Monday, September 25, 2017

KFC targets middle-class future

KFC plans to position its fare as aspirational products when it opens its doors in Myanmar in 2015, as its owner Yum! Brands announced a deal with Singapore-listed, Myanmar-focused Yoma Strategic Holdings to bring its popular chicken to the country.

There is likely some finger-licking going on at this Hong Kong outlet. Photo: Wikimedia CommonsThere is likely some finger-licking going on at this Hong Kong outlet. Photo: Wikimedia Commons

The taste and products offered by KFC along with its quality standards make it well suited for emerging markets such as Myanmar, said Yoma Strategic head of business development JR Ching.

“It is definitely the case that there is a difference in the brand positioning in emerging markets versus the brand positioning in developed markets,” he said in a Yangon interview on October 15.

Yum! as an organisation is focused on expanding into new countries, he said. KFC is often positioned in emerging markets as an aspiational product, aiming for customers from the growing middle class – a group which is making up a growing proportion of Myanmar’s population.

“If you think about brands and the way brands have been positioned around the world, as people move up in income scale they start consuming different kinds of products,” Mr Ching said.

KFC will be the first global quick-service restaurant to enter the domestic market, he said. Although competitors like South Korea’s Lotteria and Marrybrown from Malaysia have also opened their own brands of quick-service restaurants in Myanmar, “the segment is relatively undeveloped in the country,” he said.

“I think [KFC] is much more of a good food that is prepared fast than a pure fast food,” he said. “And from that perspective it does focus on quality ingredients, freshness of preparation. One of the key things is that a lot of the product is prepared fresh in the store rather than frozen to fryer.”

With US$23 billion in annual sales and more than 18,000 restaurants in 118 countries, KFC is the largest fast-food brand to announce plans to enter Myanmar. Although its owner Yum! also has restaurants like Pizza Hut and Taco Bell in its portfolio, the current agreement with Yoma Strategic is for the KFC brand.

Mr Ching said Yoma Strategic will be operating as a franchisee rather than as a joint venture, adding there are currently no plans to sub-franchise. The first outlet is planned to open its doors in mid-2015.

“We initially want to start in Yangon given its opportunity set, its income, its dynamics,” he said. Mr Ching added the firm will then consider possible expansion in the country.

Yoma has extensive property holdings, though interests in a range of other industries such as automotive sales, tourism and agriculture. Mr Ching said the company understands the crossover potential of its different business units, but has approached KFC on its own merits.

“Aside from the fact that there are synergies, our business planning and financial assumptions still assume a standalone entity,” he said. The firm will also try to source locally as much as possible.

In a press release on October 13 announcing the agreement, Yoma Strategic chair Serge Pun said KFC is well suited for the local market.

“Chicken is a staple protein in Myanmar and our people recognise the KFC brand,” he said.

“The announcement of the first KFC coming to Myanmar reflects our ongoing strategy of global expansion in emerging markets,” KFC chief executive officer Micky Pant.

– Additional reporting by Thomas Kean