By Julie Jargon
Yum Brands Inc. is revamping its KFC chain in China as the
restaurant company seeks to turn around its business in a market
that has been reeling from food supplier issues.
Joey Wat, Yum's new president of KFC China, told investors
Thursday that the brand will give local markets within the country
more autonomy in offering menu items and setting prices since
consumers in large, metropolitan areas have higher incomes and
different food preferences than those in smaller Chinese
cities.
"We want to serve customers in a better way," Ms. Wat said.
Yum has been grappling with food safety issues for two years. In
late 2012, Chinese media alleged that a KFC supplier had been using
growth hormones and antibiotics to help chickens grow faster. Yum
defended its safety practices, but the claims quickly spread
online, and the chain's sales remained under pressure for more than
a year as fearful consumers stayed home or switched to other
restaurants.
Yum had said 2014 was to be KFC's "bounce back" year in China.
For the first half of the year, sales were improving following an
advertising campaign aimed at ensuring customers that KFC food is
safe and the introduction of new menu items. But in July, Chinese
media reported that a Shanghai supplier intentionally sold expired
meat to Yum and other fast food chains in China and sales began to
slide again.
Yum on Tuesday said it now expects that same-store sales in its
China business in the current year will decline in the mid-single
digits, dragging down per-share earnings growth for the whole
company to the mid-single digits. In October, Yum had lowered its
forecast for per-share earnings growth to between 6% and 10% from a
previous forecast for growth of at least 20%.
On Thursday, Yum said November same-store sales in China are
expected to be down 15% and that December same-store sales are
expected to show improvement from November's sales.
Ms. Wat said the company is seeking to get back to the average
restaurant sales it had three years ago, when KFC outlets in China
averaged $1.7 million in annual sales. That number has since fallen
to $1.35 million.
"We understand our number one priority is growing sales," Ms.
Wat said.
She said the company plans to revamp its menu with new offerings
such as premium coffee, which it has just started to roll out. KFC
also plans to use Chinese celebrities in its ads more often, to
roll out free Wi-Fi at its restaurants and to reinvigorate its
children menu.
Write to Julie Jargon at julie.jargon@wsj.com
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