Restaurant Brand shareholders question health policies

KFC's new look pays off for Restaurant Brands.

Restaurant Brands shareholders ignored the good news about a turnaround of their biggest brand KFC at the annual meeting yesterday - choosing instead to question the board on how healthy the company's food offerings were.

Some shareholders asked the company - which made $316.4 million in sales from selling fast food in the year to February - whether it should be looking at healthier food options.

"What's your policy on reducing fat and encouraging healthier eating?" asked one shareholder, who wanted to see Asian food on the menu.

Another had not eaten at Pizza Hut in a year and said even his grandchildren were not fans.

With concern over a possible bird flu pandemic, he suggested the board might want to get rid of its Pizza Hut and KFC offerings.

"I would like to see a new brand in the business, perhaps tied up with fish or lamb," he said.

A "Vicki Salmon pizza" was among a page of new ideas he offered the chief executive.

However, such health concerns did not stop shareholders from tucking into the fried chicken, pizza and mocca frappuccinos on offer at the Ellerslie Convention Centre after the meeting.

Leading his last annual meeting as board chairman, William Falconer couldn't resist a few measured remarks about the demonisation of fast food.

Saying obesity had more to do with lifestyle than diet, he said menus had been varied to include grilled chicken and salad options at KFC as a way to address the rise of health problems.

And a company that had people buying more than $300 million worth annually of its products would be silly to deviate from such a successful path.

"Don't put demands on the company that are going to be silly from a commercial point of view," said Falconer.

"That's not to say we won't get into sushi or some Asian foods if the opportunity arises, but we've got to get money out of it."

Chief executive Vicki Salmon said there was no doubt KFC had been "the biggest highlight of the year", its comeback attributed to a programme to transform the brand and introduce new-look stores - still in its early stages.

Selling pizza was much more difficult, however, and with more competitiors in the market, Pizza Hut's magic run had started to slow.

However, Falconer said Pizza Hut was still the major player, with more than half the market.

"All the participants are feeling the pinch. But it is not correct, as the media reports on 'pizza wars' assume, that the newer competitors who don't have to report their results are succeeding at Pizza Hut's expense.

"There will be some rationalisation. What is now required of Pizza Hut, and this is in hand, is a marketing shift to secure our position in the market and an ongoing share of its growth.

"I am confident Pizza Hut will quickly re-emerge as an ongoing contributor to Restaurant Brands' earnings growth."

Restaurant Brands is disposing of its 50 loss-making Pizza Hut stores in Victoria, Australia, and offers have been accepted on 17.

A $7 million writedown on the Australian business took a chunk out of full-year profits and the company was pressed on whether more write-downs were to come.

Salmon could not rule that out. The sale process was still in its early days.

"Obviously, the good stores go first, so there may be further writedowns to come at the rump end."

Some shareholders hoped the initiatives back home would improve the shareprice which, having fallen 28 per cent over the last year, was "pretty disappointing".

Falconer said the company had to demonstrate the sustainability of the business before its share price would reflect fair value.

If losses in Australia could be eliminated either by turning the business around or exiting it, he put the company's value at $1.65 to $1.75 a share.

Shares in Restaurant Brands closed steady yesterday at $1.22.