KFC Seeking to Expand in Africa

U.S. based KFC (Kentucky Fried Chicken) is hoping to increase sales by taping Africa’s growing middle class.

After spending two decades introducing fried chicken and pizza to Chinese consumers, Yum Brands Inc. now sees Africa as its next international jewel.

Yum envisions 1,200 KFC restaurants in Africa by 2014, twice its current number. Above, a KFC in Egypt.

By 2014, the Louisville, Ky., restaurant-holding company expects to double its number of KFC outlets in Africa to 1,200. In the next four years, it aims to more than double its revenue on the continent to $2 billion.

“Africa wasn’t even on our radar screen 10 years ago, but now we see it exploding with opportunity,” says David Novak, Yum’s chairman and chief executive officer.

The improved political stability of various African governments, the region’s vast population and a growing middle class in Africa—where chicken is a dietary staple—led Yum to set its sights on the continent.

The first KFC in South Africa opened in 1971 and Yum, whose brands also include Pizza Hut, Taco Bell and Long John Silver’s, is now branching out into Nigeria, Namibia, Mozambique, Ghana, Zambia and other African countries.

American restaurant companies and retailers have been moving into emerging markets as growth in the U.S. and other developed countries has slowed, and Africa is increasingly being added to the list. Wal-Mart Stores Inc. recently offered to buy 51% of South African retail giant Massmart Holdings Ltd.

[YUM]

Africa is attractive for Western brands because its resource-rich countries are adding infrastructure while increasingly urbanized areas are creating opportunities for retail development.

Approximately 40% of Africans live in urban areas now and the number of households with discretionary income is projected to increase by 50% to 128 million over the next decade, according to a recent study by the McKinsey Global Institute.

“People are now focusing on the emerging world, with a bit of a gold rush going on,” says Graham Allan, CEO Yum Restaurants International.

“A lot of companies, especially Chinese ones, have invested in Africa,” Mr. Allan adds. “We share the general view that Africa over the next 10 to 20 years will have massive potential.”

Of the roughly one billion people in Africa, KFC estimates it currently reaches 180 million.

When McDonald’s Corp. arrived in South Africa in the mid-1990s, KFC worried about the impact the burger giant would have on its business. So KFC began opening new restaurants and remodeling existing ones to make them more modern. By the early 2000s, KFC had about 300 restaurants in South Africa.

KFC quickly outpaced McDonald’s, which has fewer than 200 restaurants in Africa. With more than 600 KFCs in South Africa now, the chicken chain has a 44% share of that country’s $1.8 billion fast-food market, followed by South African chain Nando’s, with 6%, and McDonald’s and the local Chicken Licken, each with a 5% share.

Another expansion by a major global corporation is another sign of Africa’s expanding middle class and consumer culture.  This comes after the expansion in the African market this year alone by global icons such as General Motors, Google, Microsoft, QualcommMercedes-Benz, Wal-MartEssar Steel, Ford.  This clearly shows that Africa is open for business, both small and large global companies.

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