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KFC: Setting the platter right

August 12, 2008 10:53 IST

Smarting from a protest-ridden start, KFC is now on its second course deciphering the Indian audience.

Companies will seldom rue having the first-movers advantage. Does it not naturally lead to a competitive edge? Not always, as KFC -- Kentucky Fried Chicken -- found out with its jerky start in 1995. By then the multinational brand, founded in 1952 by Colonel Sanders, already boasted of 5,142 stores in the US with a reported sales of $3,720 million.

But India presented a juggernaut of protests that marked it out for its worldwide notoriety in handling fowl, a threat to the Indian farmer's opportunities in food processing, a high level of monosodium glutamate in its content and even two flies buzzing around in one of its kitchens.

However, the lobbying failed to hoodwink anyone from seeing how unwelcome multinationals still were in the country.

KFC learnt the obvious lesson that a multinational, entering a country where nationalists were still making it harder to shake off the licence raj, could not afford hubris.

Its parent, Pepsico Restaurants International (which later spun-off its restaurants business under a company in 1997 that was eventually named Yum! Brands Inc), had inadvertently made KFC an easy scapegoat by opening its outlet as the first of its flamboyant target of 60 fast-food stores in seven years.

KFC slipped into anonymity with no advertising and froze its expansion. But was KFC up against just a first-mover's 'disadvantage' in 1995?

For, only a year later, India saw an uninterrupted influx of QSR (quick service restaurant) brands such as Domino's and McDonald's (which entered only after researching the market since 1990). Even KFC's sister chain -- Pizza Hut -- went on to put 140 outlets in no less than 35 cities since 1996.

KFC, it seems, might have rushed in where it should have carefully treaded.

"KFC was guilty of a classic MNC mindset of just bringing its global products to India, expecting the consumer to accept them without any changes," feels Lulu Raghavan, client director at Landor, a brand consulting company. India has often posed a different challenge to multinationals.

"Indians expect their global brands to provide the same international standards in service and ambience, but will not accept an alien food culture, for example," explains Raghavan.

Not only was KFC's menu all chicken-based, they were meant to be had without any other accompaniments while Indians 'liked their chicken with something,' points out Harish

Bijoor, CEO, Harish Bijoor Consults. A stiff pricing also meant that the brand had a low salience.

It took almost a decade for KFC to regain the buoyancy that had driven its Indian ambitions in 1995. In 2004, it went in for a makeover and revamped its Bangalore store with a new decor and menu and stepped up its expansion across the country.

Its journey since 2004 bears the signs that KFC not only consolidated its business partnerships for a sound supply chain but also came to understand its Indian consumer better in that hiatus. Its parent Yum! Brands Inc in the meanwhile had concentrated on Pizza Hut, while KFC, the company claims, mulled over the Indian market.

KFC had to figure out what Pizza Hut and McDonald's had already got a hang of. While McDonald's had to orient to a largely non-beef-eating population, Pizza Hut dished out Indi-style toppings and beverages all in an effort to 'customise for the Indian palette', according to Pinakiranjan Mishra who is a partner at Ernst & Young, handling retail and consumer products practice.

For this chain of fried chicken, the task meant introducing new dishes to accompany its regular fare and broadening its menu for a country with large swathes (the north and the west) comprising over 50 per cent of vegetarians.

The year 2004 saw vegetarians order a tikka wrap 'n roll, a chana snacker, veg fingers or potato fries even as their non-vegetarian friends feasted on chicken buckets and zingers coupled with vegetarian pulao  and a makhani curry at a KFC.

To reassure the veggies, the dishes came out of kitchens carefully segregated from the non-vegetarian section. Brand repositioning Erring on the price can be as costly as the wrong platter in India and KFC ran the danger of alienating the middle class with most of its chicken offerings priced higher than what they could comfortably afford.

Yet it was this section that was poised to be its largest consumer base as Raghavan points out "KFC's clientele consists primarily of the middle class because the premium segment is not looking for a fast-food experience, on a regular basis."

In came the sub-Rs 50 snackbox (at Rs 49) and the chana  snacker that costs just Rs 25 which now jostle for menu space with the quintessential zinger burger, hot and crispy chicken and original recipe chicken.

"These [the products] make people try out the brand," explains Unnat Varma, KFC India's marketing director.

Turning part vegetarian and selling mini-meals besides its gigantic chicken buckets could have diffused KFC's brand appeal in other markets.

But KFC did not have much choice. Raghavan says, "While focussed positioning is what brands should aim for, focussing on just fried chicken in India would have made it very difficult for KFC."

It helped that the brand's relaunch had been quickly followed by a global renaming in 2006 from Kentucky Fried Chicken to KFC, a far more inclusive moniker without any of the connotations of 'fried' or 'chicken', reason perhaps why it continues with it despite the brand reverting to its previous name in the US to break through the clutter there.

