Testing Times for Yum! Brands, Inc. (YUM) as Taco Bell Gets Caught in Horsemeat Scandal

Page 1 of 2

After taking measures to settle the chicken scare in China, Yum! Brands, Inc. (NYSE:YUM) got caught in UK’s horsemeat scandal. British food regulators undertook tests that revealed horsemeat in Taco Bell, a subsidiary of Yum!. The company accepted that some of its batches of ground beef contained traces of horsemeat, and is extremely disappointed to find such adulteration. This is bad news for the company, particularly at a time when it is struggling hard to fix the food safety concern in its largest market, China.

Yum! Brands, Inc. (NYSE:YUM)Instant action

The Food Standards Agency (FSA) had conducted 1,797 tests over a period of seven days to examine beef products, and investigate food processing chains that form a part of the supply chains of big food brands. Over 99% of the results were negative, but about 1% turned out to be positive for horsemeat contamination. The 1%, which comprised 4 tests, was found to have equine DNA. These four tests were for Taco Bell ground beef, beef skewers catered by Brakes, and spaghetti bolognese and beef lasagna – the two meals offered by Birds Eye. Taco Bell has apologized to its customers and says it isn’t certain if the horsemeat had been served to any of them.

However, as soon as Yum! Brands, Inc. (NYSE:YUM) learnt of the Taco Bell horsemeat issue, the Mexican fast food chain immediately conducted its own testing to confirm the news. Right after it identified traces of horsemeat, it took off beef from its menu in the three Taco Bell outlets located in the U.K., and stopped purchasing meat in the region. The fast food restaurant chain informed the FSA about the steps that it undertook. To ensure that the ingredients supplied are 100% beef, the chain would perform a test on every batch of beef that reaches its processor, and again test it before it leaves for the outlets.

Yum! which also operates Pizza Hut and KFC, asked its U.S. Taco Bell customers not to worry about the ingredients, as domestic restaurants do not receive meat from European suppliers. Domestic customers won’t be impacted by the U.K. scandal, and should be assured of the quality of beef that undergoes USDA inspections, as well as 20 checkpoints of the company.

Other food companies in Europe are also suffering from the horsemeat issue.

Other sufferers

Some of the other names that bought horsemeat in the name of beef include Burger King Holdings, Inc. (NYSE:BKW), Tesco Corporation (USA) (NASDAQ:TESO), Nestle SA (VTX:NESN), Birds Eye, Findus and Ikea.  In January, Burger King Holdings, Inc. (NYSE:BKC) was discovered to have traces of horse DNA in some hamburger patties that came from a food processing unit located in Ireland. This Irish supplier was found to keep products containing horse, but it did not reach Burger King Holdings, Inc. (NYSE:BKC) restaurants. The company instantly severed ties with this beef supplier as a part of its preventive measure.

Tesco Corporation (USA) (NASDAQ:TESO), Britain’s biggest supermarket, also got hit by the scandal as its hamburgers were found to contain horsemeat. The company would now be conducting tests, not on a sample basis, but on all the meat that it sells to ensure premium quality and avoid adulteration. The entire cost would be borne by the company, and this would squeeze the profit margin. In addition, the supermarket chain would go for close investigation of its supply chain to be confident about the source of its products. The grocery giant is now warning of higher prices, considering that the scandal will suppress its profit.

In the wake of the horsemeat scare, McDonald’s Corporation (NYSE:MCD) asked its meat suppliers to hold supplemental DNA test to be 100% confident that the hamburgers had beef and not horsemeat. On Friday, Yum!’s Oak Brook-based arch-rival confirmed that its British menu did not contain horsemeat, as sample tests conducted by the fast food giant suggested that its products were free of horsemeat. However, both Yum! Brands, Inc. (NYSE:YUM) and McDonald’s are facing food safety issues in China.

Page 1 of 2
Comments
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

The 9 Most Dangerous Countries for Tourists to Visit

Reign of Terror: The 10 Most Ruthless Politicians in History

On the Move: The 10 Fastest Growing Businesses in 2015

Fast Money: The 10 Highest Paying Fast Food Restaurants

Mixing It Up: The 14 Best Music Mashups of 2014

Rito Pls Buff: The 10 Least Played Champions in LoL Season 4

10 Covers of Popular Songs that are Better than the Originals

Must See TV: The 9 Most Anticipated Shows of 2015

The 15 Biggest Box Office Bombs of All Time

10 Things The World Can’t Stand About Americans

Picture Perfect: The 6 Smartphones with the Best Cameras

The 10 Best Countries To Work In the World

A Profitable Day At The Track: 5 Tips For Betting On Horses

Tearing You Apart: 6 Bad Habits That Ruin Relationships

Learning on the Job: The 6 Biggest Mistakes Parents Make

Shopaholics Rejoice: The 12 Biggest Malls in the World

Fright Night: 10 Horror Movies Based on True Stories

Mach Mania: The 10 Fastest Jets in the World

Military Heavyweights: The 10 Countries with the Most Tanks

All In: The 7 Richest Poker Players in the World

Abracadabra: The 10 Best Magicians in the World

The 10 Richest Asian Countries in the World in 2014

Eyes in the Sky: 10 Things You Need to Know About Drones

Rising Stars: The 6 Best Silicon Valley Startups

Military Muscle: The 5 Most Advanced Armies in South America

All that Glitters: The 7 Most Luxurious Jewelry Brands in the World

5 Things You Didn’t Know About ISIS but Should

Empowering Your Money: The 5 Best Energy Stocks to Invest In

The 11 Best Android Apps You Can’t Get on iOS

The 10 Most Important International Conflicts in 2014

Mood Enhancers: The 20 Most Uplifting Songs of all Time

Lover Beware: The 8 Countries that Cheat the Most

Breath of Fresh Air: The 25 Countries with the Best Air Quality on the Planet

Singles Beware: The 8 Worst Mistakes Made on First Dates

Healthy and Happy: The 10 Countries with Lowest Healthcare Costs

The 6 Best Company Team Building Activities to Build Workplace Camaraderie

Ships Ahoy: The 10 Busiest Shipping Ports in the World

10 Productivity Tips to Save You Time and Help You Do More With Less

Grab a Bite: The Most Popular Fast Food Restaurants in America

Friday Night Thirst: The 10 Most Popular Cocktails in the World

The 6 Greatest Unsolved Mysteries We May Never Figure Out

7 Useless Products You Never Should’ve Bought

The 5 Reasons Why You’re Single and Miserable

The 7 Most Addictive Foods in the World We Can’t Stop Eating (Even Though We Should)

5 Amazing Places You Can Swim with Dolphins

The Top 7 Most Livable Countries In The World

The 10 Most Expensive Baseball Cards Ever Pulled From A Pack

The 5 Easiest Second Languages to Learn for English Speakers

Silver Spoon: The 6 Richest Families in the World

The 20 Countries with the Largest Prison Populations in the World

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!