Dear Stockholders, - Yum China Holdings, Inc.

Dear Stockholders,I want to start by thanking our employees for their dedication, and our customers, business partners and shareholdersfor their trust placed in Yum China in this most unprecedented year.Good times build confidence; bad times build character. While the COVID-19 pandemic challenged our people,systems and capabilities, Yum China showed its resilience, responding with compassion, world-class execution andinnovation. After the pandemic hit in the first quarter, KFC and Pizza Hut recovered sales sequentially and deliveredsolid profit. Our financial strength allowed us to honor commitments to our employees for scheduled hours andextend much needed support to our employees and business partners. We captured market opportunities andaccelerated new store openings, ending the year with 10,506 stores. We drove growth in coffee and Chinese diningwith the joint venture with Lavazza and acquisition of Huang Ji Huang, respectively. Finally, we improved our accessto shareholders in Asia by listing in Hong Kong in September, making us the first Delaware-incorporated company tolist on both the New York Stock Exchange and Hong Kong Stock Exchange.Commitment to Employee Care 961millionOperating Profit 732millionAdjusted Operating Profit 695We could not have navigated the challenges we facedwithout the commitment and creativity of our employees.Yum China is committed to a “People First” philosophy,and the pandemic reinforced our determination to carefor our employees. After the COVID-19 outbreak, weextended our family care coverage for critical illnessand accidents to the restaurant management team andsupervisors. By year end, more than 18,000 employeesand 40,000 family members were covered underthis program. In addition, we established a fund withcontributions from our senior executives, board membersand employees to help frontline employees and theirfamilies impacted by COVID-19.As a testament to our commitment to employee care, forthe third consecutive year, we were both certified as aTop Employer China by the Top Employers Institute andnamed to the Bloomberg Gender-Equality Index (GEI).Yum China is the only company operating in mainlandChina included in the latest Bloomberg GEI. YumChina has also endorsed the United Nations Women’sEmpowerment Principles, demonstrating our commitmentto promoting gender equality in our workplace, industryand communities.millionFree cash flow fromoperations (Net cash fromoperating activities minuscapital expenditure)This letter contains “forward-looking statements.” We intend all forward-looking statements to be covered by the safe harbor provisions ofthe Private Securities Litigation Reform Act of 1995. Refer to page 1 of our Annual Report on Form 10-K for additional information.

Serving the Community andProtecting the EnvironmentWe strive to be a responsible corporate citizen, andsupport our communities during times of difficulty. Evenat the peak of the outbreak, a majority of our restaurantsremained open, so that millions of people could haveaccess to safe and hearty meals. To protect the healthand safety of our employees and customers, we quicklyput in place robust health measures such as contactlessdelivery and takeaway. Yum China also supported ourcommunities by providing donations, free meals, andvolunteer services to medical workers on the frontline.We have also made significant progress in sustainabilityand were named the Industry Leader for the Restaurant& Leisure Facilities Industry in the 2020 Dow JonesSustainability Indices. In December 2020, we launcheda series of plastic reduction initiatives, such asreplacing plastic straws, cutleries and packagingwith environmental friendly materials. In addition tocomplying with regulatory requirements, we are workingtowards a 30% reduction on non-degradable plasticpackaging weight by 2025. We also refuse to purchasepaper products from suppliers that knowingly causedeforestation.Innovation-Led StrategyCOVID-19 did not derail us from our vision to be theworld’s most innovative pioneer in the restaurant industry.One area of innovation of which I am most proud is ourability to launch disruptive products that resonate withconsumers. In 2020, we launched approximately 500new or upgraded products at great prices. For example,at KFC we launched the Wagyu beef burger, tea-infusedhard-boiled egg and tofu pudding, while at Pizza Hut weintroduced roasted sirloin steak with rice on an iron pan,baked crayfish with salted eggs and volcano tiramisuwith Belgian chocolate. We also tested regional flavorsin selected markets, such as Wuhan hot dry noodles andSichuan spicy crayfish (a great late-night snack!).Our innovation capabilities have made it possible for us toquickly adapt to evolving consumer demands. KFC, PizzaHut and Taco Bell were among the first western restaurantbrands to introduce plant-based meat products inChina, providing consumers with more healthy choices.To address the home-consumption trend, Pizza Hutlaunched ready-to-cook steak for takeaway and deliveryin early 2020. We also launched ready-to-heat chickensoup, fried rice, and a popular spicy noodle dish (Luosifen)in late 2020 under a new retail brand, which leverages ourproduct innovation capabilities, supply chain and online/offline assets. We are encouraged by the excitementsurrounding the launch and are working on otherattractive additions to our offerings.1

