KFC Case Study
Addressing recessionary challenges by focusing on health and value
Reference Code: CSCM0271 Publication Date: September 2009
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This case study focuses on KFC, a division of Yum! Brands, and how the fast food company is attempting to encourage growth during the recession. The company has in particular focused on value meals to enhance customer numbers, while health and environmental initiatives are designed to encourage new customers through its doors. Meanwhile, emerging markets offer the company growth outside of the stalling US market and KFC has growth strategies in place to capitalize on these regions.
The fast food market was believed to be ‘recession-proof’ by some commentators and offer good growth potential despite the poor financial situation, as consumers trade down to cheaper food options. However, players have found that some markets, such as the US, have not been as recession-proof as others, prompting companies to devise new strategies to encourage growth. KFC has concentrated on enhancing its value meal offering to encourage custom, developing new lines that are cheaper than its conventional menu items. In addition, the company has enhanced its focus on health, developing a grilled chicken offering, while environmental concerns have been addressed through reduced packaging measures. The company has developed effective online marketing strategies to address the growing popularity of the internet and user-generated content. This includes an oversubscribed free online meal voucher and a MySpace competition that offered consumers the chance to be the new face of its products. KFC is concentrating on developing an emerging market presence to capitalize on this potential growth area. In particular, it has earmarked growth in China and India where fast food demand is expected to increase significantly.
KFC Case Study
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CSCM0271/Published 09/2009 Page 1
KFC Case Study
ANALYSIS Fast food is growing in popularity around the globe as a good value meal option
The global fast food market is performing well, growing by 4.1% in 2007 to reach a value of $106.9 billion. Future performance is also expected to be buoyant: by 2012, the market is forecast to have a value of $130 billion, an increase of 21.6% since 2007. The Americas (comprising Brazil, Canada, Mexico and the US) is the most lucrative regional market, generating 63% of global revenues and benefiting from the well established nature of fast food in these countries.
The fast food industry is encouraging people to trade down to cheaper food options during the recession
Fast food retailers are attempting to capitalize on the recession by encouraging people who would not normally eat fast food to do so. In particular, they are encouraging consumers who would normally eat at higher-end, full-service restaurants to trade down in order to save money when eating out. Market players have attempted to retain these new customers through new initiatives. In the US, this has included the following: • KFC has developed a grilled chicken variant to attract new consumer to a healthier offering (more of which is discussed later). • Burger King began testing new menu initiatives in 2009, including thicker burgers, kebabs, ribs and grilled fish which, at between $6 and $7, are priced at half the cost of comparable casual dining meals. • Domino's Pizza has developed new pasta offerings as part of its efforts to diversify away from its core pizza business. It remains to be seen whether these companies can retain new customers in the long term through such value meal promotions. During the recession, however, these deals are helping the fast food industry stay afloat and capture consumers which are demanding value for money.
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