KFC Marketing Strategies in UAE discussion Introduction Yum! Brands, Inc. company history (briefly) with focus on subsidiaries in GCC market Census of GC

KFC Marketing Strategies in UAE discussion Introduction

Yum! Brands, Inc. company history (briefly) with focus on subsidiaries in GCC market

Census of GCC countries population structure with more emphasis on UAE population (stress the diversity of the market).

Body

Answer the assigned questions (1-5) without writing question, rather a report style of connected paragraphs (use subtitles when needed)

Conclusion

Conclude with your perspective on last question (6)

Writing guidelines

Number of pages not to exceed 10 with referencing
Font size: 12 and Theme Font: Times New Roman, double space between paragraphs and 1.15 space between lines.
Use APA style for references and citation. Case Study: KFC in France
The global foodservice sector is a very dynamic one, characterized by continuous expansion, product
innovations and fierce competition. YUM! Brands, with its portfolio of five brands, leads the global foodservice
market in terms of outlets but ranks second behind McDonald’s in value terms (Euromonitor 2011). Four of the
company’s restaurant brands – KFC, Pizza Hut, Taco Bell and Long John Silver’s – are the global leaders of the
chicken, pizza, Mexican–style food categories and quick–service seafood categories (Restaurant News 2011).
Within the foodservice market, fast food chains are strongly represented and constituted the growth leaders in
2009, as consumer perceived fast food chains offering good value. The company operates franchises in over 110
countries and employs about 350,000 people (Datamonitor 2011). YUM! Brands Inc. is ranked #216 on the
Fortune 500 List, generating revenues of more than $11 billion in 2010.
According to Business Week and Interbrand, YUM! Brands is one of only five companies in the world to have
two of the top global brands with KFC (64th brand in their top 100 global brands ranking in 2009) and Pizza
Hut (79th position). Kentucky Fried Chicken operates in 108 countries with more than 5,000 units in the US and
more than 11,000 outside the US. BusinessWeek-Interbrand valued KFC at $5,722 million in 2008.
Table 1. Top chained foodservice brands 2009
Brands
Sales
% of value share
MacDonald’s
71.7
13.1
KFC
17.8
3.3
Burger King
14.2
2.6
Subway
13.5
2.5
Starbucks
13.5
2.5
7-Eleven
12.5
2.3
Wendy’s
9.4
1.7
Pizza Hut
9.3
1.7
Taco Bell
6.9
1.3
Source: Euromonitor 2011
KFC – Company Development
Kentucky Fried Chicken, based in Louisville, Kentucky is the world’s most popular chicken restaurant chain. In
1930, Colonel Harland Sander opened his first restaurant in Kentucky and named the dining area “Sanders
Court & Café”.
Colonel Sanders is still an important figure for both the company and its consumers. He represents the
American origins and is an essential part of the brand. In 1952, Pete Harman in Salt Lake City became the first
franchisee for KFC. This was the beginning of a worldwide chain. Today, more than 12 million daily customers
are served in one of KFC’s 15,000 restaurants in 109 countries.
Exhibit 1 Central figure Colonel Sanders and Development of KFC Logo
Source: Kentucky Fried Chicken (2011a); Logolook (2011)
KFC is positioned as a family dining brand as it is offering a large selection of total meal solutions. KFC
restaurants offer fried and non-fried chicken-on-the-bone products under the names Original Recipe, Extra
Tasty Crispy and Kentucky Grilled Chicken. Other principal items on the restaurant’s menu include chicken
sandwiches, KFC Famous Bowls, Colonel’s Crispy Strips, chicken wings, Popcorn chicken and Chunky
Chicken Pot Pies. The outlets also offer a variety of side items such as biscuits, mashed potatoes, corn and
potato wedges as well as desserts (Datamonitor 2011). As a consequence, KFC restaurants are not only
competing against fast food operators but also against full-service restaurants, which cater to the whole family.
KFC is actively involved in community programs and promotes education, diversity and animal welfare in a
number of positive ways. Diversity is an especially important topic for both KFC and YUM! Brands: “For us,
diversity is not a target – it’s a way of life and a way of doing business. This adds perspective and depth to
everything we do. We’ve also found that a diverse team makes for better problem solvers, services all our
customers more effectively, and creates a richer culture for all of us to enjoy. In our company-owned operations
in the U.S. for example, about 30 percent of our associates are Caucasian and the remaining 70 percent are
Hispanic, African American and/or Asian. Minorities and women made up 64 percent of our external
management hires and 41 percent of internal management hires (promotions) in 2007” (YUM! Brands 2011).
Concerning the ownership structure of the chain, KFC has passed many stages. In 1971, Heublein Inc. acquired
KFC Corporation, which was later on acquired by R.J. Reynolds Industries, Inc. (now RJR Nabisco, Inc.). For a
