To understand Yum China, first learn how to piece together a chicken.

Take root downward and grow upward.

Chickens are the silent shareholders in the catering industry.

In China's per capita meat consumption, chicken ranks second only to pork, with an average of 10 kilograms of chicken consumed per person per year. It accounts for a significant proportion in the raw material list and has the highest frequency of appearance in the product line. However, in most business stories, it is just a cost item that is briefly mentioned.

What's really interesting is that when you start to trace the whereabouts of a chicken, you'll find that it's not just a trivial matter in the kitchen, but a mirror reflecting a company's underlying capabilities.

Where does the breast meat go, where do the wing tips go, and who uses the skeletons and chicken feet... Every part of the chicken is worth calculating. Even on a crazy Thursday, when you walk into KFC, you'll find that the "chicken cooking expert" doesn't even let go of the chicken feathers. The childhood nightmare, the feather duster, has become the craziest product partner.

In fact, for catering enterprises that use chicken as the main raw material, whether a chicken can be used well is not only a matter of cooking skills, but also a matter of whether the organization, supply chain, food innovation, digitalization, and even the human resource system can operate in coordination.

How to make good use of a chicken, save money for oneself, and provide consumers with better products at lower prices? Let's take a look at the answers given by Yum China, the parent company of KFC, at yesterday's Investor Day:

The first picture is from the speech of Joey Wat, the CEO of Yum China. Since 2016, China's Consumer Price Index (CPI) has risen by 13%, but Yum China has not passed on this cost to consumers.

"Someone once asked me what the secret is for us to maintain our leading position, resilience, and achieve profit growth. In fact, it's not only about what we do, but also about what we don't do. For example, we didn't raise prices in line with the market, which was not an easy decision. We decided to focus on the mass market because we foresaw that consumers would pay more and more attention to cost - effectiveness," said Joey Wat.

The second picture is from the breakdown of effective price management by Huang Duoduo, the Chief Supply Chain Officer. It can be seen that the core raw material of KFC's signature product, "Finger - Lickin' Good Original Recipe Chicken", the nine - piece chicken, has always outperformed the market trend.

The strategy to improve the supply chain efficiency is also very simple - "assemble a chicken". Behind this seemingly humorous strategy is Yum China's flexible procurement policy, diversified supplier composition, and consumer - centered product innovation mechanism.

Looking further, Yum China is not only "assembling a chicken", but also "assembling new models" through the flexible combination of KPRO, KCOFFEE, and KFC, and "assembling digital employees" through AI. The powerful back - end synergy enables every module of Yum China to be as flexible as Lego bricks, showing strong vitality through flexible combinations.

The shackles of growth do not lie in demand

But in the "foundation"

China's catering market has always been very lively.

Street - side brands are expanding, SKUs are exploding, and various "new product battles" are emerging one after another. From the consumer's perspective, this visual density creates an illusion of "seemingly no space".

However, what we see may just be a kind of "visual saturation" in business, rather than indicating that the industry has no growth space. If we raise our perspective, another picture gradually becomes clear: The demand is rising, the scenarios are expanding, and it's only those growth methods that rely solely on front - end promotion that have reached their limits.

Yum China announced several interesting sets of data at the Investor Day. From a commercial perspective, the chain - store rate of China's catering industry is only about 20%, far lower than that of mature markets in Europe and the United States, which often exceed 50%. From a consumption structure perspective, by 2030, the frequency of dining out at home and abroad is expected to increase from 3.5 times to 5.5 times, and consumer demand is still rising.

Coupled with the continuous expansion of low - tier cities and new consumption scenarios, the catering industry still has great potential. What really restricts catering enterprises from moving forward should be the parts that are not visible on the street, such as whether the supply chain is agile enough, whether the store operation is light enough, whether the single - store manpower is stable enough, and whether new product R & D can run faster at a lower cost... These are the foundations related to efficiency and innovation.

The gap in these capabilities can only be shown in a large - scale chain system. Once formed, it cannot be narrowed by one or two popular products.

In recent years, Yum China has not maintained profitability by raising prices, nor created the illusion of "new product prosperity" by infinitely expanding product categories, and has not pinned its growth on short - term marketing volume.