KFC's communication strategy that targets the youth, revolving around how 'finger-licking good' its food is has made it easier for the brand to gloss over its legacy of selling fried chicken and leverage its different tasting products.

Explains Varma, "We know consumers will not come to us for food they can get elsewhere. The taste we offer is not available anywhere else but in KFC."

For now, it is guiding the brand with its efforts to improve its healthier vegetarian food. Niren Chaudhury, the managing director of Yum! International Restaurants, the Indian arm of Yum! Brands Inc informs, "To make our vegetarian fare finger-licking good, our research team and our local vendors are working to make it 'crispy on the outside and juicy on the inside', the way our chicken products are."

KFC plans to launch more options and eventually take the spruced up vegetarian portfolio to its markets outside India. It signals the brand is intent on its vegetarian fare in India unlike its salad forays in the US market made just to win the veto vote of the vegetarian.

Even then Varma reaffirms that KFC is 'proud to be known for its fried chicken' while driving up its appeal among a wider audience with its vegetarian options.

More of its popular zingers, hot-wings and twister and wrap products, along with side-dishes such as mashed potatoes are being lined up for launch.

Knowing where its consumer is, the brand has homed in  on states with over 90 per cent of non-vegetarian population such as West Bengal, Tamil Nadu, Punjab and Andhra Pradesh besides the cities it is already present in for further expansion.

Bolstering its second life in India has been KFC's franchisees. They play a vital role -- from investments for expansion, better administration at the stores and back-end, to providing KFC's consumer interface by managing the shop-floors. KFC, on its part, makes sure it monitors their performances regularly through set parameters and audits.

Wading ahead

An evolving supply chain makes for smoother front-end operations for this fast-food chain. By turning to Venkateshwara Hatcheries Ltd (Venky's) for sourcing the key ingredient -- processed chicken, it helped allay PETA's concerns about suppliers' cruelty to the birds as Venky's has been a reputed poultry supplier in the country since the seventies.

Local suppliers pitch in with buns and vegetables.

While KFC may still be a long way from achieving the clockwork of McDonald's centralised logistics that starts from the farmer to the store, it has acquired the flexibility to absorb unforeseen spikes.

In June -- during the vacation season with the IPL just over and people trooping out of their houses -- the chain saw an the demand increase by 10-15 per cent, throwing their regular forecasts into a tizzy. KFC cut short its transportation time by airlifting stocks from the suppliers.

KFC is now raring to put more stores on the ground. "We have been adding 10 stores a year since the relaunch, and will grow from 35 to 50 by 2008 end and to 100 by 2010," Varma says of the company's ambitious plans.

Saturated high streets are driving the brand to explore other retail options. Apart from the obvious choice of malls, food courts, some drive-throughs are likely to sport its logo this year itself, reminiscent of Nirula's, India's first fast-food chain, which has set express kiosks in airports, hypermarkets and petrol stations.

Are its growth targets bullish enough when compared to players like McDonald's?

Varma answers, "They have reached the 100-stores mark in 11 years; we will achieve it in half as much time, since we only started to scale up from 2004-2005." Time will prove whether it can catch up with McDonald's which has put 137 restaurants across India since 1996, adding about 40 every year.

Putting more stores on the ground may become the least of worries for KFC in the future. Industry analysts doubt assembly-line restaurant food will flourish in the long term. Bijoor adds, "The fried chicken arena will face heat in the future with mounting health concerns and doubts about how the chicken is processed".

It is perhaps this fear that has the chain striving to bring in healthier and more varied options. Chaudhary informs, "We are looking at non-fried and toasted products."

They could also look at the regional diversity to bring in more local dishes besides fried chicken as "Indians mostly like their food to taste Indian", feels Raghavan.

The jury may still be out on its foray in India but time is on KFC's side which has brought a precedence of other brands, a softening of anti-MNC sentiments and a set of consumers leading lives that necessitate eating-out more often.

The QSR industry is now bustling at Rs 7,000 crore (Rs 70 billion), of which the organised sector comprising brands such as KFC, McDonald's, Pizza Hut, Nirula's and Haldiram account for five to eight per cent, estimates Mishra.

McDonald's India's JV partner and MD of its west and south operations, Amit Jatia, points out that consumers who were once wary of the inconsistent quality and service standards across players are now accepting QSRs -- which have evolved their supply chain and trained people -- as an eating-out option.

With a market share of 10 per cent, by internal estimates, KFC India claims that it already contributes around 30 per cent of the total system sales for Yum! Restaurants International (Yum! Brands international division) in India. Russia and France, its other potential growth nations, may just have to take a backseat.

Sayantani Kar in New Delhi
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