Chinese KFC restaurants struggle as chicken prices rise
Chinese KFC restaurants have begun serving parts of chickens not used before in response to rising costs.
According to Yum China CEO Joey Wat, the KFC brand introduced new chicken cuts in the first quarter from “a part of the chicken that we somehow have not used in the last 30-some years”. The cut is a portion between the wing and the breast.
The elevated poultry costs are largely attributed to a spin-off effect from the impact of African Swine Fever on the pork market as well as the current trade war with the US.
The costs have seen KFC’s operating margin reduced to 18.7 per cent from the previous 20.6 per cent, despite a rise in same-store sales of 5 per cent. KFC has faced commodity inflation of 5 per cent in the first quarter, according to the company’s earnings call.
“We expect poultry inflation to weigh on margins for the rest of the year,” said Yum China CFO Jacky Lo.
Wat stated that the chain may be turning to new technology to save its declining margins in the hope that such technology can provide “another way to cut out chicken.”
The brand may also introduce “some sort of ingredient” other than chicken “that probably has not been used before.”