According to Reuters, Kentucky-based
Yum! Brands Inc.
) operating unit KFC recently cleared allegations regarding its
chicken quality in China. Food safety regulators in Shanghai
assured that the antibiotics and steroids used in KFC chicken is
within the restricted levels.
However, Shanghai Food and Drug Administration (SFDA) said
that eight out of 19 chicken samples that were sent for
examination in 2010 and 2011 contained a very high amount of
antibiotic named amantadine. Amantadine is mainly considered as a
medicine for Parkinson's disease.
On December 18, China's state television CCTV reported that
two poultry farms in the Shandong province of China that supplied
chickens to KFC and competitor
) had fed chicken with unapproved levels of antibiotics. The SFDA
investigation followed soon after. Yum! Brands' share price took
a beating after the announcement of the news.
In a recent SEC filing, the company has stated that it is
always highly concerned regarding the safety of its food products
and it will be assisting the Chinese government in its
investigation to resolve this problem. The company believes that
this issue will not affect its product supply as these suppliers
provide a very small percentage of products to KFC. Although the
company did admit that, the negative publicity hurt its sales in
the past few days. As of now, management expects that the China
division's same store sales may decline 4% in the fourth
This is not the first time that the company has faced such an
accusation. Earlier in February 2011, the company's subsidiary
Taco Bell was charged that its "seasoned ground beef" violated
the beef standards of the U.S. Department of Agriculture (USDA).
The company was alleged of not having enough beef in its product
as promised by the "taco meat filling" commercial and instead the
company was mostly using fillers.
However, the company countered the accusation saying that they
used 100% USDA-inspected beef, which was then cooked in its
proprietary blend of seasonings and spices. Taco Bell also added
in its defense that its product contained 88% beef as opposed to
allegations of only 35%.
Yum! Brands currently carries a Zacks #3 Rank (short-term Hold
MCDONALDS CORP (MCD): Free Stock Analysis
YUM! BRANDS INC (YUM): Free Stock Analysis
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