February 5, 2013 / 4:20 PM / in 5 years

Yum CEO says time, not spending, cure for China sales drop

Feb 5 (Reuters) - KFC parent Yum Brands Inc on Tuesday said time, not more advertising spending, is the cure for a steep sales decline at its restaurants in China sparked by a food safety scare in the country that accounts for more than half of the fast-food operator’s overall sales.

“We totally underestimated the impact of this incident,” Yum Chief Executive David Novak said on a conference call with analysts.

Customers began shunning Yum’s China restaurants in late December after news reports and investigations focused on chemical residue found in a small portion of its chicken supply. The company was not fined by food safety authorities.

Yum quickly responded with free beverage and ice cream promotions, to little effect, said Novak, who added that Yum does not plan to increase its already significant advertising spending in China.

“There’s not a whole lot we can do right now that’s going to turn the tide. We need some time,” said Novak. “We could be wasting a lot of money doing marketing right now.”

Executives said Yum is refining and strengthening its food safety standards. It plans to begin an aggressive marketing campaign after the Chinese New Year on Feb. 10 to restore KFC’s brand image.

The company also will report monthly sales at its established restaurants in China until business there recovers, Chief Financial Officer Patrick Grismer said on the call.

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