Food Business News - February 12, 2013 - (Page 19)

China problems may challenge Yum! Brands in 2013 AP IMAGES Fourth-quarter net income declines due to antibiotics scandal in China Continued from Page 1 conference call with financial analysts on Feb. 5 to discuss the company’s fiscal yearend results. “This onslaught of negative media coverage has been longer lasting and more impactful than we ever imagined, lasting over six weeks. “The media coverage is beginning to wind down because on Jan. 25 of this year, the Shanghai F.D.A. (which is not affiliated with the U.S. Food and Drug Administration) reported its concluding findings of the investigation. The Shanghai F.D.A. identified issues and provided supervisory recommendations to Yum! China to strengthen our poultry supply chain practices, including improved voluntary self-testing procedures, improved reporting and communications and enhanced supplier management. “It is important to note that Shanghai F.D.A. did not bring a case against Yum! China, and no fines were assessed. We have wholeheartedly accepted these recommendations and appreciate the thorough review by the Shanghai F.D.A.” To restore consumer confidence in China, Mr. Novak said Yum! Brands will launch an enhanced product quality assurance program along with an aggressive marketing campaign shortly after the Chinese New Year. “Now, looking back, history gives us confidence that we have the capability to fully recover and grow,” he said. “We have faced SARS, avian flu, Sudan Red, and in every case we have bounced back. As an example, in February 12, 2013 I’m confident our China Chin business will bounce back strongly and lead the way to restoring our track record of double-digit e.p.s. growth in 2014, 2015 and beyond. — David Novak, chairman and chief executive officer of Yum! Brands 2005 when our China business was severely impacted by Sudan Red and avian flu, our same-store sales in KFC China were down as much as 40% during the crisis. Our full-year operating profit was down 5% but we stayed the course and kept building new units. “In 2006, we bounced back and reported system sales growth of 28% and our profits grew 47%. I think this demonstrates the historical resilience of the brand. Now, no two crises are the same, and we don’t know how long it will take us to recover. However, we expect to weather this storm and come out stronger.” For the year ended Dec. 29, the company had net income of $1,597 million, equal to $3.46 per share on the common stock, which compared with income of $1,319 million, or $2.81 per share, during the previous year. Sales for the year were $11,833 million, up 9% from $10,893 million the previous year. Yum! Brands opened a record 1,976 international restaurants and grew U.S. samestore sales in all three brands during the year. But net income dropped in the fourth quarter to $337 million, or 74c per share, from $356 million, or 77c per share, a year ago, as China’s KFC sales declined sharply in December following the negative publicity. The company estimates a mid-single digit decline in earnings per share in 2013, said Mr. Novak. “Putting our current short-term China sales issue aside, we will continue to build shareholder value by aggressively developing new units around the world, driving same-store sales growth and generating high returns on investment capital,” he said. “I’m confident our China business will bounce back strongly and lead the way to restoring our track record of double-digit e.p.s. growth in 2014, 2015 and beyond.” The U.S. Division of Yum! had an operating profit of $666 million, up 13% from $589 million the previous year. Samestore sales for the division increased 5% for the year, with 8% growth at Taco Bell, 3% growth at Pizza Hut and 3% growth at KFC. In the fourth quarter, same-store sales increased 3%, with a 5% growth at Taco Bell and a 4% growth at KFC with a 1% decline at Pizza Hut. “We believe that the U.S. is set up for success in 2013 because Taco Bell has momentum, because new units are now working in our favor and because we have meaningful innovation plans at all three of our brands,” said Rick Carucci, president of Yum! Brands. “Our three U.S. businesses are significantly stronger now than they were a year ago.” Innovation at Taco Bell led the charge, with introductions of the Cantina Bell menu and Doritos Locos Tacos, one of the most successful product launches in quickservice restaurant history with 325 million sold last year, Mr. Carucci said. Yum! Brands plans to build on that momentum with the March launch of Cool Ranch Doritos Locos Tacos and more Cantina Bell items at Taco Bell, in addition to rollouts at Pizza Hut and KFC. This week, Pizza Hut launched Big Pizza Sliders, customizable miniature pizzas with up to three toppings. FBN FOODBUSINESS NEWS ® 19

Table of Contents for the Digital Edition of Food Business News - February 12, 2013

Food Business News - February 12, 2013
China problems may challenge Yum! Brands in 2013
Tyson Foods sees chicken demand rising
Kellogg frozen foods business on the fast track
Table of Contents
Web Contents
Editorial - Starbucks is redefining brand loyalty
General Mills settles Yo-Plus lawsuit
Green Mountain Coffee sees single-serve pack sales rise 21% in first quarter
Soren Schroder named next c.e.o. of Bunge Ltd
New Mexico legislature blocks bioengineering labeling bill
Pork prices may be volatile in 2013
Kraft Foods fills newly-created marketing post
Hershey has big plans in nuts and fruits
American Licorice Co. to expand in Indiana
Unilever to close spreads plant in Atlanta
Greek yogurt may be going to school
Frito-Lay to launch Taco Bell-inspired Doritos
Kellogg income rises on cost-savings, Pringles acquisition
China problems may challenge Yum! Brands in 2013
Juice, baking business come into focus for Starbucks
New product pipelines pump up protein
Washington - 'Smart snack' guidelines get favorable reviews
Market Insight - Per capita calories rise on added fats
Beverage Trends - Oat beverages offer benefits beyond the bowl
Ingredient Innovations - Fiber boosts for whole grain items
Harvard’s approval of 10:1 ratio draws critiques
Beverage Business News - Nothing to see here
New Food Products
Ingredient Market Trends - Open outcry trading of hard red winter wheat futures to shift to Chicago
Ingredient Markets
Supplier Innovations and News
Ad Index
Food Business in the News

Food Business News - February 12, 2013