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

Tension in Yum!’s Mainland

2013 is off to a rough start for Yum! Its biggest and most lucrative market, China, discovered that the chicken used in KFC restaurants was injected with inappropriate levels of antibiotics. The quick service restaurant chain has therefore ended ties with over 1,000 poultry farms in China to tighten food safety in the mainland, which accounts for over half of Yum!’s top-line. Even McDonald’s has been alleged of using chicken with high antibiotics level. Just as Yum!, the company also cut off its agreement with poultry supply units accused of processing such chicken.

However, China is a more crucial market for Yum!, given its huge presence in the emerging economy. The company operates over 4,000 KFCs and 700 Pizza Huts here. So, it is critical for the fast food giant to regain its brand reputation and win back the lost trust of its Chinese customers. But, as the supplies are dependent on small scale farms that are hard to track, it would be a tough task for Yum! to ensure the food safety level.

To conclude

Yum!’s UK scandal is another reason why customers could lose confidence in the brand. It is for certain that the road ahead is tough for the fast food company, given that its KFC China sales have dropped drastically with a dull outlook, at least in the near future. Yum! is working very hard to restore its brand image in the foreign markets by tightening its supply sources. The current year outlook remains gloomy as the scenario is expected to improve in late second half of the year. In the meanwhile, it is extremely important for Yum! Brands, Inc. (NYSE:YUM) to ensure safety and quality of its ingredients along with tightening its supply chain.

The article Testing Times for Yum! as Taco Bell Gets Caught in Horsemeat Scandal originally appeared on Fool.com and is written by Rita Chattaraj

and is written by Rita Chattaraj

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