Yum Brands! – parent company of Pizza Hut, Taco Bell and KFC – is suffering from the food scandals in China. The discovery that some competing restaurants made Chinese fondue from recycled leftovers of earlier customers and the fact that lso-called lamb meat contained meat from chickens, ducks, rats and dogs, are causing troubles at other companies from the sector as well.
Fraud at competitors
The American restaurant group Yum Brands! bought Little Sheep, the biggest chain for hotpot (Chinese fondue), in 2011. However, the takeover cannot be called a success so far: sales and profit contribution dropped last year and the first quarter of 2013 did not show any signs of improvement.
In a conference with analysts CEO David Novak admitted Yum Brands! is suffering from the several Chinese food scandals. Despite the fact the chain buys its lamb at two verified suppliers and that there have been no indications of fraud, the market leader in hotpot is still suffering from the commotion when it was discovered some suppliers mixed meat from rats, chickens, ducks and dogs in their lamb. At least 11 tons of that meat was sold to chains such as Dai Mei, Tan and Macao Doulao.
Higher prices also unsuccessful
There is a second reason why Little Sheep is not faring well: Yum Brands! increased the price of the chain from 70 to 90 yuan (from 9 to 11 euro), in an attempt to change the image of the chain, towards a higher segment of the market.
Not only Little Sheep is having troubles, KFC is also having its issues. The chain was accused of administering antibiotics to chickens to increase their growth. The bird flu also hasn’t helped, causing sales to drop by a quarter to a third in the past few months.