KFC parent Yum sees setback in China recovery

KFC parent Yum sees setback in China recovery

Aug 12, 2013

KFC parent Yum Brands Inc. said Monday a key sales figure for its critical China unit fell 13 percent in July, marking a setback in its push to recover from a bird flu scare and an earlier controversy over its chicken supply.

The company, based in Louisville, Ky., had reported easing sales declines in recent months, suggesting that it was on the path to winning back spooked customers. In June, the figure was down 10 percent, after a 19 percent drop in May and a 29 percent decline in April.

But in a filing with the Securities and Exchange Monday, Yum simply cited the "residual effects" of the supplier issue late last year for July's backslide. It stood by its forecast that sales at established restaurants would gradually recover and turn positive in the fourth quarter. Sales at established restaurants is a key indicator of a chain's strength, because it strips out the impact of newly opened and closed locations.

Resource:http://finance.yahoo.com/news/kfc-parent-yum-sees-setback-china-recovery-205157215.html

KFC hold charity activity "Journey of Hope" to gaining reputation all over the world

KFC hold charity activity "Journey of Hope" to gaining reputation all over the world

"Journey of Hope” is a PR campaign because it is a part of "Add Hope", a series of CSR campaigns that aims to achieve a long-term impact. In addition, this campaign helped KFC build mutual beneficial relationship with its public. The company's reputation was greatly enhanced, while the public gained an opportunity to reduce the hunger problem in Africa. This means “Journey of Hope” was a strategic communication process.

KFC improved their reputation as well as strengthened its relationship with customers. This was evidenced by the donation, represented in the evaluation of strategy part, of customers and their involvement in the campaign. Furthermore, this campaign met the need of society; it helped feed African children, who suffered from famine and lacked nutrition, by providing millions of meals.

this activity is not only gain reputation in Africa, but also gain the reputation all over the world. This campaign also help KFC repair the reputation in China

KFC China Shuguang Fund

KFC China Shuguang Fund

On 2013 March 16, the Tenth Anniversary of KFC China First Light Fund & the Press Conference of the launch of the homepage of the First Light Fund was held in Beijing. Tu Meng, CYDF Secretary-General, Han Jilin, KFC China Division GM, Yum Brands Inc. and Alvin Chiang, Chief Marketing Officer of RenRen Inc. pressed the start button together, signifying the homepage of KFC China First Light Fund is officially on the renren.com.(Chinese popular social networking) 

The Fund was a result of cooperation between CYDF and KFC of the Yum Brands. It is an earmarked fund to render long-term support to impoverished outstanding college students. In the last decade, the Foundation created a funding model integrating student aid, restaurant internship and social service, which created a complete cycle of he helped, self-helpers and helpers. This model not only solved the financial issue of impoverished students, but also helped them to grow, build confidence in themselves,and give back to the society. In the last decade, the fund provided over 80 million yuan in grants and its beneficiaries exceeded 15,000 from 54 universities in 28 cities.

This campring is one of the sigenificant point for helping KFC repair reputation from the toxic chicken feed scandal.

Resource: http://www.cydf.org.cn/uploadfile/2013/0902/20130902030915902.pdf

Take action to regain customer's trust- KFC China Now BFC China

Take action to regain customer's trust

KFC China Now BFC China

Sept 13, 2013

Pity KFC. It's been almost a year now since Yum! Brands' chicken-based franchises went from a case study in localization taught in China business programs to a cautionary tale about the slew of quality-control problems faced by any brand in China. 

KFC's same store sales in August were down another 10 percent. At least that's an improvement from the 13 percent same store sales drop in July. It appears the brand has finally realized that there is something deeply wrong with its core business in China. So it's pulling out all the stops to try and fix it. 

One response appears to be to move the brand away from chicken—and in a hurry. In KFC windows, custumers will now find large ads for the KFC Layers and Layers Tender Beef Burger  "Time to Beef Up" screams the tagline of KFC's new campaign for a burger with not one, not two, not three, but six layers of beef.

Sure, the beef patties themselves are small, but the point is not.

