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Yum executive: China still our best market

China still remains global fast food operator Yum! Brands' most important market despite the recent chicken safety scare.

Kfc chicken scareEnlarge
A chicken wing is served in a branch of a KFC restaurant in Shanghai on Feb. 26, 2013. The fast food giant has cut more than 1,000 farms from its supplier network in China — to ensure food safety — after a scandal over tainted chicken hurt sales in late 2012. (Peter Parks/AFP/Getty Images)

China still remains global fast food operator Yum! Brands' most important market despite the recent chicken safety scare, the vice chairman of the company, Sam Su, told CNBC.

Yum! Brands' share price has dived 13 percent since late November, after allegations that the company's suppliers in China had injected growth hormones and antiviral drugs into chicken beyond accepted safety limits.

The company — which owns the KFC fast-food chain — forecasted a drop in its 2013 earnings as a result of food safety concerns surrounding its Chinese business, which contributes more than half of the company's overall sales.

The company's vice chairman told CNBC that the world's second largest economy was still a priority market despite the controversy.

"We will continue to invest in China and this is still the best market we have," Su said.

"But at the same time China is a challenging environment to operate in. You can't take the good and not the bad, you have to accept China as it is," he added.

Su referred to the company's tightening of its supply chain across China as a result of the scare. The firm has eliminated 1,000 small producers used by the firm's 25 poultry suppliers.

"Unfortunately we had an issue with one small chicken house and that has tarnished the image of the whole industry. What we are doing now is getting more good ones into the system, but that takes time," Su said.

"We have created much better safety environment than before, but we have to admit that we're not perfect. We have learned a few things this time ... we should have innovated along the way and got better," he said.

He was confident that Yum! Brands would be able to win back the trust of Chinese consumers.

"My experience tells me if you respond to their concerns with concrete action, you will win their trust," he said.

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Original Source URL: 
http://www.cnbc.com/id/100494013

http://www.globalpost.com/dispatch/news/business/companies/130226/yum-brands-cuts-suppliers-china-companies-global-economy-food