* Yum's 11-year streak of double-digit profit growth in
* China same-store sales drop 13 pct in March
* Troubles in China may go deeper than bird flu - analysts
* Shares down more than 2 pct after-hours
By Adam Jourdan and Lisa Baertlein
April 11 Yum Brands Inc, the biggest
foreign fast-food chain operator in China, is in danger of
breaking its 11-year streak of double-digit profit growth as it
scrambles to deal with food scares and bird flu in its most
The U.S.-listed firm, the world's largest restaurant company
by number of outlets, said in a filing Wednesday that the latest
deadly avian flu outbreak would have a "significant, negative
impact" on sales at KFC stores in China in April.
Analysts said the company's problems in China - which
accounts for more than half its global sales - were deeply
rooted, and that sales which started slowing before the chicken
scare would need more than a flu-jab to revive.
"KFC has got off to a very bad start this year, it's had a
double whammy of incidents. But increasingly there's also much
stiffer competition from local quick service restaurants firms,"
said Frank Gibson, an independent business consultant based in
"Longer term it will be hard for them to maintain the growth
they've experienced in the past, but this will be more due to a
more complex and dynamic environment than necessarily due to the
issues they faced in the first quarter of this year."
Yum's troubles in China began in December when it was
accused of selling chicken laced with excessive chemicals. It
was cleared of any wrongdoing and publicly apologised over its
handling of the affair, but that did not spare it being accused
of "arrogance" by the state-run Xinhua news agency.
Sales were beginning to recover when they were hit again by
a new outbreak of bird flu, which has killed nine people so far
and stirred fresh fears about the safety of poultry products.
Beijing-based food and agribusiness analyst Chenjun Pan, at
Rabobank International, said consumer confidence would take many
months to recover.
"While the area affected is still in the east of China, the
consumer confidence impact is nationwide," she added, saying the
impact would be greater than previous bird flu outbreaks.
Some restaurants, airlines and schools in the commercial
capital of Shanghai have taken poultry off the menu in response
to the latest health scare, local media reported.
Several KFC outlets which Reuters visited were quieter than
normal and had signs citing World Health Organisation assurances
that cooked chicken is safe to eat.
Not everyone was convinced.
"I avoid eating chicken these days. Not only KFC, but also
McDonald's and so on," Moon Li, a Shanghai woman in her
20s, told Reuters.
China's popular microblog Weibo was abuzz with talk of
giving up chicken and other meat.
"Recently I've decided to become a vegetarian," wrote 'A
Qiong Smile' on China's equivalent of Twitter.
Yum said in Wednesday's filing it plans to educate
consumers, as it has done in the past, that properly cooked
chicken is safe to eat.
Sales at Yum's China restaurants that have been open for at
least one year fell 13 percent in March, more than the 10
percent average drop expected by analysts polled by Consensus
The March results included a 16 percent drop at KFC and a 4
percent rise at Pizza Hut. Yum is due to report its
first-quarter earnings on April 23.
Yum shares fell more than 2 percent to $65.20 in extended
trading following the report. Yum's stock traded around $72 in
late March before reports of the first avian flu deaths.