BEIJING: Yum Brands Inc, the owner of Pizza Hut and KFC, reported its fourth straight quarter of falling sales, indicating that the company is still struggling to regain lost ground in China after a food scandal last year.
Yum’s sales at established KFC and Pizza Hut restaurants in China have taken a hit ever since a television news story in July last year alleged that one of its suppliers was using meat that was past its expiration date.
Food safety is a highly emotive subject in the country, where scandals ranging from toxic baby milk formula to dirty food oil are common. That makes convincing Chinese customers to come back to a tainted brand tough, marketing experts say.
Yum’s same-store sales in China plunged 10 percent in the second quarter, much steeper than the 8.4 percent fall analysts had expected, according to research firm Consensus Metrix.
Hedge fund Third Point LLC, which took a stake in Yum in May, has said there is room for the company to split off its China business, a move that another stakeholder, Corvex Management, is pushing for.
“We are bullish on China over the long term and believe our best initiative right now is to get the business back on track,” said Jonathan Blum, Yum’s chief public affairs officer.
Adding to Yum’s China woes, calorie-conscious Americans back home are turning to food perceived to be healthier, resulting in the company losing out to newer competitors such as Shake Shack Inc and Chipotle Mexican Grill Inc in the United States.
