A long-term Egyptian recovery in place since currency devaluation in 2016 can resume after the war between Russia and Ukraine ends, Mathias Althoff, ... partner at Swedish frontier markets investor Tundra Fonder, tells The Africa Report.
With ten openings planned by the end of the year in Morocco, discussions with a view to a future location in Algeria, reinforcing its presence in East and West Africa the American chain Kentucky Fried Chicken (KFC) is holding out great ambitions for the continent…despite current pressures on African purchasing power.
“KFC is constantly looking for opportunities to expand its operations,” confirms the brand, which – like Pizza Hut and Taco Bell – belongs to the Louisville-based Yum! Brands group. The latter, which has 53,000 restaurants worldwide, including more than 26,000 KFCs, saw a turnover of $6.5bn in 2021.
Leader on the continent
On the continent, KFC, which last year celebrated its 50th anniversary in South Africa – its first restaurant in Africa – is present in 25 countries with more than 1,300 franchises.
“More than 20 million customers are served every month,” says Nolo Thobejane, who took over the management of sub-Saharan operations (excluding the South African market) at the beginning of the year.
In 2021, South Africa and Egypt were in the group’s “Top 25 Markets”, in 12th place (ahead of Australia and Mexico) and 25th place (neck and neck with Vietnam) respectively.
While Africa’s contribution to the group remains modest – sub-Saharan Africa accounted for four per cent of KFC’s total sales in 2021, with the Middle East/Turkey/North Africa zone contributing the same amount – the broad network of the brand created by Colonel Harland Sanders makes it the leading fast-food chain in Africa.
“It is the only group to have succeeded in developing on a continental scale via the well-tried franchise model,” says Julien Garcier, director of Sagaci Research in Nairobi.
Since 2016, this unrivalled footprint has enabled the firm to establish a “KFC Index”, an indicator for comparing the cost of living in Africa inspired by the “Big Mac Index” valid elsewhere in the world.
In fact, McDonald’s ($23.2bn in sales in 2021) and Burger King ($1.8bn in sales in 2021), KFC’s compatriots and main rivals have a much smaller presence on the continent: the former in only four markets (South Africa, Morocco, Egypt and Tunisia); the latter in eight (South Africa, Morocco, Egypt, Nigeria, Kenya, Ghana, Liberia and Côte d’Ivoire).
It is the only group to have succeeded in developing on a continental scale via the well-tried franchise model
“We have used the successful methods identified in South Africa to expand elsewhere in sub-Saharan Africa,” says Thobejane, who highlights several other strong points: the (secret) recipe with eleven herbs and spices, which manages to attract a large number of customers; the imposition of international hygiene standards; the restaurants’ strategic location; and finally, the solidity of the local partner, which is “crucial to the development of the brand in the field.”
Strong franchisee network
While the appeal of an international brand and the popularity of the core product (chicken) also play a role, KFC has also established a strong and diverse network of franchisees. In addition to Roos Foods, backed by the investment fund RMB Corvest, in South Africa, there is Kuku Foods in East Africa (Kenya, Tanzania, Uganda and Rwanda), the Portuguese group Ibersol in the Portuguese-speaking markets of Angola and Mozambique, and the Indian Devyani International Limited in Nigeria.
In North Africa, the brand is developed by Kuwait Food Company, the flagship of the Americana group, owned by the Adeptio investment fund of Emirati businessman Mohamed Alabbar and a Saudi Arabian sovereign wealth fund: the Public Investment Fund. This partner announced at the end of April its intention to carry out a double IPO (in Riyadh and Abu Dhabi), which should result in the raising of one billion dollars.
In this region, KFC’s dynamism is undeniable. In Morocco, where the number of outlets should increase from 20 to 30 by the end of 2022, the franchise has just concluded a partnership with the Bimbo group, a Mexican bakery giant, in order to complete its offer with buns, small cakes and tortillas.
In Algeria, the local press has reported a possible move by the Lebanese group Azadea. Although it has not been confirmed by the main parties concerned, Charbel Chahoud, who joined Azadea in 2016, has been presenting himself on LinkedIn since March as the head of operations for KFC Algeria.
West Africa alone illustrates the diversity of franchisees. In Senegal, the American chain has entrusted the national poultry champion Sedima with its brand management, while in Côte d’Ivoire the restaurants are run by a joint venture between the local subsidiary of Vivo Energy, a service station manager, and KFC Baobab Côte d’Ivoire, with the chicken being supplied by the local poultry leader Sipra (via its subsidiary Coqivoire).
Local sourcing is the crux of the battle in the fast-food industry because it ensures a relatively affordable price for the consumer, which is around 2 or 3 euros for a meal on the continent
While the system seems to be working well, it is not all easy. “Working in so many countries requires tenacity to comply with different legislation and market rules,” says Thobejane.
Maintaining a constant level of service is also a major challenge – and a daily one – for the brand. Similarly, local sourcing, which is possible for both chicken and potatoes in most countries, remains a major point of tension.
“The KFC model requires a high volume of orders and the same quality of raw material all year round, which can be complicated to obtain from suppliers,” explains Sagaci Research’s Garcier.
“However, local sourcing is the crux of the battle in the fast-food industry because it ensures a relatively affordable price for the consumer, which is around two or three euros for a meal on the continent,” the analyst says.
Although KFC is doing better with lower prices than its foreign competitors and offers adapted to the local context, its products are still too expensive for the majority of the population. In many countries, they are only accessible to a middle class of limited size.
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“Setting up business in shopping centres and petrol stations is a way of capturing these consumers, mainly from the upper-middle class. But this will not be enough to conquer the rest of the middle class or more modest consumers,” says Garcier.
Dependent on an increase in purchasing power in order to develop, KFC must also deal with an increasingly competitive environment. Its foreign competitors – although in the challenger position – are not giving up. For example, Burger King has 19 outlets in Morocco, only one less than KFC, and six in Côte d’Ivoire, just as many as the brand with the red-and-white logo.
Strong local competition
But the American king of fried chicken has had to face the emergence of African challengers for several years now, charging very competitive prices and reminding the population to eat local.
This approach is having an impact: in January, KFC was the subject of an outcry on Kenyan social media after revealing that for compliance reasons, it was sourcing its fries in Egypt instead of from local potato producers.
The brand’s most serious African competitor is in East Africa. There, KFC is up against Chicken Inn, the brand of Zimbabwean group Simbisa, which opened its first restaurant in 1987 in Harare before expanding to the rest of the country as well as to Kenya, Zambia, Namibia, Mauritius and Ghana, while granting franchises in Swaziland, Malawi and the DRC.
With 140 Chicken Inn restaurants in the region, the group (whose portfolio also includes Galito’s, Pizza Inn, Nando’s and Creamy Inn and employs more than 5,500 people) achieved sales of around €50m from June 2020 through June 2021, a result doubled in a year despite the impact of Covid-19.
The more competitive the sector becomes, the more we are ready to prove why we remain one of the most popular brands in Africa
Elsewhere, the competitors are smaller in size but stand out for their dynamism. In Senegal, for example, businessman Demba Kâ, head of EDK Oil and active in the oil sector, retail and finance, launched Djolof Chicken in 2020, a “brand of 100% Senegalese crispy chicken at affordable prices” that already has 11 outlets in Dakar.
None of this scares KFC. “The more competitive the sector becomes, the more we are ready to prove why we remain one of the most popular brands in Africa,” says its chief of sub-Saharan operations.
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