It’s good that Yum! Brands, Inc. (NYSE:YUM) has realized that the dominant reason behind their declining quality of chicken lies in China’s meat industry. The entire Chinese meat industry relies on small scale farms, and thus is vulnerable to risk as the small scale farms hardly meet the quality standards. Thus, Yum! is planning to tie up with international poultry suppliers. The company has announced that it’s working with international poultry suppliers, and is helping them enter the Chinese market, or to invest in the Chinese small scale suppliers to improve their quality.
Not only Yum! Brands, Inc. (NYSE:YUM) has realized the weakness in the Chinese meat industry, but it has also taken initiatives to bring it to the notice of the government that the industry requires more investment and quality check. The company has invited representatives from industry groups, such as the China Chain Store & Franchise Association, the China Cuisine Association, and the China Animal Agriculture Association to speak at the company’s press emphasizing the fact that the meat sector requires more investment and better management, to ensure quality and consumer safety.
Further expansion:
Competition is constantly increasing in the lucrative Chinese market. On one hand, its biggest competitor McDonald’s, has plans to add almost 750 restaurants to their 1300 outlets in China, while on the other hand, Burger King Worldwide Inc (NYSE:BKW), which currently operates only 100 outlets in China has plans to open almost 1000 new outlets in the mainland within the next five to seven years. Yum! already operates more than 4,200 KFC restaurants and 800 Pizza Huts in China.
When all of its competitors are expanding, Yum! Brands, Inc. (NYSE:YUM) is not sitting idle. Though sales at its KFC stores open at least 12 months in China declined 41% in January, that won’t stop Yum from trying. The company plans to open at least 700 stores in China. Once the company manages to solve the quality issue problem, these large number of stores will surely help it to boost its topline.
Foolish bottom line:
Regaining the confidence of its consumers won’t be an easy task for Yum!, but the company has taken the first step to do so. The company is already showing decent performance in other parts of the world. Once the company becomes successful in regaining customer confidence in China, there will not be any looking back. I agree it will take time, may be not before the next two quarters, but I somehow have faith in this company. It will fight back.
The article Yum! is Trying Hard to Fix It originally appeared on Fool.com and is written by Satarupa Bose.
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