Resource: http://www.brandchannel.com/home/post/2013/09/13/The-Week-In-China-091313.aspx

Yum blindsided by KFC chicken scare in China (KFC take steps to recover Scandal in China)

Yum blindsided by KFC chicken scare in China (KFC  take steps to recover Scandal in China)

February 5, 2013

NEW YORK (AP) — When KFC was hit by a controversy over its chicken suppliers in China late last year, parent company Yum Brands offered free drinks and ice cream to bring diners back.

"The onslaught of negative media coverage has been longer lasting and more impactful than we expected," CEO David Novak said in a conference call with investors Tuesday. Although Novak said he expects the KFC brand to recover eventually, he could not say exactly when that would be.

He noted that the company will need the "gift of time" for the controversy to subside, because diners have plenty of other places where they can go while the issue is fresh in their minds. Yum said it plans to mount a marketing campaign to start rebuilding trust next week, after the Chinese New Year.

Since Dec. 18, however, the company has been reeling from a report on Chinese television that said its suppliers were ignoring regulations and giving chickens unapproved levels of antibiotics. Yum says a subsequent investigation by Shanghai regulators concluded on Jan. 25, with the company agreeing to adopt stricter oversight of its suppliers.



Resource: http://finance.yahoo.com/news/yum-blindsided-kfc-chicken-scare-china-191806693--finance.html

KFC commitment advertisement

In order to regain customer's trust,  Sam Su, chairman and chief executive of Yum's China operations and some Chinese KFC employees   shot the advertisement to promise all the customers "  Trust in every bite." and these advertisement are put on many Chinese famous website, and  television.

CEO Jingshi Su promise KFC  owe responsibility to everyone

Resource:http://v.ku6.com/show/T3WPSPlmh58e9-kWetHRyg...html

Poultry testing employee promise excellent variety  of Leghorn chickens, therefore, KFC's chicken is natural which grow up within 45 days.

http://www.56.com/u15/v_MTAxMzUyMTU2.html

A supply-chain assessment program called "Operation Thunder"

A supply-chain assessment program called "Operation Thunder"

May 9, 2013

The fast-food franchise owner has reeled from one PR disaster to another in China. How the company can bounce back.

Yum has launched a supply-chain assessment program called "Operation Thunder"

The fast-food franchise owner has reeled from one PR disaster to another in China. How the company can bounce back.

 At the end of 2012, Chinese food investigators discovered that suppliers linked to Yum had fed their chicken more antibiotics than permitted. This past Monday, Yum (YUM) faced another PR disaster when reports suggested Chinese regulators started investigating a mutton supplier possibly tied to the company's hot pot franchise Little Sheep.

The fallout from the antibiotics issue was immense, and Yum has launched a supply-chain assessment program called "Operation Thunder" to address it, CEO David Novak said during the company's 2013 first-quarter earnings call. The company can't afford a string of food quality problems in China.  There will likely be additional supplier audits, or Yum could bring more production to its own facilities.

executive vice president at communications firm Levick suggests hiring someone local and making him or her responsible for food safety issues. This tactic, he says, could not only help the company prevent future problems, but it would give the public somewhere to turn should things go wrong.

Resource: http://management.fortune.cnn.com/2013/05/09/yum-brands-china-troubles/

KFC launches China campaign to rebuild brand

KFC launches China campaign to rebuild brand

KFC unveils tighter quality control in China to rebuild battered brand after poultry scandal

BEIJING — KFC launched a campaign Monday to rebuild its battered brand in China, promising tighter quality control after a scandal over misuse of drugs by its poultry suppliers.

The company, a unit of Yum Brands Inc., promised to test meat for banned drugs, strengthen oversight of farmers and encourage them to improve their technology. It said more than 1,000 small producers used by its 25 poultry suppliers have been eliminated from its network.

Resource: http://article.wn.com/view/2013/02/25/KFC_launches_China_campaign_to_rebuild_brand_z/

How Chicken Poetry Is Helping KFC Recover From China Scandal

Chicken-themed poetry 

March 13, 2013

After Food Safety Crisis, Sales Are Improving Despite Delayed Response. Following the launch of "Operation Thunder" and a chicken-themed poetry contest, fast feeder KFC appears to be recovering from a food safety crisis in its most important market.