few years, KFC was a subsidiary of Reynolds until being bought by PepsiCo, Inc. in 1986. A decade later, in
1997, PepsiCo announced the spin-off of its quick service restaurants, namely KFC, Taco Bell and Pizza Hut,
into Tricon Global Restaurants, Inc., which changed its name 2002 to YUM! Brands, Inc. Nowadays KFC is
still part of the world’s largest restaurant company and continues to serve high quality and innovative products
to its customers (Kentucky Fried Chicken 2011a). In the US, the market is stagnating: sales declined by 8% in
2010 due to the YUM! Brands continued refranchising activities in the market and KFC’s poor performance and
8% same-store sales decline. Overall for the whole year 2010, Euromonitor predicted a sales growth of just over
4% to US$ 11.3 billion (Euromonitor 2011).
There are several factors YUM! Brands has to consider for its strategic development:
•
KFC, the core brand of YUM! Brands, is performing poorly in the US market; new product
introductions failed to sustain momentum but also core products fail to yield expected sales due to a lack
of marketing support.
•
France is a vitally important market, especially for KFC as chicken fast food is predicted to continuously
increase from 2009 to 2014. As YUM! Brands has invested heavily in France, it will be the main
beneficiary of this projected US $500 million sales increase.
•
YUM! Brands has been very committed to increasingly offer healthier food options among its chains,
especially at KFC restaurants. However, this preference of healthy food options over core fried chicken
products has already entailed negative consequences as core customers have been alienated.
KFC expansion and KFC France
What started in 1952 with the first franchise in Salt Lake City led to over 190 KFC franchisees and 400
franchise units in the U.S. and Canada in 1960 and over 600 franchised outlets and a first oversee unit in
England four years later. KFC initially got off to a meek start in France. Its former parent PepsiCo opened just
seven locations in 1992 before abandoning the effort to expand elsewhere. Nowadays, KFC’s presence in
France is of particular importance, as the Wall Street Journal (May 5th 2010) noted:
Yum executives see KFC’s France business as an anchor for what could be a broader expansion
in continental Europe. KFC’s European footprint is under 800 restaurants, lagging behind burger chain
McDonald’s Corp., with about 5,600. KFC plans to have 300 stores in France by 2015, and sees a possible
tenfold increase over time. “One day I’d like to have over 1,000 stores here, though we’re going to take it 100 by
100” at a time, Ivan Schofield, general manager of KFC France, said in an interview. “It’s their most important
market in Europe,” […] restaurant analyst Steve West said. “Obviously, China’s the most important market, but
there’s a lot of growth opportunity for Yum in France” (Wall Street Journal 2010).
Fast-food competition remains less intense in France, where McDonald’s and local operator Quick dominate the
market. In addition to relatively tame competition, France has another major appeal: It is one of the largest
dining-out markets in Europe. Many French consumers still frequent locally owned, corner restaurants, but fast
food has made headway as diners cut their lunchtime down to 30 minutes or so, Mr. Schofield said. France’s
fast-food customers also tend to prefer full meals with desserts, rather than just sandwiches, which bring the
average sale to between €6 and €8 (about $8 to $10.50) at KFC. As a result, KFCs in France make more money
than anywhere else in the world. Stores on average reach sales of $4 million a year, about three times that of the
average KFC elsewhere in the world (Wall Street Journal 2010).
The French market is of crucial importance for YUM! Brands and KFC as well as other fast food companies
and constitutes an important strategic basis for Western Europe. Consider the following statement by David C.
Novak, the Chairman and Chief Executive Officer at YUM! Brands (YUM! Brands 2009): “Meanwhile, we are
off and running, widening our competitive advantage, getting stronger and more diversified every year. What
excites me most is that there’s no doubt our calculated investments in high potential markets are definitely
paying off. Five years ago we were just starting to make headway in France. Today, France has the highest
average unit volume in the world and now the rest of Continental Europe has a proven model to follow”.
The French market is a primary target market for YUM! Brands as the country is considered to be
underpenetrated and offering a strong potential for outlet expansion despite local competitors such as Quick.
This chain, however, has made some attempts in the last few years to strengthen its customer base by focusing
on the lucrative group of Muslim consumers:
“The Quick chain of 358 restaurants around France said it would boost its halal-only outlets to 22 on
Wednesday after the trial in eight areas with a strong Muslim population also saw a doubling of customers and a
rise in the amounts they spent. The growing halal market is now twice as large as that for organic food in
