Yum Brand reported results for the fourth quarter of 2012 on Monday, saying that China Division KFC same-store sales sharply slipped “as a result of adverse publicity from the poultry supply situation”.
According to the report, Yum Brand’s same-store sales declined 6% in China during the fourth quater, and the negative sales trend in its China KFC business will adversely impact 2013 EPS.
The scandal of KFC chicken in China has been drawing media attention in the past two months. Last December, China’s national television, CCTV, reported an investigation towards KFC, showing that some poultry suppliers were using excessive levels of antibiotics in chicken, which helped accelerate the growth cycle of the chickens from 100 days to just 40 days.
According to an article published in The Epoch Times, media in China found out that one of KFC’s Chinese poultry suppliers, Suhai Group, feeds the chickens “chemicals that are so toxic it even kills the flies that buzz around it”:
The chemical additives are produced inhouse by Suhai Group and are then handed to workers in feed processing factories, according to the report. Some 500 bags of the additives are produced per day, using chemical ingredients including silver nitrate, chloride, and a sterilization medicament.
In the process, around 5,000 chicks are kept in each shed—greatly increasing the risk for infectious diseases to spread—and are given the additive-laced feed and medicine to enhance their immune system. The idea is apparently to raise and kill them quickly enough, in 45 days, before the chemical additives start to adversely affect the chickens.