End of a Growth Era: McDonald's and Yum Sell China

Having established large footprints in China, two fast food giants are looking to cash out.

Caixin: Yum Brands, McDonald's Explore China Pullback

In early September, Yum, which owns the KFC, Pizza Hut and Taco Bell chains, announced a sale of a slice of its China operations to private equity fund Primavera Capital Group and Ant Financial Services Group, which is affiliated with Alibaba Group. The move is a step in the company's plan to spin off its China operation and list it on the New York Stock Exchange separately.

The deal came as Yum's archrival, McDonald's, said in March it will sell 20-year franchise rights for its restaurants in China, Hong Kong and South Korea, a move that attracted suitors like U.S. private equity firm Carlyle Group and Chinese state-backed conglomerate CITIC Group.

Social mood and mistakes

Declining social mood correlates with greater numbers of accidents and mistakes. It also changes the way accidents and mistakes are interpreted by the market.

Here we have a perfect example: It's A Brain? It's A Kidney? It's KFC's Next PR Nightmare

As if Yum Brands were not suffering enough this morning - as they forecast China comp sales to drop 6% (more than the forecast 4% decline), it seems the UK has their next PR disaster waiting to happen, courtesy of their KFC brand. After a 19-year-old Brit found a "horrible wrinkled foreign body" in his fried chicken meal, KFC has apologized (rather magnanimously) saying "while there was no health risk, we agree it was unsightly." Judge for yourself just how puke-worthy and generally emotionally scarred you would have been after biting into this 'brain-looking' image. KFC clarifies: "Although we haven't received the product, it appears from a photograph that unfortunately on this occasion a kidney, and not a brain as claimed, was not removed in the preparation process."

Chinese sales fell due to news reports that KFC chickens in China were grown rapidly with supplements.

During positive social mood, the firm would take a hit, but this news would engender more comedy than fear about the food supply.

On day YUM acquires Little Sheep, reports of unsanitary conditions hit media

YUM's acquisition of Little Sheep (0968.HK) has been cleared by regulators, but the media has launched an attack on the hot pot chain for unsanitary conditions. It's the big story of the day on the news service for QQ after a reporter in Guangzhou visited one of the restaurants.
小肥羊的卫生“黑幕” (Little Sheep's sanitary "dirty tricks")
Some things include oil residue on plates and cooking implements, reusing dishwater, not wearing gloves while handling food. Chinese consumers are extremely concerned about food safety and fast food companies are seeing more and more scrutiny. I doubt this will be enough to affect YUM"s stock, but look for English news today or tomorrow if the story grows.