The Hindu Business Line : Counting on its chickens

The restaurant is chilly, but the kitchen is warm and toasty. What looks like artery-clogging amounts of oil is bubbling away in deep-fat fryers. Chunks of chicken are being breaded, fried and then rested on heated counters, small labels indicating t he time until when it is good to be served. There is some staff member or the other, hair tucked away in blue safety cap, scrubbing their hands at a wash basin in the corner. Charts stuck on the wall attempt to predict the demand and estimate the amount of business the day will bring in. For KFC, it’s one more dry run for the day on which its 50th outlet in India, in Chennai’s Anna Nagar, formally opens to the neighbourhood.

The previous day, the restaurant was opened for two hours and did a business of Rs 1 lakh, which is the average takings per outlet per day, says Niren Chaudhary, Managing Director, Yum! Restaurants India. “It’s an incredible time to expand,” he says in reply to a question about the slowdown. The topline has grown 20 per cent over the last year and the number of consumers has grown 10 per cent. Pizza Hut, also part of the Yum! portfolio, is growing, but at a slower pace as it’s much bigger than KFC in spread, with 150 outlets across the country and price points that are “two times that of KFC”. It has grown 6-7 per cent over the previous year and is adding about 15 outlets a year.

AFFORDABLE TREATS

The reason for these restaurants thriving, he explains, is the emphasis these concepts place on affordability. KFC is a quick-service restaurant model which aims to be affordable with prices starting at Rs 25 for a sandwich, and Pizza Hut is positioned as “affordable casual dining”, and that makes them “recession-proof”. Further, rentals are seeing a correction, and the group is gung-ho about KFC’s prospects.

Customers, especially the young ones between 19 and 29 that are KFC’s core, are looking for “something new, something different”, says Chaudhary. This trend is one of the dominant drivers of consumption and also the factor driving Yum! to test-market its other big brand, Taco Bell, in Bangalore, where the first outlet will open in November or December. And it’s not as if all this food needs to have an “Indian bent” either. “What’s more important is to be differentiated – the newness of the idea is far more important that the familiarity of the idea,” he adds.

That apart, price and value for money are constants that need the most careful consideration. Our consumers are SEC A & B in big metros and are subset of our market in the entire country. If the country’s one billion, our market is 100 million, so focus is key. Focus on the metros and there is a big likelihood of getting to your target consumers, he says.

Given that KFC’s target customers are youth, the emphasis on affordability is very high, says Chaudhary. Moreover, as it’s a quick service restaurant model, it needs massive throughput at low average spends to be competitive. There’s a selection of sandwiches for Rs 25, a snack box meal for less than Rs 50 and lunch may cost Rs 100-150 per head – and the money-value equation doesn’t end there. There is the price point value, and then the ‘value in totality’ (what one gets for the amount paid) and the third is ‘abundance value’ (the total amount of food that one gets ordering as a group). Further, marrying affordability to innovation, which ties in with the ‘something new, something different’ insight, is key.

Chaudhary says a restaurant has multiple jobs to do – it is not just a place to get a meal, it is also a venue for people to catch up and connect, pretty much ‘the other place’. Therefore, an air-conditioned, smart and affordable place is bound to do well. He points to the explosion of coffee places in the country, saying they multiplied rapidly because they recognised this truth.

Vishwadeep Kuila, CEO of the Chennai-based Oriental Cuisines which runs a host of fine dining restaurants and the Planet Yumm chain of food malls, says the organised food market in India is barely 2 per cent of the total food sales, compared to 12-15 per cent worldwide or 20-25 per cent in developed countries. As such, there is enormous potential available in India “as long as market players understand what India likes”. He says: “Let’s face it, India is starved of such outlets, neat places where people can eat well and catch up. And while people may cry about junk food, be wary about it, we will still grant it to our children.” However, the ambience is always secondary to quality and service, he says. Fast food brands such as KFC and McDonald’s are the top grossers next only to homegrown brands such as Saravana Bhavan at Chennai’s Ascendas Planet Yumm food mall, which Oriental Cuisines runs, he says.

