01 - Combine flour, sugar, yeast, and salt in a large bowl or stand mixer. Add warm milk, egg, and softened butter. Mix until a soft dough forms, then knead for 8-10 minutes until smooth and elastic.
02 - Split dough into three portions: 60% for flesh, 25% for rind, 15% for skin. Add red coloring and extract to largest portion. Leave medium portion plain. Mix green coloring or matcha into smallest portion. Fold chocolate chips into red dough.
03 - Shape each portion into balls and place in separate greased bowls. Cover with plastic wrap or towel. Let rise for 1 hour until doubled in size.
04 - Punch down each dough portion. Flatten red dough into a log the length of your loaf pan. Wrap white dough around red log, then wrap green dough around both layers. Pinch seams tightly to seal.
05 - Place loaf seam-side down in greased 9x5-inch loaf pan. Cover and let rise 30-45 minutes until puffy and doubled.
06 - Preheat oven to 350°F. Bake for 30-35 minutes, tenting with foil after 20 minutes if top browns too quickly. Internal temperature should reach 190°F.
07 - Cool in pan for 10 minutes, then transfer to wire rack. Let cool completely before slicing to reveal the watermelon pattern.