Avian Bird Flu Risk Hits KFC And China’s Poultry Industry

Updated on

For years scientists around the world have been warning that a strain of flu could break out that could potentially kill hundreds of millions of people. And the most likely source for such a flu strain includes poultry and other live stock.

Now in China, with ten people dead, and dozens more sick from a strain of H7N9 Avian Bird Flu strain, the nation’s poultry industry is under threat.

Avian Bird Flu Risk Hits KFC And China's Poultry Industry

The primary reason that birds and other livestock are considered to the most likely source for the next strain of flu stems from several important factors. For one, livestock and birds are kept in cramped living conditions, allowing diseases to travel and evolve from bird-to-bird with ease.

Avian bird flu is not necessarily lethal to the birds themselves as their immune systems know how to cope with the disease, and often the disease is incapable of infecting other types of animals. Sometimes, however, a strain of Bird Flu develops the ability to infect humans, whose immune systems have little ability to respond to the disease.

So far the strains of Avian Bird flu that have jumped from poultry to humans have often been extremely deadly, but not particularly virulent. Usually the strain can cross from bird to human, but cannot then spread from human to human.

Due to this, outbreaks have been easily contained in the past, and the current outbreak appears to be well under control. Either way, however, consumers in China are afraid of the disease and cutting back purchases of chicken.

Kentucky Fried Chicken (KFC), owned by Yum! Brands, Inc. (NYSE:YUM), has seen its sales plummet in recent days as consumers stray away from chicken products. While scientists have claimed that cooked chicken poses no threat, many consumers aren’t buying it and shunning the popular meat all the same.

Through March, same store sales dropped 16 percent YOY, a huge decline for KFC, which operates some 4,000 stores in the country.

This blow comes after years of Yum! Brands, Inc. (NYSE:YUM) ramping up investments in the country, which have made KFC the nation’s most popular international fast food chain. Unlike other fast food chains, KFC relies almost entirely on chicken. McDonald’s, for example, could respond to the Avian bird flu crisis by shifting to sales of beef, fish, and other items. If necessary, the company could even drop chicken all together. Such a move would be far more difficult for KFC.

Could the company’s big gamble on selling fast food to Chinese citizens be derailed because of a case of sniffles among birds? KFC is taking the threat seriously and has been launching a major education campaign to let people know that cooked chicken poses no threat. Still, if fear of poultry products continues to rise, KFC may find its sales depressed over the long run and with China accounting for such a huge portion of Yum’s sales, this could depress stock prices.

Beyond KFC, the entire poultry industry is under threat. The China Animal Agriculture Organization has reported a large slump in chicken sales. A chick that would have cost CNY 1.10 before the outbreak now costs a mere CNY .3. The Chinese government is now ramping up efforts to cull infected animals as the disease has been found on poultry farms and in markets across the nation.

In some parts of the nation poultry markets and sales have been shuttered completely in an effort to slow the spread of the disease. Meanwhile shares of Chinese poultry companies and related businesses are trending downwards as investors shun the risk.


Leave a Comment