The Chinese government’s investigation of two poultry suppliers who provided chicken with unapproved levels of antibiotics to KFC has ended, but problems persist for KFC’s parent company Yum! Brands. The parent company has agreed to improve its oversight of suppliers, but says it will take time to recover from the bad publicity.
Yum! Brands warned that it expects profit for the year to decline as it works to recover from a controversy over its chicken suppliers in China. The company gave the grim forecast after its profit in the fourth quarter declined 5 percent.
Since an investigation aired on national Chinese television on December 18, Yum! has been dealing with an "onslaught of negative media attention" over its chicken suppliers, said company spokesman Jonathan Blum. The TV station had reported that suppliers were ignoring regulations and giving chickens inappropriate levels of antibiotics. The government investigation into the issue was concluded on January 25.
"Our primary emphasis now is to rebuild consumer confidence and sales in China," Blum told the Associated Press, noting that the company plans to mount a "brand reputation" campaign in coming weeks.
For the fourth quarter, a key sales figure fell 8 percent in China, more than the 6 percent decline the company had forecast. It marked the first decline in the region since 2009. While Yum! has far more locations in the U.S., its business in China is more profitable because the cost of doing business there is less. Yum is the biggest Western fast-food chain in China, with about 5,400 locations.
For the period ended December 29, 2012, Yum! said net income fell to $337 million, or 72 cents per share. That's compared with $356 million, or 75 cents per share, the same time in 2011. Analysts expected a profit of 82 cents per share on revenue of $4.13 billion.
Other chain restaurants owned by Yum! Brands include Taco Bell and Pizza Hut.
Yum! Brands warned that it expects profit for the year to decline as it works to recover from a controversy over its chicken suppliers in China. The company gave the grim forecast after its profit in the fourth quarter declined 5 percent.
Since an investigation aired on national Chinese television on December 18, Yum! has been dealing with an "onslaught of negative media attention" over its chicken suppliers, said company spokesman Jonathan Blum. The TV station had reported that suppliers were ignoring regulations and giving chickens inappropriate levels of antibiotics. The government investigation into the issue was concluded on January 25.
"Our primary emphasis now is to rebuild consumer confidence and sales in China," Blum told the Associated Press, noting that the company plans to mount a "brand reputation" campaign in coming weeks.
For the fourth quarter, a key sales figure fell 8 percent in China, more than the 6 percent decline the company had forecast. It marked the first decline in the region since 2009. While Yum! has far more locations in the U.S., its business in China is more profitable because the cost of doing business there is less. Yum is the biggest Western fast-food chain in China, with about 5,400 locations.
For the period ended December 29, 2012, Yum! said net income fell to $337 million, or 72 cents per share. That's compared with $356 million, or 75 cents per share, the same time in 2011. Analysts expected a profit of 82 cents per share on revenue of $4.13 billion.
Other chain restaurants owned by Yum! Brands include Taco Bell and Pizza Hut.
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