KFC faces word of mouth crisis in China

16 April 2010

SHANGHAI: KFC, the fast food chain, is having to counter critical word of mouth in China, after an online promotion turned into a public relations crisis.

The company, which is owned by Yum Brands, currently operates more than 2,000 stores in China, and recently launched an initiative that offered 50% discounts for three popular items on its menu.

Money-off coupons were made available to download in small batches at highly specific times of day, and were only accessible via KFC's page on Taobao, the ecommerce platform.

However, copies soon spread virally across the internet, meaning that the overall level of demand greatly outstripped expectations.

Some KFC outlets began to turn away customers, arguing that their vouchers had been acquired from illegitimate sources and were thus not valid.

The China Daily, the newspaper, reported that 20 branches of KFC in Nanjing were "besieged" by dissatisfied customers, while 30 people refused to leave a restaurant in Shanghai.

Similarly, the Global Times said consumers in one store in Beijing started "flipping chairs and tables and refusing to leave after their coupons were denied, the branch's manager said".

In a statement, Yum Brands said: "KFC has reported the case to local police, and we'll cooperate with the investigation."

"KFC is sorry for the disturbance. If consumers insist that their coupons are from official sources, they are required to show evidence," it added.

Figures from The Little Red Blog, which covers the Chinese advertising and media industries, showed that a web search for "KFC half-price Family Barrel" on Baidu yielded nearly 50,000 negative results.

Moreover, it reported that a single post about the matter on Tianya, one of China's biggest internet communities, had been viewed almost 360,000 times and generated 2,279 comments in one week.

Initially, these problems appeared likely to boost a scheme by McDonald's, which promised to allow people to reclaim vouchers for chicken wings issued by others firm in exchange for its own McWings.

However, the Chinese government has now ordered McDonald's to call a halt to this effort in the wake of the troubles that affected KFC.

The long-term impact on KFC remains unclear, particularly given that Yum Brands saw its Chinese like-for-like sales rise by 4% year-on-year in the first quarter of 2010.

Contributors to this trend were said to include KFC's roll out of a new breakfast menu and the expansion of its home delivery service.

"We now have over 3,500 restaurants in China, strengthening our leading position in the world's largest growth market," said David Novak, chairman/ceo of Yum Brands.

"We expect to further that lead by opening about 500 new restaurants in China this year."

Data sourced from AdAge China, Little Red Blog, Reuters; additional content by Warc staff