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 food service industry.

Among the per capita meat consumption in China, 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 inquire about the whereabouts of a chicken, you'll find that this is 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? 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 chicken feathers. The childhood nightmare, the feather duster, has become the craziest product partner.

In fact, for food service 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 question of whether the organization, supply chain, food innovation, digitalization, and even the human resources system can operate in a coordinated manner.

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 answer 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, the Consumer Price Index (CPI) in China has increased 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 supply chain efficiency is also very simple - "put together a chicken". Behind this seemingly humorous strategy lies Yum China's flexible procurement policy, diverse supplier composition, and consumer - centered product innovation mechanism.

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

The shackles of growth do not lie in demand

They lie in the "foundation"

The food service market in China has always been very lively.

Street - side brands are expanding, the number of SKUs is 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 relying solely on front - end hard - pushing 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 in the Chinese food service industry is only about 20%, far lower than that of mature European and American markets, which often exceed 50%. From the perspective of consumption structure, 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 food service industry can still be described as having great potential. What really restricts food service 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 store operations are light enough, whether the manpower in a single store is stable enough, and whether new product R & D can be carried out faster at a lower cost... These are the foundations related to efficiency and innovation.

The differences in these capabilities can only be shown in a large - scale chain system. Once formed, they cannot be smoothed out 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 operation, and pricing determines survival".

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

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

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

With the same chicken, Yum China 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 China regards it as an interface for the spill - over of back - end capabilities. Those businesses that can be supported and magnified by the underlying capabilities may be the solution for 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 multi - brand, multi - scenario, and multi - channel front - end is not a risky move, but a natural expansion.

The invisible soil

Determines how tall 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 storms. In the past 38 years, our business has been growing rapidly like bamboo and maintaining resilience during the cycles." 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. Only after the root system is stable can the bamboo grow one meter a day."

Yum China's root system is an interlocking network. Supply chain, digital and membership systems, 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 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 magnify 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 annual sales of 4 billion, the newly launched "Thin and Crispy Golden Sand Chicken Wings" this year, a Chinese - flavored 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 China 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, allowing every part of the chicken to find its "blockbuster fate".

This, in turn, enables 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 price 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 annual sales exceeding 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 operations lighter. Capabilities such as AI order replenishment, intelligent inventory and prediction models, digital store operations, and membership systems are aggregated into a brain. The differences between regions, stores, and even employees are continuously reduced through data, the trial - and - error cost has dropped significantly, and the pressure on stores at the execution level has also been relieved.

Bamboo roots don't grow randomly; they adjust their direction according to changes in water, light, and soil. Food innovation is the extension direction of this root system. The core 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 they can maintain a high hit rate for new products.

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

People

The most crucial roots in this bamboo forest

In this "bamboo forest" narrative, what is most easily overlooked is actually "people".

The real strength of a bamboo forest has never been the height of a single bamboo, but how the rhizomes connect the roots and stems into a system. For Yum China, this "rhizome" is the RGM at the front - line. It enables the judgment of the underground root system, the stability of the supply chain, and the speed of food innovation to be transformed into stable business results at the front - end.

Inside Yum China, restaurant managers are called RGMs (Restaurant General Managers). It's worth mentioning that the long - adhered - to value is "RGM No.1 (Restaurant Manager First)".

The coincidence between R.G.M as the naming of the corporate strategy and RGM as the job title is a signal in itself. Previously, it has completed the transformation from resilience to growth. Now, Yum China no longer sees resilience and growth as a trade - off, but requires that in the same system, it should simultaneously balance anti - volatility, seek growth, and build a moat. And it's still the RGMs at the front - line of the restaurants who truly implement this set of strategies.

Yum China's strategy for the RGM role still retains the idea