Meanwhile, KFC kicked off a poetry contest on social media. The company asked fans to pen poems that include the phrase, "The chickens are innocent," laying the blame on illicit drug use at the farms. Best poem wins an iPad mini. 

KFC's chicken poetry contest: I am innocent.

Resource: http://adage.com/article/global-news/chicken-poetry-helping-kfc-recover-china-scandal/240319/

KFC Launches "Operation Thunder" To Fix Image in China

KFC Launches "Operation Thunder" To Fix Image in China

KFC has taken on a more active approach to social media to face the issue directly

KFC has taken on a more active approach to social media to face the issue directly

Mar 13, 2013

"After a slow start in reacting to the crisis late last year, KFC has taken on a more active approach to social media to face the issue directly. They have increased activity on their own Weibo and RenRen accounts, including responding to many of the comments about the crisis and by engaging media key opinion leaders. They will share news articles about the crisis on their Weibo account which in turn creates more buzz," said Sam Flemming, founder and chairman of Shanghai-based social-media research and consulting firm CIC.

Though crisis communication plans typically call for striking hard and fast, Yum CEO David Novak said in early February there was no need to rush into a marketing campaign. "We could be wasting a lot of money right now doing marketing," he said. "We need to give it time."

Resource: http://adage.com/article/global-news/chicken-poetry-helping-kfc-recover-china-scandal/240319/

KFC cuts suppliers after China chicken scare

KFC cuts suppliers after China chicken scare

Feb 26, 2013

KFC China, a division of Yum Brands Inc, announced new quality-assurance measures on Monday in a bid to restore brand confidence. 

The moves include eliminating more than 1,000 unqualified chicken houses; improving control on poultry suppliers; and implementing timely reporting and communicating with the public, the company said. 

KFC will stop using chicken farms that have potential risk, improve the screening process of suppliers and step up self-inspections to address food safety concerns, the company said in a statement late Monday.

“It will always be our top priority to provide customers with the safest chicken with the best quality,” Yum China’s chairman and chief executive, Sam Su, said in the statement.
“We have seen some safety problems from the incident… and we aim to address the issue within the shortest time.”

KFC also pledged to enhance communication with the government and the public, after the Chinese arm of Yum admitted last month that it failed to inform authorities about tests showing high levels of antibiotics in chicken.

Resource: http://tribune.com.pk/story/512782/kfc-cuts-suppliers-after-china-chicken-scare/

KFC prepare revamps its reputation in China

KFC prepare revamps its reputation in China

KFC revamps its reputation in China

KFC revamps its reputation in China

February 25,2013

Wooing the Chinese. KFC has launched a campaign to rebuild its brand in China following a scandal over banned drugs being used to fatten chickens in its supply chain.

The company has promised a zero tolerance approach to food safety abuses. The largest fast-food chain in China has seen a 37 per cent slump in sales since the scandal hit.

KFC China announces measures to regain trust

February 26, 2013

KFC China, a division of Yum Brands Inc, announced new quality-assurance measures on Monday in a bid to restore brand confidence.

The moves include eliminating more than 1,000 unqualified chicken houses; improving control on poultry suppliers; and implementing timely reporting and communicating with the public, the company said.

Last year, Shanghai's food regulators said that tests conducted by a third-party agency found that eight batches of chicken supplied to KFC by Liuhe Group Co had excessive levels of antibiotics. The fast-food chain said it stopped all supplies from Liuhe in 2012.

"Some of these smaller and not-as-well-managed chicken-house operators may resort to improper use of antibiotics or other drugs, especially if illness (in chickens) occurs," said Sam Su, chairman and CEO of Yum China.

Su denied reports that hormones were used in its chicken farms, and emphasized that the Liuhe antibiotics scandal was an isolated incident.

Guo Geping, president of the China Chain Store and Franchise Association, said Yum still has its work cut out.

"Although many foreign enterprises, including Yum, have made much greater efforts in quality assurance here in China than in their home countries, food safety is still their biggest task," he said.

As a result of the antibiotics case, KFC sales in China, its largest overseas market, have been adversely affected.

