Yum’s Chinese Chicken Troubles

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January 26, 2013 4:21 AM EST

Wall St. Cheat Sheet

While Yum! Brands’ ( didn’t reprimand Yum harshly at the time, hinting that the company may finally be getting past Chinese scrutiny of its brand. However, consumers were a little less forgiving. When word got out about the chicken, thousands commented negatively on the company.

Yum’s chairman and chief executive of its China operations, Sam Su, apologized to consumers and accredited the chicken issues to poor internal communication and a failure to address problems quickly. China is critically important to Yum, as the company earned 44 percent of its revenue there last year.

Fortunately for Yum, the Chinese seems to be focusing more on the chicken suppliers. One Chinese chicken supplier, New Hope Liuhe Co., apologized for negligence and closed a processing plant. Su said Yum would strengthen its supervision of suppliers in the future.

Unfortunately, the Chinese government is still wary of Yum, as Chinese authorities said last month that they were doing a follow-up investigation on Yum’s own chicken testing — in which the company found 8 out of 19 batches of chicken samples had excessive levels of antibiotics in 2010 and 2011 — to see if the company had responded appropriately to the findings. Yum expects its fourth-quarter same-store sales in its China division to drop 6 percent, which could have a stiff impact on the company’s total revenue.

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The article was first published by Wall St. Cheat Sheet and does not represent the views or opinions of International Business Times.

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