Bird Flu And Unsafe Chicken Cause Yum! Brands' 29 Percent Sales Dive In April 2013

Yum! Brands Inc., owner of the KFC fastfood chain, reported that same-store sales in China dropped 29 percent in April 2013. Concerns about the safety of KFC's chicken and the spread of bird flu in China prompted customers to stay away from KFC restaurants. KFC's efforts to offer localized dishes is working against KFC's brand, which is driven by the taste of its friend chicken and which is what made Chinese consumers fell in love with the restaurant chain in the first place. Also, KFC is feeling the pressure from U.S.-based competitors McDonald's Corp. and Burger King Worldwide Inc., which are expanding their China operations. Reports about high levels of antibiotics contained by locally sourced chicken also harmed KFC's sales and profit, which Yum forecast to decline by mid-single digit rate in 2013. In contrast, net income increased 21 percent to $1.6 billion in 2012.

"Yum’s 29% Sales Collapse in China Goes Beyond Avian Flu", Bloomberg News, May 13, 2013

Wal-Mart Spends $16.3 Million On Food Safety Measures In China

Wal-Mart Stores Inc. said it is investing 100 million yuan, or $16.3 million, to improve food-safety management at its retail stores in China. Government officials in that country launched crackdowns on violators of food safety rules following public furor over several well-publicized food safety scandals. Wal-Mart plans to expand mobile food-safety laboratories to manage third-party providers of food-quality tests at 70 stores owned by the company across China's southern Guangdong province. In 2011, Chongqing government officials accused the retailer of mislabeling regular pork products as organic pork, making them more expensive. The incident prompted heightened food safety awareness for Wal-Mart, which also plans to improve employees' food safety training and hire more retail compliance experts.

"Wal-Mart Invests $16.3 Million in China Food Safety", Wall Street Journal, May 09, 2013

Chinese Parents Trust Only Foreign Infant Formula Brands Sourced From Outside The Country

Parents in China want only foreign infant formula brands, but trust them only if purchased from sources outside the country. Driven by food quality and safety scandals, the trend is having impact on sales in markets as far away as Europe where Chinese visitors sometimes empty store shelves. Food safety cases involving infant formula in China include the 2008 incident which killed six babies and downed 300,000 others who were given infant formula mixed with an industrial chemical designed to circumvent laboratory tests for protein content. Most recently, the local distributor of Hero baby formula, a high-end brand from Switzerland, was caught mixing expired milk powder into cans being readied for sale. China's leading formula brand, with 15 percent of the market, Danone's Dumex has been commended for its openness about its operations and efforts to convince consumers about its safety standards.

"Chinese Don't Trust Food Made In China Either, Seek Baby Formula From Abroad", Advertising Age, May 07, 2013

California Sues Food Retailers For Selling Lead-Tainted Foods Without Warning Labels

The State of California has filed a lawsuit in San Francisco Superior Court alleging that Whole Foods, Trader Joe’s and other food retailers are selling ginger and plum candies contaminated with lead and carrying no warning labels. The state attorney general’s office said lab tests verified the presence of lead in the products in violation of Proposition 65. Even minute amounts of lead and other potentially harmful ingredients in food products must be disclosed to the public. A Whole Foods spokesman said the company was investigating the problem, but there was no comment from Trader Joe’s.

"Whole Foods, Trader Joe's Sued By California For Lead In Candies", Huffington Post, May 01, 2013