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KFC China dumps Nestle

Beijing - US fast food giant KFC has signed a dairy product agreement with China's Mengniu Dairy, ending a two-decade local tie-up with Nestle, state media said on Tuesday.

Milk and other dairy products made by Mengniu will be sold at KFC's 2 000-odd outlets in China from next year, the China Daily reported, citing the agreement signed on Monday.

This is not the first time that Mengniu Dairy, based in northern China's Inner Mongolia region, has replaced Nestle as a supplier for multinational food companies in China.

In June, it took the place of Nestle as liquid milk supplier for American coffee chain Starbucks, the China Daily said.

Mark Chu, KFC brand general manager with Yum! Brands Inc (China Division) declined to elaborate on why KFC ended its partnership with Nestle, only saying the two firms "will start other kinds of cooperation in the future".

Industry insiders argued less costs may be a key reason for the change as Mengniu products would be priced lower than those of Nestle at KFC outlets, the newspaper added.

KFC's rival McDonald's has been partnering with Chinese dairy producers like Sanyuan since 1992 when it entered China as part of its strategy to localise and cut costs, the report said.

- AFP

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