Jan 10, 2013 10:46 AM EST
Yum Brands Apologizes for Chicken Scare

KFC’s parent Yum Brands has apologized to consumers in connection with its handling of a recent chicken scare that caused sales to drop.

Yum, which gets more than half of its revenue from China, said on Monday that its fourth-quarter same-store sales in China would likely to decline 6% of the negative publicity from the safety review. On the next day after the news, shares of Yum Brands fell 4.2 percent.

The scandal of the tainted meat broke out first last month when China Central Television covered a one-year undercover investigation of some of the chicken suppliers of KFC and McDonald in eastern Shandong Province. Farmers said that they had given their chicken excess amount of antiviral drugs and hormones to accelerate growth and make them stay healthy in overcrowded chicken house. Some birds even would grow too fat to walk.

 "I, on behalf of Yum China, sincerely apologize to you," Su Jingshi, chairman and chief executive of Yum China, wrote on KFC’s Weibo, Yum's Su also apologized for the company's failure to notify the government about the test results as well as a lack of transparency and slowness of external communication. The company had cut ties with the suppliers.

Chinese consumers have been frequently exposed to recurring food scares such as cancer-causing toxins or additives found in food. Especially in 2008, China was hit by the biggest food safety scandals, when industrial melamine in dairy products killed more than six infants and made 300,000 ill.

Currently,Yum, the largest foreign restaurant in China, is operating about 5,100 restaurants in more than 800 cities in China. Among the existing restaurants, 4,000 are KFC stores.

In a statement, the company promised to “keep on demanding suppliers be tested and improving the sample-reexamination approach, in order to avoid any problematic production going into Yum's logistics system.”

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