Chinese consumers expect foreign brands to be safer and better than domestic ones. But when that confidence is hurt, like happened after a government investigating into the poultry supply of KFC, damage can be huge, explains business analyst Shaun Rein in Bloomberg.
The Shanghai Food and Drug Administration on Dec. 20 said tests conducted by a third-party agency from 2010 to 2011 found found eight batches of chicken supplied to Yum by Liuhe Group Co. had levels of antibiotics that didn’t meet prescribed standards. Yum, which operates KFC and Pizza Hut chains in China, got 44 percent of its revenue from the Asian nation in 2011. The company said that it stopped all supplies from Liuhe in August.
“The trust in KFC was so high that now the anger is high,” said Shaun Rein, managing director of China Market Research in Shanghai. “People tend to trust western brands, they think these brands have better quality control over the supply chain and they are not going to cut corners.”
Food safety is a big worry for many Chinese consumers and it may take at least three to six months for them to start returning to KFC stores, Rein said.
Not all foreign companies get it right, when they have to adopt their offers to Chinese tastes. Ben Cavender recalls how four companies, B&Q, IKEA, GAP and Dunkin Donuts got it wrong when they tried to localize.
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