Yum China recovery remains rocky even as online anger calms

Mon Mar 11, 2013 9:32am EDT
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By Adam Jourdan

SHANGHAI (Reuters) - Chinese consumers' anger at KFC over a food safety scare has abated as the number of negative posts about the fast food chain owned by Yum Brands Inc on the country's most popular microblogging platform fell by two-thirds.

China's half a billion microbloggers posted 3 million overwhelmingly negative comments about KFC in the month that began on December 18, when state media started reporting on the scare over contaminated chicken, a Reuters review of data from the Twitter-like platform Weibo shows.

The number fell from January 18 to February 18, but microbloggers still posted more than 1 million comments on KFC, indicating that the largest foreign fast food chain in China still has its work cut out for it as it tries to reverse a steep sales slide.

Yum will release China sales figures for February at around 03:00 p.m EDT, the first time it is singling out data from the market that accounts just over half of its overall sales.

Yum has estimated that same-store sales for the January-February period would be down 25 percent.

For January, they fell 37 percent, indicating that the company is anticipating a modest pickup in February, a month that included the week-long Lunar New Year holiday, which traditionally boosts restaurant sales. The holiday fell in January in 2012.

Jack Russo, senior consumer analyst covering Yum for brokerage Edward Jones, believes the drop in negative online traffic also helped lift February sales. "I would have to think consumer anger towards Yum has dissipated since the initial outrage," he said.

Kentucky-based Yum's reputation for serving high-quality meals in China, where food contamination is a chronic problem, was tarnished after news reports and government investigations focused on chemical residue found in a small portion of its chicken supply.   Continued...

A customer takes a nap at a KFC restaurant in Beijing February 26, 2013. REUTERS/Kim Kyung-Hoon