KFC raises prices in China on higher costs

(China Daily)
Updated: 2008-08-21 07:59

SHANGHAI -- US fast-food chain Kentucky Fried Chicken (KFC) raised its prices in China for the second time this year due to mounting commodity costs.

The price increase, which came into effect on Monday, ranges from 0.5 yuan to 2.5 yuan for different items on the food giant's menu, said Xu Hui, KFC's public affairs director.

"The price of all burgers have gone up by 0.5 yuan, and the price for medium coke has risen to 6.5 yuan from 6 yuan," a KFC employee working in the outlet on the Middle Huaihai Road in Shanghai said.

Prices of six types of burger sets increased by between 1.5 yuan and 2.5 yuan.

Xu blamed the soaring prices of fossil and edible oil, increasing costs of labor and electric fees for the latest rise in prices.

This is the second time that KFC has increased its prices in China this year. Items on its menu rose from between 0.5 yuan and 1.5 in March.

"The price increases are inevitable based on the rising food and commodity prices, and no company will be able to absorb the price on a long-term basis," said Ashok Sethi, regional director of UK-based market research company TNS.

Beset by the dull performance in the US, where Yum Brands Inc, KFC's parent company, suffered a double digit loss in operating profit in the second quarter, China has become the savior for the fast-food company.

The Kentucky-based restaurant chain posted $378 million operating profit for the second quarter. Its China division contributed $90 million.

However, the company said its margins were hit in China mainly by the climbing commodity inflation.

Wang Ke, a 29-year-old teacher and customer at KFC, said the price rise was unacceptable.

"Its products are quite small in size, and not worth the money if prices continue to go up," Wang said.

KFC was the first quick-service eatery chain to enter China in 1987, followed by another Yum-owned brand, Pizza Hut, which entered the market in 1990. Yum has become the largest fast-food chain in China with over 2,700 restaurants on the mainland.

KFC's major rival McDonald's said it had no plans to raise its prices further after a price hike in June.