01 - Combine flour, sugar, yeast, and salt in a large bowl or stand mixer bowl.
02 - Add warm milk, egg, and butter. Mix until a soft dough forms, then knead for 8-10 minutes until smooth and elastic.
03 - Separate dough into three portions: 60% for red flesh, 25% for white rind, and 15% for green skin.
04 - Add red or pink food coloring and watermelon extract to the largest portion. Knead until color is evenly distributed, then fold in chocolate chips as seeds.
05 - Leave the medium portion plain for the white rind layer.
06 - Mix matcha powder or green food coloring into the smallest portion for the outer skin.
07 - Shape each portion into balls, place in separate greased bowls, cover, and let rise for 1 hour until doubled in size.
08 - Punch down each dough. Flatten red dough into a log the length of your loaf pan. Wrap white dough around the red log, then wrap green dough around both layers. Pinch seams to seal.
09 - Place seam-side down in a greased 9x5-inch loaf pan. Cover and let rise for 30-45 minutes until puffy.
10 - Preheat oven to 350°F.
11 - Bake for 30-35 minutes, tenting with foil if the top browns too quickly.
12 - Cool in pan for 10 minutes, then remove and cool completely before slicing to reveal the watermelon pattern.