Our Growth InitiativesDespite the challenges in 2020, we remain confident in thegrowth opportunities in China and have been staying thecourse with our long-term strategy. We believe the YumChina of the future will have a much larger footprint acrossChina, enabled by growth in our store network, growthin our portfolio of brands and growth in our digital anddelivery capabilities.Store Network ExpansionIn a year that was anything but normal, we opened1,165 new stores. This marks the highest number ofnew openings in our history of operating in China.More importantly, we remain disciplined with our storeexpansion. The payback period for new stores continuesto be healthy at approximately 2 years for KFC and 3 to4 years for Pizza Hut. There is still ample white space inChina to grow. We have been tracking several hundredcities that we currently do not have a presence yet forKFC and even more cities for Pizza Hut. Smaller storeformats such as the “small town model” at KFC and “Huband Spoke model” at Pizza Hut will enable us to penetratelower-tier cities and increase density in existing cities.While it took us 33 years to reach 10,000 stores, we intendto accelerate our store expansion to reach the next 10,000at a faster pace!Small Town modelHub and Spoke modelOur leadership position in China is underpinnedby our world-class supply chain management andnationwide network. Consisting of 25 logistics centers, 7consolidation centers, over 2,000 cold-chain trucks andreal-time monitoring systems, our supply chain enablesus to serve quality food to our customers and helps fuelstore expansion in China. To efficiently and adequatelysupport our store expansion, we will continue to investin strengthening our logistics and other operationalinfrastructures.1,165New stores210,506Total stores(at year end 2020)across1,500 cities

300 80%million membersDigital ordersOff-premise salesKFC and Pizza Hut combined(at year end 2020)KFC and Pizza Hut’sCompany salesKFC and Pizza Hut’sCompany sales 50%Growing Emerging BrandsWhile we remain dedicated to the growth of our corebrands, there are considerable opportunities in scalingour emerging brands, including two segments withstrong growth potential: coffee and Chinese dining.We have three distinct coffee brands with clearsegmentation and strategy. At KFC, K-Coffee offersgood quality coffee at affordable prices. Over 140 millioncups of K-Coffee were sold in 2020. Meanwhile, COFFii& JOY offers specialty coffee for coffee lovers utilizingan asset-light model. In addition, we opened Lavazza’sfirst flagship store in Asia in early 2020 with premiumcoffee and high-quality food offerings. Since then, fouradditional beautiful Lavazza stores have been opened inShanghai. Encouraged by the overwhelmingly positiveconsumer feedback of our initial stores, we expect toaccelerate the store openings for Lavazza and testdifferent store formats. We are excited about the growthpotential across all our coffee brands and are committedto making coffee a meaningful part of Yum China.K-coffee capsulesThe Chinese cuisine market is massive. In particular,hot pot is very popular in China. In 2020, we acquiredHuang Ji Huang, an industry-leading simmer pot brand.In tandem with this acquisition, we established a Chinesedining business unit to consolidate and strengthen ourcapabilities in Chinese dining. We are pleased with theintegration progress and will continue to drive synergiesbetween Huang Ji Huang and Little Sheep in the areasof menu innovation, seasoning distribution, supply chainand franchise development.3

Joey WatChief Executive OfficerYum China Holdings, Inc.Driving Growth with Digital and DeliveryWe started to accelerate our digital capabilities overhalf a decade ago. Today, Yum China has developed apowerful digital ecosystem, which allows us to betterengage with our customers throughout the customerjourney. Digital ordering increased from approximately55% of KFC and Pizza Hut Company sales in 2019 to80% in 2020, reflecting the increased popularity ofdelivery and mobile ordering. Our membership basecontinued to grow, exceeding 300 million by year end,and accounting for approximately 60% of system salesof KFC and Pizza Hut in 2020. We are leveraging avariety of tools to further improve member stickinessand spending. For example, our privilege subscriptionprogram has been effective in increasing memberspending during the subscription period.Powered by our digital and delivery capabilities, wecaptured the shift in customer demand to deliveryand takeaway. Off-premise dining accounted for over50% of our KFC and Pizza Hut Company sales in2020, compared to approximately 40% in 2019. Withredesigned menu items, packaging suitable for takeawayand enhanced digital platforms, Pizza Hut nearly doubledits takeaway sales mix in 2020. We continued to improveour delivery rider management by upgrading our riderplatform with better zoning and rider routing, and rollingout trade zone and cross-brand rider sharing.The pandemic highlighted the importance of digital anddelivery. We will continue to invest in this area, to achievegreater digitization, automation and intelligence acrossour operations. The capability to track, analyze andautomate across our value chain, from farm to fork, willmake us even stronger and nimbler.Last but not least, Yum China is committed to providingsteady shareholder returns. With our strong cashgeneration capabilities, we have returned approximately 1.2 billion to our shareholders since we became anindependent public company in 2016. After suspendingour share repurchases and, for two quarters, cashdividends due to the unprecedented effects of theCOVID-19 pandemic, we resumed cash dividends in thefourth quarter of 2020. I am confident that our strategicgrowth initiatives will position Yum China well to yieldsustainable returns for our shareholders in the long-run.I am humbled to lead this talented and dedicated team.We will remain focused on positioning Yum China forsustainable long-term growth, while working with ouremployees, customers, shareholders, and businesspartners to create positive impact on our communitiesand the environment.Joey WatChief Executive Officer4

Apr 25, 2021 · Yum China is the only company operating in mainland China included in the latest Bloomberg GEI. Yum . Refer to page 1 of our Annual Report on Form 10-K for additional information. 1 Serving th