Resource: http://www.chinadaily.com.cn/business/2013-02/26/content_16256737.htm

KFC onslaught of negative media attention

KFC onslaught of negative media attention

Feb 5, 2013 

Since an investigation aired on national Chinese television on Dec. 18, Yum has been dealing with an "onslaught of negative media attention" over its chicken suppliers, spokesman Jonathan Blum said. The TV station had reported that Yum's suppliers were ignoring regulations and giving chickens unapproved levels of antibiotics.

KFCA government investigation into the issue was concluded on Jan. 25 and Yum has agreed to adopt measures to strengthen its oversight of suppliers. But the company says it will take time to recover.

"Our primary emphasis now is to rebuild consumer confidence and sales in China," Blum said, noting that the company plans to mount a "brand reputation" campaign in coming weeks.

Even though Yum has far more locations in the U.S., its restaurants in China are far more profitable because the cost of doing business there is lower and there's much more room for growth. Already, Yum is the biggest Western fast-food chain in the country with KFC accounting for most of its 5,300 locations. The nation's economic growth had until now been a boon for Yum, helping it register a streak of growth for more than a decade.

Although the investigation into chicken suppliers didn't focus solely on KFC, Blum said that the chain was hit especially hard because it's the biggest chicken chain in the country. He noted that the negative media attention had been slowing, but that the earnings results could stir up more bad publicity.

Resource: http://www.dailyfinance.com/2013/02/05/kfc-yum-brands-tainted-chicken-china/

Bird flu drags KFC stock down in China- China Beat

Bird flu drags KFC stock down in China- China Beat 

Alarming sales decline of the KFC after scandal

Alarming sales decline of the KFC after scandal

“OUR food is perfectly safe to eat.” From the company that once boasted that its fried chicken was “finger-lickin’ good”, this is hardly a bold sales pitch. But Yum! Brands, the owner of KFC, Pizza Hut and Taco Bell, has good cause to sound defensive. A food-safety scandal in China, its most important market, refuses to blow over.

KFC sales in China fell by a staggering 41% in January. Overall, same-store sales for Yum! outlets in China fell by 6% in the fourth quarter of 2012, versus the same period a year ago; the comparable figure in 2011 was a 21% rise (see chart). 

Yum! will have to revise its global earnings target for 2013 “significantly”.

Resource: http://www.economist.com/news/business/21571467-yum-brands-stumbles-china-yucky-kentucky

KFC expects for future 

 5 Jan , 2013

OS ANGELES — KFC’s parent, Yum Brands, has warned that it expects 2013 earnings to shrink rather than grow as it struggles to manage a food safety scare in China and expects no return to growth in restaurant sales there until the fourth quarter.

Shares of Yum, a fast-food chain operator based in Louisville, Kentucky, fell 5.6 percent in after-hours trading Monday as Wall Street analysts and investors received the disappointing news. The company has been widely seen as a model for how a foreign company can do business in the complex Chinese market.

Still, Yum expects same-store sales in China to be down 25 percent for its financial first quarter for China operations, which includes only the full months of January and February. It said KFC same-store sales in China should perk up by the fourth quarter.

As a result, Yum forecast a “mid-single-digit” percentage decline in earnings per share for 2013. Yum had forecast growth this year in earnings per share of at least 10 percent, and analysts polled by Thomson Reuters I/B/E/S had expected the same.


REUTERS (2013)
Resource:   http://www.nytimes.com/2013/02/06/business/global/kfc-parent-suffers-after-china-scandal.html?_r=0&adxnnl=1&adxnnlx=1393258821-X7Y15j5s0b4dtzqLlp3K5Q

KFC Parent Suffers After China Scandal

KFC Parent Suffers After China Scandal

February 5, 2013

Overall fourth-quarter net income at Yum, which also operates the Pizza Hut and Taco Bell chains, fell to $337 million, or 72 cents per share, from $356 million, or 75 cents per share, in the same period a year earlier. Excluding special items, Yum had a profit of 83 cents per share. That topped analysts’ average estimate by a penny, according to Thomson Reuters I/B/E/S. Total revenue rose to $4.15 billion from $4.11 billion.

