January 19, 2007 / 9:13 AM / 14 years ago

KFC to switch to no-trans-fat frying oil

NEW YORK (Reuters) - KFC on Monday said all 5,500 of its U.S. fried-chicken restaurants will switch to a cooking oil with no trans fat by the end of next April.

An order of french fries at a KFC fast food restaurant in New York, October 30, 2006. REUTERS/Shannon Stapleton

The company, a unit of Yum Brands Inc., is also switching oils at its 786 restaurants in Canada.

With fast-food restaurants under increasing criticism that they contribute to obesity and the risk of heart disease, KFC joins hamburger chain Wendy’s International Inc. in cutting out artery-clogging trans fats.

Many local governments, including New York City’s, are looking at banning trans fats.

KFC said using the new oil would mean there were no trans fats in any of its fried foods — about 65 menu items in the United States, comprising 80 percent of its menu. The company is also working on removing trans fats from items such as biscuits, which are not fried.

KFC restaurants in many other countries, including China, already use a more healthful oil.

“And if they don’t already use (the zero trans-fat cooking oil), they’re working on it now,” said company spokeswoman Laurie Schalow.

McDonald’s Corp., the world’s largest restaurant chain, promised in 2002 to reduce trans fats in some of its products. While the chain has introduced healthier foods — such as apple and walnut salads — it has yet to convert its oils entirely, saying it has not found an alternative that works as well.

KFC said that after a two-year trial of various cooking oils, it settled on low linolenic soybean oil, a zero trans-fat cooking oil, to replace partially hydrogenated soybean oil in its U.S. restaurants.

Since the new oil is also made from soybeans, it “preserves the taste profile,” according to KFC President Gregg Dedrick.

The Canadian restaurants will switch to a Canadian-made canola oil, with the change complete by early next year.

KFC has already quietly begun using the healthier oil in several hundred restaurants in New York City, Chicago, Atlanta and its hometown, Louisville, Kentucky. Dedrick said consumers have not been able to tell the difference. He declined to say whether sales had been affected at the converted stores.

KFC is working with several suppliers, including Monsanto Co., a leader in genetically altering crops.

Monsanto representative Christopher Horner said in an interview that more than 90 percent of the soybeans in the United States are genetically modified, but this particular low-linolenic trait was developed through conventional breeding.

As demand for non trans fat oil has soared, Monsanto quintupled its production of soybeans this year from last, to 500,000 acres. In 2007, it expects to triple production to more than 1.5 million acres.

The U.S. food industry in general and many fast-food restaurants in particular have been under growing pressure to offer more healthful products because of an increase in obesity in the country, especially among children and adolescents.

“The fast-food industry as a whole has been under some pressure to make this change, so it is really in their benefit to be proactive,” said Arun Daniel a senior analyst at ING Investment Management, which owns about 600,000 Yum shares.

But, at least in the near term, any increase in customer traffic at KFC is likely to be offset by the cost of making the change, he said.

“If anything, it could impact them negatively on the margins,” Daniel said.

Dedrick said the investment to find and convert to the new oil had been factored into the company’s business model, so it would not be taking any charges. He said KFC would not raise menu prices and expected the price of the new oil to come down over time as supply and demand even out.

Yum, which also owns the Pizza Hut, Taco Bell and Long John Silver’s fast-food chains, said the other chains were exploring similar moves.

Trans fat increases the low-density lipoprotein — the so-called bad cholesterol — in food. The U.S. Food and Drug Administration made it mandatory to list the trans-fat content of all food products, starting last January 1.

Yum shares closed up $1.14, or 1.9 percent, at $60.10 on the New York Stock Exchange on Monday. The stock has risen 25 percent so far this year.

With additional reporting by Dan Wilchins and Brad Dorfman

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