Heads must roll at Yum, crisis-management expert says

There's only one solution for the public-relations woes in China at KFC's parent company Yum Brands Inc: fire some higher-ups.

That's the opinion of David E. Johnson, CEO of Strategic Vision LLC, a public relations and branding agency in Suwanee, Georgia.

KFC, which has 6,000 restaurants in more than 850 Chinese cities, initially attracted diners with the taste of its fried chicken and American cachet. But its reputation as a model for how a foreign company can succeed in China took a big hit in the first half of 2013 amid an outbreak of avian flu and revelations that locally sourced chicken contained unacceptably high levels of antibiotics.

Last week, the fast-food restaurant chain faced its latest public relations challenge as China Central Television reported that ice samples taken from a KFC outlet in Beijing were found to be dirtier than toilet water.

The samples from a KFC in the city's Chongwenmen area contained 12 times as much bacteria as toilet water and 19 times the allowable bacteria levels for drinking water in China, the predominant state broadcaster reported.

Hours after the broadcast, in a statement posted to Sina Weibo, China's Twitter-like microblogging service, KFC apologized to consumers. Its statement said: "We are sincerely sorry that this sort of situation has occurred. Our executives have reached the store to look into the case."

But Johnson says that apology doesn't go far enough.

Yum needs to show "that some heads are rolling, as a result of this," Johnson said. "They need to show that they've made changes."

The restaurant chain also should show images of KFC executives at the restaurant in question, "eating KFC, reassuring the consumer (that) 'we wouldn't put anything in our mouth that's not good. We're taking the appropriate steps'", Johnson said.

As evidence that Yum's image-management efforts so far are ineffective, two weeks ago the Kentucky-based company - which also owns the Taco Bell and Pizza Hut chains - posted its third straight quarterly profit drop. Analysts attributed the decline to diners taking pains to avoid KFC amid its recent scandals.

Until recently, the company had enjoyed a long stretch of double-digit earnings growth, driven by KFC's popularity in China, its biggest market.

Yum risks being stigmatized unless it "gets out in front of this" latest crisis, Johnson said. Customers "will begin to say: "stay away, it's a bad American restaurant."

Generally, Chinese choose US brands over those from China because of their perceived higher quality, according to a Boston Consulting Group study released last fall. Natalie Lowe and Alistair Nicholas, researchers with the California-based International Association of Business Communicators, reported in 2011 that Chinese consumers prefer foreign brands because of their reputations for standards in hygiene, health and safety. But numerous scandals affecting consumer products, particularly food, have led Chinese consumers to be "very much concerned with brand and corporate reputation", the researchers found.

Early this year, after a disappointing first-quarter earnings report, Yum strengthened its food safety standards and launched an aggressive marketing campaign to underscore its commitment to food safety. At the time, CEO David Novak said the company remained "more committed than ever" to restoring customers' confidence and regaining their brand loyalty.

But the power of Weibo and other social media tools to magnify complaints make it tougher to win back lost customers, Johnson said.

"The public expects more and more, regardless of how respected you are," he said.

"You have a more demanding public with social media. The standard corporate response - 'We're apologizing, we're taking steps to correct it' - no longer washes with today's savvy consumer," Johnson said. "They expect almost personalized attention."

If you don't get in front of a significant hit, "it takes several years to fully recover," he said.

Japan's Toyota Motor Corp - whose sales and reputation for quality were hurt in connection with complaints of unintended acceleration in its vehicles - is a case in point, he said. "It took them several years to get back their reputation."

For the record, ice samples taken from two other chains - Kongfu and McDonald's - also failed to meet national standards, according to CCTV. A branch of local fast-food brand Kongfu was found serving ice with five times as much bacteria as toilet water. Ice from a McDonald's outlet, meanwhile, turned out to be cleaner than toilet water but was not considered drinkable, the broadcaster said. McDonald's and Kongfu both issued statements on Sina Weibo saying they paid close attention to the ice-cleanliness report and were investigating.

That likely won't wash with apology-savvy consumers, either.

Contact the writer at michaelbarris@chinadailyusa.com

(China Daily USA 07/31/2013 page2)