Yum reported a 6 percent drop in fourth-quarter sales at established restaurants in China because of “adverse publicity” regarding chemical residue found in some of its chicken supply.

Its China business continued to suffer in January, when same-store sales — revenue from stores open for at least a year — dropped 37 percent, including a 41 percent decline for KFC and a 15 percent decline for Pizza Hut Casual Dining.

Yum said the January data had probably affected by the timing of the Lunar New Year, which fell in January last year. The week long holiday period, which is in February this year, typically increases sales at restaurants and other tourist-related sectors.

Resource: http://www.nytimes.com/2013/02/06/business/global/kfc-parent-suffers-after-china-scandal.html?_r=0&adxnnl=1&adxnnlx=1393258821-X7Y15j5s0b4dtzqLlp3K5Q

Issue affect the company

Issue affect the company

KFC sales in China hit by govt chicken probe

January 9, 2013

Yum! Brands Inc, owner of the KFC fast-food chain, said fourth-quarter same-store sales fell more than projected in China as demand was hit by a government investigation into one of its former chicken suppliers.

Industry experts had predicted the negative impact of the probe, which is expected to be felt in the long term.

KFC sales in China in the last two weeks of December were affected by the adverse publicity associated with the probe into Chinese poultry suppliers, the US company said in a filing with the United States Securities and Exchange Commission on Monday.

China same-store sales fell by 6 percent year-on-year in the fourth quarter, compared with a previous estimate for a decline of 4 percent, the filing said.

Shanghai's food regulators said that tests conducted by a third-party agency from 2010 to 2011 found that eight batches of chicken supplied to the company by Liuhe Group Co had excessive levels of antibiotics. Yum said it stopped all supplies from Liuhe in August 2012.

The revelation sparked heated debate among Chinese consumers. The negative impact will linger for a long time for KFC, which relies heavily on domestic chicken suppliers, said Gao Jianfeng, general manager of the Shanghai-based Bogo Consultants.

With a huge number of restaurants demanding large quantities of chicken ― the main ingredient on their menus ― KFC won't be able rebuild its supply chain in the short term, Gao said.

He added that food safety issues in the Chinese supply chain, from chicken to fodder, are widespread.

"No single company can preserve its reputation in such an industrial chain," he said.

An increasing number of fast-food consumers have started to go to other Western chains such as McDonald's or Burger King, he said.


Resource: http://www.ecns.cn/business/2013/01-09/44370.shtml

Influence of investor according to market situation

Influence of investor according to market situation

The company, based in Louisville, gave the grim forecast after its profit in the fourth quarter fell 5 percent, with a key sales figure in China dropping (Fairchild, 2013). The loss of customer cause China same store sales fell by 6 percent year-on-year in the fourth quarter, compared with a previous estimate for a decline of 4 percent (China Daily, 2013). This is the first decline in China since 2009(Fairchild, 2013). The company expects sales at restaurants open at least a year in China to plummet 25 percent.

For competitors, this KFC instant chicken scandal cause two main influence for them. On the one hand many customers move from KFC to other fast food chain like McDonald's, and Burger King etc. or other restaurant which are domestic chains, like Dicos, Kungfu restaurant (national fast food chain), Da Niang Dumpling and Yonghe Bean Milk (Taiwan fast food chain), have been cannibalizing existing KFC stores. KFC scandal makes these fast food chain increase more customers. On the other hand this event also to other fast food chain sounds the warning bell, remind them must pay much more attention to food safety. These losses will impact on investors’ confidence and may cause investors no longer insist on investment in the company. However, the decline of share price may attract some potential investors who have confidence for KFC future development.

Fairchild,C (2013) Yum Brands Expects Profits To Fall Due To Chicken Scare In China

 Resource: http://www.huffingtonpost.com/2013/02/04/yum-brands-kfc-chicken_n_2618677.html 

China Daily (2013) KFC sales in China hit by instant chicken scandal, 

Resource: http://english.sina.com/business/2013/0108/546371.html

Survey on internet about this event

Survey on internet about this event

This event caused wildly discussions of the Netizen online. Three leading social networking which are Sina Weibo, Tecent and MSN did a survey on users’ attitude about KFC food safety. Although this survey only for some Netizen, if there was any truth in the investigation result, the future road of KFC in china will tough. According to survey on the Sina, the most of people (75.9 %) thought they will not buy KFC food in the future and 84.4 % prople thought the food of KFC were not safe.

