September 5, 2008

Yum Brands Inc. who owns Taco Bell, Pizza Hut and KFC, plans to be more nimble next year in its pricing strategy, adjusting prices more often to meet rising ingredient costs so as to manage costs effectively.

Yum Brands was caught by surprise by this year's increased cost of US$110 million, which was twice of what it initially expected as rising costs of labour, food and energy crimped profits.

Yum Brands has typically raised prices two or three times a year, but Yum Chief Financial Officer Richard Carucci said prices at its restaurant chains could rise several times next year if commodities continue their steady rise. 

Carucci was speaking Thursday in New York City at a retail conference sponsored by Goldman Sachs & Co.

While Yum has benefited from diners trading down to fast-food fare as well as growth in developing markets like China, its margins have suffered from the rise in the cost of key ingredients like chicken and dairy. For the second quarter ended June 14, margins at Yum's US restaurants narrowed to 12.4 percent from 15.3 percent a year earlier.