Yum Brands Is Working to Win Back Customers in China: CEO

Yum! Brands Inc., owner of KFC and Pizza Hut, said its China team is trying to regain customers after a supply chain scare has recently hurt results.

“Our leadership team in China is working hard to rebuild consumer trust and sales,” Chairman and Chief Executive Officer David Novak said in letter yesterday, which was e-mailed to Yum’s more than 40,000 restaurants and about 1.5 million store employees worldwide. “I have also been briefed on their plans to engage the community and customers to win back and reinforce our market leadership position.”

Yum, still recovering from a poultry supply chain investigation in China that started in 2012, last month was hit by another food scare. Yum supplier Shanghai Husi, a division of OSI Group LLC, became the subject of a government probe into the altering of expiration dates on food.

The fast-food chain terminated its relationship with OSI globally after the probe. Oak Brook, Illinois-based McDonald’s Corp., which will start selling beef and chicken burgers in some Chinese cities again soon, yesterday said it’s not getting products from any OSI Group or affiliate facilities in China. Previously, the chain was sourcing food from Husi’s Hebei plant while transitioning to a new OSI facility in Henan.

Last week, Yum said there’s been a “significant, negative impact” to same-store sales at KFC and Pizza Hut during the past 10 days in China as a result of the latest food scare. It’s too early to tell how long it will take for sales to recover, the company said in a filing.

Novak said in the letter that Yum’s China team is working to improve its surveillance and management of suppliers.

Yum, based in Louisville, Kentucky, has more than 6,300 restaurants in China and gets about half of its revenue from the country. The company, which also owns Taco Bell, is scheduled to report third-quarter earnings on Oct. 7.

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