BEIJING—Yum Brands Inc.'s KFC is suing three companies in China
for allegedly spreading rumors about the quality of its food,
including that its chickens have eight legs, a move that comes as
the fried-chicken company fights to regain lost ground in one of
its most critical markets.
KFC said on its Chinese-language website that three Chinese
media companies tarnished its image by spreading false information
about its products on social media. KFC alleged in its statement
that the companies spread rumors, "misleading the consumer," on
microblogs and through photos and articles that claimed its chicken
had six wings and eight legs. The fast-food chain said it is
requesting compensation of up to 1.5 million yuan (about $245,000)
from each company, an apology and an end to the alleged
practices.
The companies are Ying Chen An Zhi Chenggong Culture
Communications Ltd. in the southern Chinese city of Shenzhen, and
Wei Lu Kuang Technology and Ling Dian Technology in inland Shanxi
province. The three companies couldn't immediately be reached for
comment.
Yum didn't release further details about its court action, and
its representatives didn't immediately respond to requests for
comment.
KFC cited the Chinese government's intensified campaign to clean
up what it deems rumors on social media. It is very hard for
companies to protect their reputation on the Internet, KFC
said.
The move also comes as Yum attempts to win back consumers that
it has lost in China, which accounts for roughly half of its
revenue. In April, Yum posted profit and revenue declines in the
fiscal first quarter ended March 21, as it struggles to overcome
setbacks in China. Yum's China sales in the quarter were down 9%
from a year earlier, to $1.26 billion, following declines in the
third and fourth quarters of last fiscal year. Overall net income
slid 9% to $362 million in the quarter from a year earlier on sales
of $2.62 billion.
Yum's woes began with a Chinese media report in November 2012
alleging that a KFC supplier had been using growth hormones and
antibiotics to help chickens grow faster. The claims spread quickly
online and tapped into widespread consumer worries in China over
food safety.
Government officials investigated and recommended Yum strengthen
its poultry-supply-chain practices, which Yum says it has done.
Yum's chief executive of China operations, Sam Su, apologized at
the time for failing to address problems quickly and for poor
internal communications. Mr. Su also said the company planned to
cut small chicken suppliers and strengthen supplier management and
oversight.
Defamation is common on China's Internet, and courts have
convicted Internet marketers for illegal business practices. Still,
it is rare for a Western company to take action publicly on an
alleged incident.
"China's social media is full of companies that will create
content—positive and negative—for brands," said Sam Flemming,
founder of social media analysis company Kantar Media CIC.
Olivia Geng contributed to this article.
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