Fried chicken fast-food chain KFC’s entry into Africa was more a coincidence than part of a strategic plan. [hidepost=9][/hidepost]
In the late 1960s, the CEO of KFC’s holding company at the time visited South Africa on a safari with his family. When he arrived he was amazed to find a much more developed country than he imagined. It was then decided to launch KFC in South Africa, and the first store opened its doors in 1971. At the time KFC only had a presence in a few developed markets. Had the CEO not been such an adventurous traveller, KFC would have probably only entered South Africa much later.
These days KFC Africa is run by managing director Keith Warren, an enthusiastic South African, whose first job was as a restaurant waiter. Warren’s current responsibilities are much greater than only ensuring a table gets its food on time; he oversees all the KFCs on the continent, a network that will comprise close to 1,000 restaurants by the end of 2012.
Following significant success in the South African market, KFC started to venture into its neighbouring countries, such as Namibia, Botswana and Swaziland. However, it wasn’t until the 2000s, that the company seriously started to look at countries further north on the continent.
“South Africa was just too much of a prospect in terms of the further development of [the] market that we didn’t really want to distract ourselves taking the focus further north,” Warren told How we made it in Africa in an exclusive interview.
Around 2007, KFC earnestly started to consider opportunities in the rest of the continent. Warren says that Nigeria, with its population of over 150 million people, was a natural choice. And in December 2009, KFC opened its first branch in Lagos.
According to Warren, KFC was very well received in Nigeria. “Our original development plans for Nigeria were quite conservative, and within six weeks, I was [in discussion] with the franchisees, and they were saying, ‘Forget that, we are now going to build as many stores as we possibly can’. We are finding that the only limiting factor we’ve got in Nigeria right now is actually chicken supply, and finding suppliers who are able to meet our global quality standards in sufficient quantity.”
“We agreed that the best thing to do would be to develop the business across a number of geographies. So if we hit speed wobbles, or came across obstacles, we wouldn’t be dependent on just that one market, and would therefore be under pressure,” explains Warren.
Focusing on KFC
KFC’s parent company, Yum! Brands, also owns the Pizza Hut and Taco Bell franchises. Are there any plans to launch these brands in Africa? Warren says that while Yum! is putting the bulk of its energy into KFC, it is looking at expanding Pizza Hut’s footprint.
“We have existing Pizza Hut operations in Morocco, Egypt and Mauritius. And we are in the process of developing a plan for Pizza Hut potentially in South Africa, and possibly other markets across Africa … Because chicken being the preferred protein on the continent, KFC is by far the most successful model.”
It is a well known fact that Africa is not an easy place to do business, although the situation has improved in many countries. For KFC, the biggest challenges are managing its supply chain and dealing with government protectionism and regulation.
“We have countries in which we operate where the chicken is the most expensive chicken in the world. It is the most inefficiently produced chicken in the world. It is the lowest standard chicken in the world. And it is all because the government is protecting the local industry … The reality is, and it has been proven the world over, whenever you have trade barriers and protection, you end up with an [unfavourable] economic result.”
Warren says that while South Africa’s fast food industry is extremely competitive, this is not the case in the rest of the continent. But while there are many opportunities, companies should do their homework.
“We have seen a number [of our] competitors go into markets in Africa and loose a bunch of money and withdraw. Some of the bigger South African brands have gone in, paid some very significant schools fees, and then had to either withdraw or scale down their operations … The potential in Africa is enormous, but you got to be very thoughtful, and go about it the right way.”