What is in this article?:
- Yum China overhauls supply chain, marketing
- Focusing on progress
Yum China announced a new marketing campaign to highlight several of its planned changes for sourcing chicken.
Yum! Restaurants China, the 5,400-plus-unit division of Louisville, Ky.-based Yum! Brands Inc., began a campaign to reassure Chinese consumers of its food safety standards with an announcement on Monday that it has dropped more than 1,000 small producers of poultry from its supply chain.
Yum China also announced a new marketing campaign to highlight several of its planned changes for sourcingfor its KFC, Pizza Hut and Taco Bell restaurants.
Stating in a translated press release that “it is better to be safe than sorry,” Yum China chairman and chief executive Sam Su said the company’s purging of smaller chicken farmers, along with further investment in quality assurance, reporting and communications protocols, would speed up changes to the supply chain needed to turn sales around.
“The poultry industry is actually fairly advanced in its development when compared to other agribusiness segments in China,” Su said. “However, in comparison to more advanced economies, the poultry industry has not yet reached the same level of maturity and sophistication, and therefore we need to accelerate its evolution. Even though these 1,000 smaller chicken houses are only a tiny percentage of China’s total poultry farms, they can tarnish the image of the entire industry.”
Yum China has been the fastest-growing division for Yum Brands for several years, and last year it contributed more than 40 percent of the company’s annual operating profit. But a mid-December report by China’s state-run television network, CCTV, exposed a common misuse of antibiotics and other drugs among Chinese poultry farmers, and the report linked two KFC suppliers to such producers.
Yum swiftly announced that it had ended the partnership with the two suppliers, but negative publicity attached to the controversy has pummeled sales. In its fourth-quarter earnings announcement earlier this month, Yum Brands reported a 6-percent decrease in same-store sales in China for the period.
Chief financial officer Patrick Grismer disclosed that January same-store sales plummeted an estimated 41 percent at KFC and 15 percent Pizza Hut and are projected to drop 25 percent in the first quarter. He added that Yum would release monthly figures of that metric to investors and the public until same-store sales recover in China.