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KFC (YUM) Announces Plan to Serve Meatless Chicken

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Fried Chicken giant KFC, operating under Yum! Brands (YUM - Free Report) , announced that they are planning on serving vegan fried chicken with the help of Beyond Meat (BYND - Free Report) . The company will begin trial running their vegan chicken in an Atlanta restaurant on Tuesday. The trial run will make KFC the first US fast food chain to introduce a Beyond chicken item, beating Chick-fil-A and Popeyes. Beyond Meat’s stock has skyrocketed 487% since its IPO in early May, while YUM has gained 15.1% YTD, outperforming the broader food and restaurant market.

Can This Propel KFC on the Homefront?

KFC has seen most of its growth come from its international business because of the tough competition it faces in the US from the likes of Popeyes and Chick-fil-A; China accounts for 27% of KFC’s total sales compared to US sales of 17%.

KFC has been contemplating about implementing a meatless option for some time now as they had meetings with major meatless meat suppliers back in May. The company hopes the new meatless chicken can drive some buzz around the restaurant; their same store sales have been relatively stagnant, only up 2% YTD. After a five-year turnaround, KFC expects a net annual gain in US restaurants for the first time since 2014. The implementation of meatless options helped Del Taco (TACO - Free Report) in its time of need. Del Taco saw its same-store sales return to growth after introducing its vegetarian food menu.

KFC’s meatless chicken will be fried in the same fryers as chicken but KFC stated that they are targeting a more flexible demographic that is trying to lower their meat intake. Ethan Brown, CEO of Beyond Meat, stated “To be able to bring Beyond Fried Chicken, speaks to our collective ability to meet the consumer where they are and accompany them on their journey.”

The meatless chicken is set to debut in Smyrna, Georgia and will offer nuggets and boneless wings. A six- or 12-piece combo meal will run about $6.49 and $8.49, respectively. The combo meals are priced at a discount relative to other KFC combos, which will likely drive the trial of the product. Earlier this year, Dunkin’ Donuts (DNKN - Free Report) and Subway began offering Beyond Meat products like meatless breakfast sandwiches and meatless meatballs.

Takeaway

KFC is hoping the new meatless chicken will revamp its business in the US as the stiff competition from other fast food fried chicken chains have hindered its US sales. KFC is attempting to accommodate its business to the contemporary health-conscious consumer. Beyond Meat’s test run with KFC can serve as a reminder to investors of the potential the company has with big fast food chains. If the Beyond Fried Chicken product commercializes well, other fast food restaurants will want to get in on the meatless craze. BYND is a Zacks Rank #2 (Buy) and Yum Brands is a Zacks Rank #3 (Hold).

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