Diners say not biting on KFC's China revival campaign

Reuters
File photo of KFC's staff wait for customers at its restaurant in Beijing
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KFC's staff wait for customers at its restaurant in Beijing in this October 9, 2013 file photograph. …

By Lisa Baertlein and Adam Jourdan

NEW YORK/SHANGHAI (Reuters) - Yum Brands Inc's KFC website in China trumpets the slogan "Trust in every bite."

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 year ago about excessive antibiotic use by a few KFC suppliers.

There is a lot at stake for Yum. It is China's largest Western restaurant operator with roughly 4,500 KFC outlets, and the company reaps more than half of its overall operating profit there.

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

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

Yum Chief Executive David Novak said he is confident that "I Commit" is on target - noting that "hundreds and hundreds of consumers" in testing said they felt better about the KFC brand after the chain directly addressed safety worries.

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

A survey conducted in November found nearly 40 percent of respondents were still very concerned about antibiotic use in KFC chickens. Yum, which cut off some of its suppliers after the television report on antibiotics, initially predicted safety fears would quickly fade.

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

Analysts on Wednesday pressed company executives for details on their plan to reignite KFC sales in China in the face of quality concerns, tougher competition and choppy consumer spending.

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

Nevertheless, KFC China will soon be putting up results that will compare with the steep declines that started in December 2012.

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

"I think we should start seeing progress as we move into the year," Novak said after declining to predict when that turn would come.

STUBBORN FOOD SAFETY WORRIES

Some diners told Reuters that Yum's ads bring back memories of China national television's December 2012 report showing that a few poultry farmers supplying Yum misused antibiotics in their poultry production.

"This strategy just risks fanning the flames rather than letting people forget about it," said Yu Kaixin, 24, a recent university graduate from Shanghai, while eating a beef burger at McDonald's, which has also taken a hit from the food safety worries.

In response, Novak said "there will always be sideline critics. I would put our marketing capability up against a 24-year-old university student."

The Shanghai Food and Drug Administration investigated the chicken contamination incident. It did not bring a case against Yum China and did not assess a fine.

The restaurant operator quickly responded by cutting less-modern farms from its poultry supplier network. Its "I Commit" public relations push features KFC workers, including KFC China CEO Su, who said the chicken in China is the same as what is served at its restaurants around the world.

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

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

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

An online poll of 1,000 Chinese conducted by ConsumerEdge Research during the first three weeks of November found that safety concerns remained prominent.

About 39 percent of survey respondents "strongly agreed" that they were concerned about antibiotics in KFC chicken, while 33 percent said the same about bird flu and KFC chicken.

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

(Additonal reporting by Shanghai newsroom; Editing by Emily Kaiser and Matthew Lewis)

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