France, whose five million Muslims make up Europe’s largest Islamic minority. Quick came in for criticism
earlier this year when its trial, which sold only halal beef and replaced bacon with smoked turkey, hit national
headlines. Agriculture Minister Bruno Le Maire said ethnic marketing like this was against French values”
(Reuters 2011).
KFC’s presence in the French market has continuously increased from just 19 outlets in 2002 to 115 outlets by
November 2010. Due to this dynamic growth, KFC has outperformed McDonald’s as well as the total fast food
market. YUM! Brands plans on aggressively continuing this expansion strategy and reaching 200 outlets by
2013. However, McDonald’s also considers France to be the most attractive market in Western Europe and will
therefore maintain competition at a high level.
KFC competes with a strong and innovative product menu, including both healthier and more customized
offerings. The aggressive outlet expansion together with a continued menu innovation should smooth KFC’s
way to keep up momentum in this highly attractive growth market.
The situation in France is not only very promising in financial terms but also highly demanding when it comes
to marketing. The population’s composition is very diversified and the country accommodates a number of
ethnic subgroups, stemming from former French colonies and DOM-TOM (Département d’outre-mer Territoire d’outre-mer). It is paramount from migration statistics that the inflow from these countries is a
continuous one and will further change the French landscape.
Exhibit 2 Fast food in France: value growth of KFC vs. McDonald’s vs. total market 2005-2009
Source: Euromonitor 2011
Exhibit 3 Most numerous immigrants to France, 2006
Source: Eurostat (2008b)
There is, however, a common characteristic among these subgroups: most of their members follow the Muslim
religion, which is why we will have a closer look into this religious orientation
Muslim Religion
Muslims follow a belief system that is based upon five pillars (Islam Guide 2011). Strictly observant Muslims
further follow the sharia, a framework extending religious beliefs into the private, social and political life. The
religion also prohibits its members to engage in haram activities (or haraam, the Arabic word for forbidden),
which include for instance drinking alcohol or consuming proscribed food products such as pork. Additionally,
the followers of the Islamic religion are not allowed to eat already dead animals, birds of prey, land animals
without ears, blood or animals improperly slaughtered. The last rule implies that animal slaughter must be done
in such a way that results in a quick and humane death and reduces the animal’s suffering. To be even more
specific, an animal’s jugular veins and carotid arteries must be cut with a sharp knife in order to produce a
maximum blood flow (Islam Guide 2011). All this is done in the name of Allah. The Sharia law applied to food
products further specifies that they must not contain additives that are not “clean” or untainted during
processing, packaging, storage, transportation or transaction. Other food products which contain ingredients
such as gelatin, enzymes, emulsifiers, and flavors are questionable (mashbooh), because the origin of these
ingredients is not known (IFANCA 2011). If these premises are fulfilled, the food product is considered to be
Halal or permitted according to Islamic law (Islam Guide 2011).
The question whether a product is haram or halal is not always clear and unambiguous. Especially cases of
cross-contamination are of great concern as well as the question of whether automated facilities are allowed in
the slaughtering process (calling out the name of Allah via tape versus a person speaking the required words).
As a consequence, countries and certifying bodies also diverge in their opinions regarding appropriate halal
standards which impose difficulties for companies operating internationally.
What is more, there is no single unified authority in Islam which means that the interpretation of ambiguous
cases is the responsibility of the certifying bodies, which are quite different concerning their certification
standards. Halal certifications can be issued by one of over 100 halal certification agencies worldwide, whereby
each of the organizations holds their own set of standards and guidelines concerning the certification. Whereas
there is one major agency in the US, the Islamic Food and Nutrition Council of America (IFANCA), the
situation in Europe is more difficult. There are numerous bodies offering Halal certifications and companies
need to take care that the certifying body is the official agency of the specific country they are operating in.
The Muslim Consumer
According to a recent Business Issue paper of the AT Kearny consulting company specifically addressing the
opportunities of the Muslim market, the demand for sharia-compliant products and services reaches a $2 trillion
mark annually and is increasing rapidly (A.T.Kearney 2007). Western countries and governments increasingly
