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KFC will soon be serving vegan fried chicken — with Beyond Meat’s help

Posted at 8:27 AM, Aug 26, 2019
and last updated 2019-08-26 08:27:26-04

(CNBC) — Colonel Sanders will soon be serving vegan fried chicken to see if customers think it’s finger lickin’ good.

KFC will start testing plant-based fried chicken from Beyond Meat in an Atlanta restaurant on Tuesday.

The test makes the Yum Brands subsidiary the first national U.S. fast-food chain to introduce a Beyond chicken item, beating Popeyes and Chick-fil-A. Beyond pulled its vegan chicken — the first product from the company — from grocery store shelves earlier this year after deciding it was not up to standards.

KFC has been mulling vegan fried chicken for months. Kevin Hochman, who heads KFC’s U.S. division, said in an interview in May that the chain did not have any plans to test vegan alternatives, but he had meetings scheduled with several major suppliers to learn more about meatless meats.

The Louisville, Kentucky-based company said it will consider customer feedback to help decide the next step. If KFC were to decide on a broader test or an eventual nationwide roll out, a Kentucky fried plant-based chicken could drive more U.S. customers to its stores to try it for themselves.

In recent quarters, the majority of KFC’s growth has come from its international business amid tough competition from Chick-fil-A and others in its home market. China accounts for 27% of its sales, while the U.S. makes up about 17%. After a five-year turnaround, KFC is expecting a net annual gain in U.S. restaurants for the first time since 2014. At the end of 2018, the chain had a little more than 4,000 locations in the U.S.

The alternative meat strategy has worked for other restaurant chains that have chosen to include vegan meats from Beyond or its rival Impossible Foods. Customers who buy meat substitutes from Beyond and Impossible are largely flexitarians, people who are cutting down their meat intake. Del Taco, which sells a Beyond Taco, saw same-store sales return to growth after introducing the vegetarian menu item.

Excitement about the meat substitute market has driven investor interest in Beyond. The company, which went public in May, has seen its stock soar as high as $234.90 a share. Amid broader market declines, trade tension and recession fears, however, shares have tumbled. Still, Beyond shares remain up 487% since its initial public offering.

Yum Brands’ stock, valued at $35.3 billion, is up 26% this year.