Yum! Brands, Inc. (NYSE:YUM), owner of the famous KFC food chain, is determined to enhance safety measures and take a firm grip on requirements for its suppliers in China, in a bid to win back consumers and keep up sales. The food makers' sales reportedly came down due to probe into its chicken suppliers.
The company is seeking to weed out the smaller chicken operators whose facilities are not sufficiently modernized. The company said its supplier review process will put a “more stringent emphasis on food safety”.
KFC is trying to build sales and improve results in Asian nations after a former chicken supplier was caught supplying meat with a large amount of antibiotics. There was a decline in sales in the Asian region by 6 percent. This was the first quarterly drop in three years.
KFC is the largest fast food chain in China with more than 4,000 outlets, the company was affected negatively, when a television report aired in December, alleged that some of its suppliers violated food safety rules.
The Louisville, Kentucky based company got approximately 44 percent of its 2011 revenue from stores in China. However, the comparable sales in China are expected to decline 25 percent in the first quarter, according to the Chief Financial officer Patrick Grismer.
The Government of China said, based on a test conducted by a third party agency, that from 2011 to 2012 eight batches of Chicken supplied to Yum! Brands, Inc. (NYSE:YUM) by Liuhe Group contained antibiotics level that were above the prescribed standards. After this confirmation Yum stopped buying from Liuhe in August, according to what it posted in its microblog.
The company launched a campaign in China to heel its battered position in the country. The company promised to test meat for banned drugs, to reinforce oversight of farmers and inspire them to make their technology more advanced. The company said more than 1,000 small producers used by its 25 suppliers have been scrapped from its network due to lack of standardized technology.
“Starting now, we will stress strict management and the principle of zero tolerance in food safety,” Sam Sun, the chairman of Yum Restaurants China, said at a news conference. “We will immediately drop any supplier that lacks the determination or the ability to manage breeding well.”
KFC plans to scrap more than one thousand chicken coops, which it describes as small and not well equipped. Also, the restaurant vowed to enhance its communication to the government and the general public. The company will file its findings on poultry safety and test result with the relevant authorities.