accommodate Islamic peculiarities, such as Britain planning to sell treasury bonds compatible with Islamic rules
against interest payments. The paper also stresses the importance of the Muslim market that western businesses
cannot afford to ignore. Advertising executives are aware of the huge potential of this group and assume that
ignoring them would be like missing the Hispanic market in the 1990s (NY Times 2007). According to
projections for 2010 to 2030 of the Pew Research Center’s Forum on Religion and Public Life, the world’s
Muslim population will increase about 35%, therefore growing at about twice the rate of the non-Muslim
population. For Europe alone, the analysis projects a growth by nearly one-third, rising from 6% (44.1 million)
of the region’s inhabitants to 8% (68.2 million). There are on average more people leaving Muslim-majority
countries than migrating to them, target countries being more-developed ones such as Europe, North America,
New Zealand and Australia.
Table 2. Number of Muslims in selected European countries
Source: Pew Forum (2011)
Due to continuous migration, the highest increases are likely to occur in Western and Northern Europe, for
instance in Belgium from 6% today to 10.2% or in France from 7.5% to 10.3% (Pew Forum 2011). The
population of Muslims in Europe has grown from 4.1% or 29.6 million in 1990 to 6.0% or 44.1 million in 2010
and is therefore increasing at a faster pace than the non-Muslim population.
Reuters (2011) assumes that the Halal food market is worth $560 billion. According to A.T. Kearney (2007), it
is worth $30 billion to the top five food retailers worldwide and another $15 billion to the top 10 food
processing companies. McDonald’s has been a pioneer in addressing Muslim consumers’ needs, especially in
Asia. McDonald’s Singapore saw an influx of eight million patrons a year after obtaining a Halal certification
(Lada et al. 2009).
Despite being inclined towards Western assortments, Muslim consumers are increasingly opting for products
and services that reassert their identity as Muslims and respect their principles. They consciously choose Islamic
brands, Halal certified food and financial services compliant with the Qur’an. Around 70% of the worldwide
Muslim population adheres to Halal products and services and the vast majority of them (about 75%) indicate
their willingness to stick to these standards even after having migrated to another country (Lada et al. 2009).
In summary, marketing managers should be aware of the following factors: the Muslim population is increasing
rapidly as is its purchasing power. There also appears to be growing devotion to Islamic principles and
prescriptions among its members.
Student Assignments
YUM! Brands needs to find the right balance and offer a strong range of diversified choices without neglecting
its core product range – as it otherwise risks alienating core KFC customers. This applies to both healthier food
(which implies the risk of losing the Original [fried] Recipe loyal customers) as well as Halal food. Consider the
following illustration:
Exhibit 4. Outcry of KFC customers
This Facebook group has several thousand members and clearly demonstrates the resistance among core
customers to KFC’s attempt to address the needs of Muslim consumers. The outcry is enormous even though
there is only a single product, the Big Daddy, of more than forty items on KFC’s menus that will not be served
in Halal stores.
Where do you want to go with the KFC brand?
Upon reading the case of KFC in Europe, write a report on KFC marketing approaches in UAE outlining KFC’s
offer strategy in the diversified UAE market and its implications for other GCC countries. When developing
your report, consider the following questions:
1. What implications does the population composition of UAE and other GCC countries in general have
for your KFC sales & marketing plan? (use census to depict the structure of GCC population)
2. To what extent is the UAE market a role model for other GCC countries and KFC outlets
3. What needs do KFC restaurants fulfill? How are they perceived by Mowatineen (locals) and Wafideen
(noon locals)? Who are the customers of fast food in GCC, elaborate on their profile?
4. There are differences in what is offered locally and elsewhere around the world. Do you suggest further
menu adaptation to the composition of GCC current population taking into consideration the diversity of
population and the increasing number of healthy food conscious customers locally (use citation form
local studies).
5. Do you think that offering Halal meals for minorities outside the Muslim world makes good business
strategy? Explain your perspective when travelling outside MENA.
6. What do you think about the outcry of KFC customers in UK ? and taking in consideration the data in
Table 2 and how is it justified that KFC and other YUM brands are adjusting their menu to local cultures
in their overseas subsidiaries and refrain from catering to the same customers in their Europe or America
branches? Present your argument.

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