Joey Wat, the CEO of Yum China, summarized this strategy as "pricing is business operation, and pricing determines survival".

With the same raw materials, Yum China can achieve higher utilization rates and more diverse product fates.

For example, by "massaging" the chicken and using unique seasonings, it created the delicious and juicy "Golden SPA Chicken Burger" at an affordable price. Another example is that through innovative methods, it re - explored the segmentation of chicken wing roots and developed the "super single product", the Spicy Chicken Wings, which has now grown into a pillar SKU with an annual sales volume of over 2 billion. Through the synergy of food innovation and the supply chain, it meets the rational consumer demand.

Behind this is Yum China's profound understanding of "value": Consumers want value for money, and enterprises want to maintain a sense of value with their underlying capabilities.

With the same chicken, Yum can break it down into multiple SKUs to support multiple brands; with the same franchise model, while others treat it as a light - asset model, Yum uses it as an interface for the spill - over of back - end capabilities. The businesses that can be supported and magnified by the underlying capabilities may be the solution to growth at this stage.

Now it seems that Yum China's judgment is clear. A company that can handle the "integrity of a chicken" well and push the system efficiency to the upper limit of the industry will naturally have a longer growth path. Once the back - end becomes stronger, the front - end's multi - brand, multi - scenario, and multi - channel development is not a risk, but a natural expansion.

The invisible soil

Determines how high the bamboo can grow

To understand why Yum China's strategy can be implemented, we need to shift our perspective from "stores and brands" to the underground.

"Bamboo grows at an amazing speed and can withstand the wind and rain. In the past 38 years, our business has been growing rapidly like bamboo and maintaining resilience in the cycle," Joey Wat described Yum China as a bamboo forest at the Investor Day. "The real secret lies underground: before breaking through the ground, bamboo takes 3 - 5 years to take root and form a vast interconnected root system. After the root system is stable, the bamboo can grow one meter a day."

Yum China's root system is an interlocking network. The supply chain, digital and membership system, food innovation, organization, and talent. These capabilities are intertwined, becoming the foundation of the enterprise like a root system.

Taking the supply chain as an example, the company continuously improves the supply - chain efficiency through streamlining. However, "Streamlining" does not mean thinning the menu, but deleting the "complexity that is meaningless to the system". Instead of pursuing more, it pursues leaving the large single products that can amplify the scale effect and using every piece of raw material in the most efficient way through continuous innovation.

For KFC's core category, chicken wings, in addition to the Spicy Chicken Wings with an annual sales volume of 4 billion, the newly launched "Crispy Golden Sand Chicken Wings" this year, a Chinese - style chicken wing, is as popular as the roasted chicken wings, demonstrating the amplifying effect of innovation on driving sales of core categories.

For the highly seasonal crayfish products, Yum uses digital technology for real - time price monitoring, drives product R & D through procurement, and turns the original single - line R & D into a multi - sided linkage, enabling every part of the chicken to find its "blockbuster fate".

This, in turn, allows Yum China's supply chain to support more brands and SKUs. As a result, The larger the store scale, the lower the risk; the more effective SKUs, the smaller the pricing fluctuation. In the past three years, Yum China has launched more than 1,600 innovative or upgraded products, and more than 100 of all Yum China products have an annual sales volume of over 100 million yuan.

The reason why bamboo roots can form a network underground is that they can "share".

At Yum, the "shared" infrastructure is digital infrastructure, which uses various cutting - edge technologies to make the front line lighter. Capabilities such as AI order replenishment, intelligent inventory and forecasting models, digital store operation, and membership system are aggregated into a brain. The differences between regions, stores, and even employees are continuously narrowed through data, the trial - and - error cost drops sharply, and the pressure on stores at the execution level is also relieved.

Bamboo roots don't grow randomly. They adjust their direction according to the changes in water, light, and soil. Food innovation is the extension direction of this root system. The core decision - making of Yum China's food innovation strategy is whether new products can be digested by the supply chain, understood by the digital system, and verified by the membership system. This is why it can maintain a very high hit rate for new products.

The underground root system accumulated over nearly four decades determines Yum China's current speed and resilience.