Fast food franchisee chain Yum! Brands said that the company's fourth-quarter same-store sales in China have suffered due to the government-initiated probe into one of its erstwhile chicken suppliers.
According to a filing with the United States Securities and Exchange Commission the sales in China dropped 6% year-on-year, against the project 4% decline, with the adverse publicity kicked up by the probe to be blamed.
The Shanghai Food and Drug Administration had earlier ordered tests to be administered third-party agency from 2010 to 2011 and found that eight batches of chicken supplied to the company by Liuhe Group had excessive levels of antibiotics.
KFC ordered an immediate termination of the supply contract with Liuhe, but the damage seems to have been done.
Shanghai-based China Markets Research managing director Shaun Rein was quoted by Bloomberg saying that consumers had placed high trust in KFC which had now turned into anger.
"People tend to trust Western brands, they think these brands have better quality control over the supply chain and they are not going to cut corners," opined Rein.
