KFC is going antibiotic-free. Yum! Brands' (NYSE:YUM) chicken chain recently announced that by the end of next year, all of the chickens it purchases will be raised without antibiotics important to human medicine. The significance of the move can't be understated.
After a year-long campaign by animal-rights activists, the acquiescence by KFC to their demands to alter its practices is a really big deal beyond just the logistics of coordinating with some 2,000 family-owned and -managed farms, or rolling it out to its more than 4,200 U.S. restaurants. It could change how the entire poultry industry operates.
A sick industry
Reuters reports that 70% of antibiotics considered vital for fighting infections in humans are sold for use in meat and dairy production. According to the World Health Organization, the overuse of antibiotics in animals raised for human consumption is leading to the rise of antimicrobial-resistant bacteria that can spread to humans through the food supply.
The CDC estimates that at least 2 million people in the U.S. each year become infected with bacteria that are resistant to antibiotics and at least 23,000 people die each year as a direct result of these infections.
The decision by KFC to eliminate antibiotics from its chicken follows a yearlong campaign by the Natural Resources Defense Council [NRDC] and other advocacy groups such as the Center for Science in the Public Interest, Consumers International, Food Animals Concern Trust, and the U.S. Public Interest Research Group. Last September, they released a report that graded KFC with an "F" for its policies and practices relating to antibiotic use. Among other chains that earned failing grades were Buffalo Wild Wings, Burger King, Domino's Pizza, Sonic, and Starbucks.
Only Chipotle Mexican Grill and Panera Bread earned an A grade, while KFC's sister chains, Taco Bell and Pizza Hut, were graded a C- and D+, respectively.
While there is a growing movement in the industry away from antibiotics usage as a growth stimulant, the leadership position being being staked out by KFC is a potential game-changer because, as the biggest bone-in-chicken buyer in the country, it can single-handedly change industry practices. Reuters reports that KFC is the second-largest chicken chain by sales, trailing Chick-fil-A.
Lots of ruffled feathers
Last year, McDonald's (NYSE:MCD) committed to not serving chicken raised with antibiotics by March 2017. It reported last October that after removing artificial preservatives from its Chicken McNuggets, sales surged 10% and continued to sustain themselves at an elevated level. Chick-fil-A is going even further, vowing that by the end of 2019 its chicken won't use any antibiotics whatsoever, medically important to humans or otherwise.
It may be that other chains eventually move to that position as well. KFC (and others) are still allowing chickens to be treated with antibiotics if they're needed for their health, but what Chick-fil-A is saying is that while the birds can still be treated, they have to be culled from its supply. It doesn't want to serve any chicken to customers that have antibiotics in them.
The importance of KFC's announcement, though, is that it's the second-biggest chicken chain in the U.S. after Chick-fil-A but is the largest buyer of bone-in chicken in the country. KFC points out that the move is the first time a major national fast-food chain has included an antibiotics commitment to chicken-on-the-bone menu items.
Chickens coming home to roost
The non-profit NRDC estimates 40% of of the U.S. chicken industry has eliminated or pledged to eliminate routine use of medically important antibiotics, and KFC alone could tip the balance to over 50%. It might even be higher because of KFC's extending it to bone-in chicken as well. Since it is such a large purchaser, farmers may very well have to change their farming practices to accommodate it, meaning even if some chains hadn't made the commitment themselves, they still might see change because of KFC's move.
In addition to the antibiotic-free pledge, KFC also said all of its core products would be free of artificial colors and flavors by the end of 2018, while by the end of this year 100% of its menu will be free of food dyes, excluding those found in beverages and from third-party products.
Just because animals are purposely raised for slaughter doesn't mean they should be kept in brutish and miserable conditions, or be given drugs that are solely used to fatten them up. From ending the use of gestation cages for pigs, stopping the use of weight-gain drugs for cattle, and allowing egg-laying hens more free-range opportunities, the protein industry is improving the lot of the animals under their care.
KFC's decision to join the movement toward using only antibiotic-free chickens on its menu is a big deal that may ruffle the feathers of enough producers to end up causing the entire industry to flip to healthier birds.
Rich Duprey has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Buffalo Wild Wings, Chipotle Mexican Grill, and Starbucks. The Motley Fool owns shares of Panera Bread. The Motley Fool has a disclosure policy.