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Louisville, ky. -- Yum! Brands Inc. faces a potential 10-percent to 20-percent decline in KFC's U.S. and European sales because of customers' avian flu concerns, senior Yum executives told analysts in an Oct. 25 meeting at which plans for airing reassuring TV ads were disclosed.

Yum based its sales downturn estimate on the company's experience in China, Prudential Securities analyst Larry Miller indicated in an Oct. 26 report on the briefing by Yum chairman and chief executive David Novak, KFC president Gregg Dedrick and Yum chief financial officer Richard Carucci.

KFC faces potential disruptions in customer traffic and chicken supplies to its 1,500 outlets in China because of avian flu outbreaks in four provinces there and the Chinese government's Nov. 1 ban on poultry imports from eight affected neighboring countries. Yum's profits from KFC's Chinese operations exceeded $200 million last year, more than the company's earnings from its largely franchised U.S. KFC system of nearly 5,400 restaurants. Yum's overall net profit for 2004 was $740 million.

Yum, in a report this month on the four weeks ended Oct. 31, said sales in its China division, which includes Thailand and Taiwan, grew 8 percent in local currencies, compared with results for October 2004, when sales had risen 24 percent over the October 2003 total. Yum does not disclose same-store results for the China division, which has about 2,000 total KFCs.

Inquiries to Shanghai-based Yum Restaurants China and to Yum headquarters in Louisville did not yield details about KFC's supply logistics in China or any recent sales downturns at U.S. or Chinese KFC outlets.

"We really can't speculate on something that hasn't happened," a Yum spokeswoman in Louisville said. "We're developing contingency plans and hope we won't have to use them."

Although scientists indicate that the deadly strain of avian flu may never spread to the United States, Yum senior vice president Jonathan Blum confirmed that a "contingency marketing campaign" was being readied that would include reassurances about the safety of eating chicken.

Analyst Miller indicated that Yum's leaders outlined a possible "proactive" campaign for U.S. and European markets that would include televised advertising directly by KFC or through chicken industry associations. Possible TV ads would seek to educate consumers about the safety of eating cooked chicken and KFC's "flexible sourcing from non-affected areas" and stockpiling of supplies. A contingency also was disclosed in which alternative proteins such as fish or pork would be promoted, his Oct. 26 report indicated.

In an Oct. 31 report, Miller estimated that poultry demand was falling 20 percent to 40 percent in parts of Europe and Asia because of bird flu fears.

The NPD Group, a Port Washington, N.Y.-based market research firm, last month reported that U.S. consumers' awareness and concern about avian flu had grown by 16 percent in a recent two-week period. NPD said that a jump in concern of that magnitude had not occurred with any other food or health issue since the first U.S. case of mad cow disease.

"So far, we have not seen the avian bird flu topic impacting adults' eating patterns," said Kristin Nickels, product manager of NPD's Food Safety Monitor.

China said its ban on imports would continue indefinitely on poultry from Thailand, Vietnam, Indonesia, Cambodia, Japan, North Korea, Romania, Croatia, Kazakhstan, South Africa, Mongolia, Turkey, Russia and Sweden.

Early last year, after avian flu killed or forced the slaughter of at least 11 million chickens in several Asian nations, Yum said its plans for alternative chicken sources for China were in place. News reports at the time indicated that the KFC chain in the region had turned from distressed suppliers of poultry in Thailand to chicken sources in Taiwan and elsewhere. Reports at the time also described substantial sales declines at American chicken restaurants in Asia as consumers shunned poultry.

Chinese officials have stressed that none of some 60 human fatalities from bird flu in Asia since 2003 has occurred in China. However, they reportedly conceded Nov. 6 that the death last month of a 12-year-old girl from a respiratory illness in Hunan province may have been linked to the deadly H5N1 strain of the virus. At least 60 other people in Asia are known to have recovered from the disease.

Separately, the White House on Nov. 1 released guidelines for protecting foodhandlers in restaurant kitchens and processing plants from potential contact with flu-infected poultry. The Bush administration suggested safeguards for only five types of jobs, including lab workers, medical workers, farm workers/animal handlers and airline flight crews.

The foodhandler guidelines gave general precautions. "Good hygiene practices during handling of raw poultry meat and usual recommended cooking practices for poultry products would lower any potential risk to insignificant levels," they stated. Care also was advised in the handling of eggs and egg products. The guidelines noted that the virus can be killed in poultry cooked to temperatures exceeding 180 degrees.

Amy Garber contributed to this report.

rmartin@nrn.com; agarber@nrn.com