Diners say not biting on KFC's China revival campaign

Reuters

By Lisa Baertlein and Adam Jourdan

NEW YORK/SHANGHAI, Dec 4 (Reuters) - Yum Brands Inc's KFC website in China trumpets the slogan "Trust in everybite."

That message is part of the company's new "I Commit"campaign intended to reassure customers in its largest market, who have cut back on visits since Chinese media reports a yearago about excessive antibiotic use by a few KFC suppliers.

There is a lot at stake for Yum. It is China's largestWestern restaurant operator with roughly 4,500 KFC outlets, andthe company reaps more than half of its overall operating profitthere.

Despite a decades-long reputation for serving safe food inChina, KFC has struggled to fully restore diners' trust in acountry where dangerous contamination scandals are commonplace.

Interviews with Chinese consumers suggest that rather thansoothing concerns, KFC's new ads are reminding diners about thefood safety scare at the fried-chicken chain, which couldundermine Yum's mission to revive sales there.

Yum Chief Executive David Novak said he is confident that "ICommit" is on target - noting that "hundreds and hundreds ofconsumers" in testing said they felt better about the KFC brandafter the chain directly addressed safety worries.

"We don't want to be doing it forever, but we want tocommunicate it and get it out there because it's a lingeringissue," Novak told Reuters in an interview following Yum'sannual investor meeting in New York on Wednesday.

A survey conducted in November found nearly 40 percent ofrespondents were still very concerned about antibiotic use inKFC chickens. Yum, which cut off some of its suppliers after thetelevision report on antibiotics, initially predicted safetyfears would quickly fade.

Yum's sales, which fell sharply in late December 2012 afterthe antibiotic residue media report, took another hit from abird flu outbreak in China in April.

Analysts on Wednesday pressed company executives for detailson their plan to reignite KFC sales in China in the face ofquality concerns, tougher competition and choppy consumerspending.

Yum executives said they planned to back the "I Commit"campaign with new food and value offers, but they did not offerdetails.

Nevertheless, KFC China will soon be putting up results thatwill compare with the steep declines that started in December2012.

"That's what I call an unfortunate benefit," Novak said ofthe easier comparisons.

"I think we should start seeing progress as we move into theyear," Novak said after declining to predict when that turnwould come.

STUBBORN FOOD SAFETY WORRIES

Some diners told Reuters that Yum's ads bring back memoriesof China national television's December 2012 report showing thata few poultry farmers supplying Yum misused antibiotics in theirpoultry production.

"This strategy just risks fanning the flames rather thanletting people forget about it," said Yu Kaixin, 24, a recentuniversity graduate from Shanghai, while eating a beef burger atMcDonald's, which has also taken a hit from the foodsafety worries.

In response, Novak said "there will always be sidelinecritics. I would put our marketing capability up against a24-year-old university student."

The Shanghai Food and Drug Administration investigated thechicken contamination incident. It did not bring a case againstYum China and did not assess a fine.

The restaurant operator quickly responded by cuttingless-modern farms from its poultry supplier network. Its "ICommit" public relations push features KFC workers, includingKFC China CEO Su, who said the chicken in China is the same aswhat is served at its restaurants around the world.

The chain also is investing in social media programs,retraining employees and arranging consumer visits to chickenfarms - one of which is featured in an ad.

The message also was not having the desired effect on AoKun, 25, an investment manager from Jiangxi Province.

The more KFC promotes its food quality, "the more I go offthem," he said while eating a hamburger combo meal at BurgerKing. "They keep harking on about it again and again.It's not their competitors that are beating them. It'sthemselves."

An online poll of 1,000 Chinese conducted by ConsumerEdgeResearch during the first three weeks of November found thatsafety concerns remained prominent.

About 39 percent of survey respondents "strongly agreed"that they were concerned about antibiotics in KFC chicken, while33 percent said the same about bird flu and KFC chicken.

"This antibiotic thing is really being stubborn," said PeterReidhead, the ConsumerEdge analyst who runs the China survey.

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