Every Thanksgiving, I sit down to a nice meal of Kentucky Fried Chicken. I buy it the night before and then reheat it the next day to celebrate the holiday. This might sound odd to some, but I've just never been a turkey guy. Besides, who can resist those delicious biscuits? Enjoying the Colonel's secret recipe always provides a wonderful excuse to eat those golden chunks of fattening bread.
I'm not so sure I will be savoring the Colonel's cooking this year, though. And I really don't have to tell you why, do I? Well, I guess I'll spell it out anyway -- bird flu. Yes, I'm one of those people who is afraid of catching influenza from an avian species.
According to TheWall Street Journal, Yum! Brands (NYSE:YUM) has prepared an advertising initiative to assuage any fears that might erupt if any bird flu incidents occur. The company wants to ensure that its KFC brand is not tarnished and that consumers can feel confident ingesting cooked fowl. Believe me, I'm a consumer who needs to sit down and watch a whole infomercial dedicated to calming the nerves. Some execs actually believe that fears of the flu could take KFC sales down 10% to 20%, so they are treating this matter quite seriously, especially because the company has already experienced some backlash from the flu in China.
This is smart policy on the part of Yum! Brands. Competitors like McDonald's (NYSE:MCD) and Wendy's (NYSE:WEN) also need to be concerned because they serve chicken products as well. It's important for shareholders to know, however, that these companies would be able to weather any storm that might erupt from the negative publicity or isolated outbreaks that might occur. As many observers have pointed out, we need only look at mad cow disease to figure that out. Even tragedies such as the terrible attacks of 9/11 exert relatively short-term effects. The effects can be horrible, of course, but the lesson here is that an investor should not panic and sell out of a long-term investment that said investor believes in from a fundamental viewpoint. Oftentimes, that can be the wrong move.
The stock took a slight hit Wednesday, closing down 2.5%. It could go down further as talk about the avian flu increases. But will you sell? Think long-term. That's the only way to deal with something like this. Short-term, the company will lose sales. In the long run, the brand power will remain. And besides, the company is diversified with its two other major brands, Pizza Hut and Taco Bell. The Colonel might have to rough it for a while, but he'll eventually win out.
For related articles, see:
- Pilgrim's Pride Investors Turn Chicken on Outlook
- Chiron's Bird Flu Contract
- Chasing Down Bird Flu
- Discuss the bird flu and other issues at the Yum! Brands discussion board.
Fool contributor Steven Mallas owns none of the companies mentioned. The Fool has a disclosure policy.
