Bloomberg News

Yum Brands Vice Chairman Apologizes for Chicken Supply Scare

January 10, 2013

Yum! Brands Inc. (YUM:US)’s vice chairman apologized to Chinese consumers for a food safety scandal involving a former chicken supplier in an letter posted on KFC’s official microblog.

Yum’s self-inspection processes and internal communications had been lacking, Sam Su, also chairman of the the Louisville, Kentucky-based restaurant chain’s China business, said in the letter today. The company failed to change its suppliers quickly enough, he said.

Yum, which operates KFC and Pizza Hut outlets in China, said fourth-quarter same-store sales fell more than projected there after a government probe into the former supplier. The Shanghai Food and Drug Administration said on Dec. 20 tests conducted by a third-party agency from 2010 to 2011 found eight batches of chicken supplied to Yum by Liuhe Group Co. had antibiotics levels that didn’t meet prescribed standards.

“I promise you that all of Yum’s employees, starting from me, will adopt a humble attitude and listen to all sides, doing our very best to tackle the problem,” Su said in the letter. “We will make serious changes and raise our management standards in order to win back your trust.”

Su, who spearheaded Yum’s rise on the mainland and oversaw the takeover of the Little Sheep Group hot pot chain, pledged to run more stringent checks on supplier quality and encourage poultry companies to adopt advanced farming methods. The chain got 44 percent of its revenue from the nation in 2011.

Yum will learn from the experience and also improve its communication with government ministries going forward, he said.

China same-store sales (YUM:US) dropped 6 percent in the fourth quarter, compared with a previous estimate for a decline of 4 percent, the company said in an exchange filing this week.

To contact the reporter on this story: Liza Lin in Shanghai at llin15@bloomberg.net

To contact the editor responsible for this story: Anjali Cordeiro at acordeiro2@bloomberg.net


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