Shares in Yum! Brands, parent company of the KFC fried chicken chain, slipped 2.6 percent in trading as more cases of H7N9 bird flu were reported in China, a market the company has depended on for much of its sales growth.
China’s poultry industry has suffered significant financial losses because of the virus, which has killed 14 people and infected 63 others. Reuters reported the poultry industry has recorded losses of more than $1.6 billion since the flu struck. Health and food safety officials have culled thousands of birds and closed live poultry markets in Beijing and Shanghai to slow the rate of infection.
Consumption of cooked poultry is not a risk factor for contracting the virus, still poultry prices in China have declined on weaker demand, according to news reports.
All of this is bad news for Yum! Brands as the company is planning an aggressive expansion in China. David Novak, Yum! Brands, Inc.’s chairman and CEO, said in March that the goal for his company is to replicate McDonald’s US success in China.
“We have an enormous KFC opportunity in China,” he said during a presentation at the Bank of America Merrill Lynch Consumer & Retail Conference. “I always like to compare the opportunity we have in China with that of McDonald’s in the United States, where you know McDonald’s has 14,000 restaurants in the United States.
“If you go to Hutchison, Kan., or any small town across the United States, you’ll see a McDonald’s on the corner location, the best location, and prime real estate, and you’ll see them literally everywhere. That’s exactly what we are doing with KFC in China as we expand into all these lower tier cities. We have first-in advantage. We are getting the prime location, and we are becoming — we definitely are going to be the McDonald’s of China — but this time it’s KFC.”
Initiatives under way include building a breakfast business, adding a home delivery component, adding 24-hour service in some markets, and researching ways to grow share and create opportunities in under leveraged day-parts.
