Shareholders to Sue KFC Parent After Recent China Chicken Scare and Stock-Price Tumble

We hear a lot in this country about food recalls, and over the past few years we've heard enough from overseas to become wary of the food supply that makes its way to our shores from China.

But how much do we hear about food raised in China that stays in China? And how often does it occur to us that some of that food is raised for Chinese markets served by U.S.-based companies?

Bronstein, Gewirtz & Grossman, LLC, a New York-based "corporate litigation boutique," announced today that it has filed a class action on behalf of the poor schmucks who bought stock in KFC parent company Yum! Brands, Inc. between October 9, 2012, and January 7, 2013. Over the past two months, the fast-food colossus' share price has taken a steep tumble as news emerged that poultry raised for KFC's Chinese market contains "excessive" levels of steroids and antibiotics aimed at accelerating growth.

According to reports from the official Chinese news agency Xinhua, health agencies in Shanghai have concluded that while levels of antibiotics and steroids in KFC chicken are not considered unsafe, the company has failed to keep a close-enough eye on its suppliers.

McDonald's poultry supply has also been implicated in the scare and the company has seen a drop in sales in China.

The company has a stated commitment to animal welfare, including an online Corporate Responsibility Report that outlines its beliefs and practices both domestically and internationally. Gut Check has reached out to Yum's animal-welfare experts for comment.

On October 9 of last year, Yum's share price stood at $66.04. On November 29, it topped out at $74.47.

On January 7, according to today's press release from Bronstein, "Yum revealed in a filing with the SEC the Company lowered its China Division's full-year 2012 guidance for same-store sales, due to publicity surrounding the Chinese government's review of Yum's poultry supply. As a result of these disclosures, on January 8, 2013 Yum shares dropped 5%, from $67.89 per share to as low as $64.40 per share."

The biggest drop -- 10 percent in a single day -- came on November 30, one week after news first surfaced in China about the food scare.

Yum's share price closed yesterday at $64.59.

A report yesterday from the Reuters news agency indicates that Yum "has apologized to customers in China over its handling of the food scare."


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