	Tencent	Sina	MSN
Number of responses	124,831	130,943	6,043
Will not buy KFC food in the future	69.7 %	75.9 %	92.6 %
Will not buy KFC food in the future	12.0 %	16.9 %	7.4 %
KFC food is not safe	N/A	84.4 %	85.2 %
KFC food is safe	N/A	3.7 %	4.0%
Responses Bias	Everyone	Middle class	Professionals

Resource: LI, J. (2012)

LI, J. (2012) Too-Fast Food: Behind the Scene of YUM! Brand China Slump, 

Resouece: http://www.forbes.com/sites/junhli/2012/12/06/too-fast-food-behind-the-scene-of-yum-brand-china-slum/

The influence of stakeholder

The influence of Stakeholder

The stakeholder of KFC are various like customers, suppliers, investor, competitors  employee,  and so on.

The impact of  customer is the direct effected stakeholder by this event. For catering enterprise, lost customer’s trust is a deadly blow.  An increasing number of fast food consumers have begun to buy food to other Western chains such as McDonald's and Burger King.

Due to the increasing income levels of Chinese, many Chinese people are more focus on healthy eating. This KFC scandal directly makes many Chinese have careful consideration of food safety. It brings new perceptions for overseas fast food brands and cutting down their trust and appreciation of these chains. Before 2012, 24 hours opening and convenience are two of the reasons for many Chinese people became its loyal consumers, and more important factor is the majority of customers always trusted the multinational brand, believing that KFC can ensure the food safety. After this event, many people would rather spent 10 yuan (£1) to purchased 1kg chicken which were free range," said Zhang who is a previous KFC loyal customer (China Daily, 2013).

Resource: http://usa.chinadaily.com.cn/china/2013-01/07/content_16089880.htm

KFC make commitments 

 January 11, 2013

FAST food giant Yum Brands Inc, apologized for a recent "instant chicken" scandal. The company said it had found faults in food testing procedures, and a lack of communication inside the company and with the public.

It promised to improve testing procedures and require suppliers to complete testing before delivering food to prevent problem products reaching the company.

It also promised to strengthen communication with local government and report problems to supervisors in time.

Resource: http://english.people.com.cn/90778/8088573.html

KCF make an apology on the company's Weibo microblog

 Jan. 10, 2013

Yum apologises for inspection shortcomings, lack of transparency * Yum gets more than half of total revenue from China . "We regret shortcomings in our self-checking process, a lack of internal communication," Su Jingshi, chairman and chief executive of Yum China, wrote on the company's Weibo microblog. "Su also apologized to the government for the company's failure to actively test results and for a lack of transparency and speed in its external communication.

The photo shows the apology letter written by Su Jingshi, chairman and chief executive of Yum China, posted on the company's official website and Sina micro blog.

Resource: http://english.cri.cn/6909/2013/01/11/2561s742998.htm

KFC admits hiding antibiotics test results of tainted chicken in China and make an apology in official websit

KFC admits hiding antibiotics test results of tainted chicken in China and make an apology in official websit

Shanghai Daily, January 11, 2013  

Fast food giant Yum Brands Inc, owner of KFC and Pizza Hut, Thursday apologized for a recent "instant chicken" scandal and conceded it hadn't reported excessive antibiotics detected in chicken samples. 

The company published an open letter to customers on KFC's official website to apologize for not reporting the test results and for not quickly changing suppliers. 

KFC said it had found faults in food testing procedures, and a lack of communication inside the company and wwith the public. KFC also admitted it did not tell authorities about test results indicating high levels of antibiotics in its chicken. 

It promised to improve testing procedures and require suppliers to complete testing before delivering food to prevent problem products reaching the company.It also promised to strengthen communication with local government and report problems to supervisors in time. 



Resource http://www.china.org.cn/business/2013-01/11/content_27653880.htm