Expansion plans

Yum! plans having 100 KFC outlets in place by end-2010 at an investment of Rs 150 crore. The bigger goal is to have 300 outlets in place by 2011 and 500 outlets operating by 2015. For now, the focus will be on expanding its presence within the big metros that it’s present in now. “In the long run, a city like Chennai could have 20-25 outlets, while Mumbai and Delhi could have twice as many,” says Chaudhary.

Even as it is on a rapid expansion drive, Yum! is also battling charges of forex violations. The charge is that it failed to invest $80 million over seven years under which it received the licence to operate. While the company confirms receiving a show-cause notice from the Enforcement Directorate, Chaudhary says Yum! is a responsible MNC and has been operating in the country for more than a decade and he’s confident of its stand.

Competition from the likes of McDonald’s or more local chains serving similar food does not bother Yum! “The organised branded food sector is in a stage of complete infancy,” says Chaudhary. “The runway and opportunity are absolutely mammoth – it’s not a situation where one brand takes away from the other. None of us are at a scale that’s large enough for that to happen,” he adds. The sector is growing dramatically, and those that will do well are brands that concentrate on great innovation, higher level of food safety and sanitation, consistency and affordability, he says.

KFC has often been in the news for animal rights activists protests who allege the chickens they source haven’t been raised in humane conditions but Chaudhary doesn’t have much to say about it other than to state that they source the chicken only from poultries that “comply with the laws of the land” such as Venkateswara Hatcheries and Godrej Tyson.

Oriental’s Kuila says it is a long way off before people make a big hue and cry about junk food. And a lot of these multinational brands are focusing on developing countries because they know there won’t be protests similar to the West. As long as they are mindful of quality and hygiene, they will do well, he adds. “The model is very replicable and it can be a large chain with consistent quality, almost like a factory,” he remarks.

A major concern with fast food, that of health, is sought to be addressed when Chaudhary says that there is less than one per cent of transfatty acids in KFC’s cooking medium. And in the next few years, the brand will also look at non-fried options. “There’s a proactive approach to this across all our stores,” he says.

Will the ‘chicken’ branding work in a country with a large vegetarian population? The goal is for KFC to be a “mainstream powerhouse brand” and that means much adjustment and innovation – the fryers are separate, the oil used is separate, and there are many vegetarian options on the menu, says Chaudhury, though he adds that growth in the non-vegetarian section is “dramatic”. “As KFC’s pretty new as a concept, it can stand for anything and the consumer can give us credit for it. We don’t want to exclude anyone so we have a vegetarian range we don’t normally have outside India,” he says. In fact, Taco Bell’s Mexican-inspired food is easily adapted to both vegetarian and non-vegetarian versions and has Yum! upbeat about its prospects.

Yum! has two other brands, a hamburger brand called A & W, and a seafood brand called Long John Silver’s, but has no plans to bring them to India. “We don’t see the potential in them to be national concepts,” says Chaudhary. “Has Yum! as a chain broken even? “I’d say we’re largely trending in that direction, we continue to be more in investment mode – if our ambition is to be more than 300 by 2010, there’s a lot of investment that should be done ahead of that curve.” says Chaudhary.

Globally 85 per cent of Yum!’s restaurants are franchised, and that’s what the group is working towards in India too; only 15 pc are company-owned.

“We want to bring in high-calibre franchise partners in the years to come. The customer doesn’t care who’s running this restaurant, the brand must be faceless. The investment is the franchisee’s, we support them with know-how, logistics, supply chain, but most of all, how to run an organisation,” says Chaudhary.

Pizza Hut is fully franchised but KFC is a mixed model, with Yum! owning some restaurants. In the short term the company will ramp up investment much faster but that will even out with time as it finds the right franchise partners, he adds.

Related Stories:
KFC’s 50th outlet opens in Chennai

More Stories on : Hotels | Supply Chain Management | Advertising | Poultry

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Stories in this Section
Counting on its chickens

Why Indians love advertising

Building on cricket

Heady scent of success

A collective enterprise

Born in the USA

Responsible choices

Characteristics of persuasiveness

Sustaining an admirable reputation bookmark