and will make the necessary
investments required to ensure its success.
First, our lead-
ership position
in China and
other emerging
markets:
We’re building East Dawning to be
the premier mainstream Chinese
food quick service restaurant.
135
Pizza Hut Home Service stores
in China.
656
New restaurants in China in 2011.
3