Ethical Issues: KFC in India

Submitted by Arun Trikha

4706/1016 March 2013

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KFC – Background

Founded by Harland Sanders in early 1930s in Corbin Kentucky,

the US

In 1935, Sanders was awarded with

the name of Kentucky Colonel

by the State Governor, for his

contribution to state’s cuisine

In 1952, Sanders started franchising

his chicken business and

called it as Kentucky Fried

Chicken

By 1964, Sanders franchised more

than 600 outlets in the US and

Canada and sold his interest in the

company in the US for USD 2 MM to

the group of investors

In 1966, Company was listed on New

York’s stock exchange

In 1971, company was acquired by Heublein Inc.for USD 285 MM

In 1982, Heublein Inc. was acquired

by Reynolds Industries and In

1986, the company was

further acquired by PepsiCo for USD

840 MM

By 2004, KFC emerged as world’s most

popular chicken restaurant chains

with 11,000 restaurants in over

80 countries

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KFC – At Present

One of the largest food chain serving chicken

Part of global restaurant system known as Yum!

Company’s headquarters are found at Louisville, Kentucky in the US

Roger Eaton, Chairman and CEO of KFC

Operating 5200+ restaurants in the US and over 15,000 units around the world

Earned a revenue of USD 15 Bn in 2011

Offering services to over 12 MM customers in 120 countries around the world

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KFC – India

First fast food multinational food chain to enter India after the economic liberalization policy of the Indian government, in early 1990s

Received permission to open 30 new outlets across the country from the Indian government

Opened first fast-food outlet in Bangalore as it had a substantial upper middle class population

Planned to open 60 KFC and Pizza Hut outlets in the country in the next 7 years

Faced opposition and entangled in various controversies due to opposition from farmers, nationalists, and economists

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KFC – Problems Faced in India

Protest by angry farmers led by the Karnataka Rajya Ryota Sangha (KRRS). Farmer leader Nanjundaswamy led the protest and condemned KFC’s entry to India

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Protest by cultural and economic activists2

Protest by PETA in the late 1990s3

Support of celebrities in against of KFC4

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Suppliers have to adhere to the ethical policies of KFC which includes paying fair wages to the labor, not employing under age labour, and avoid placing harmful chemicals in their commodities

Strict Vendor Engagement

Policies

Health and Safety of Workers

The company also looks out for the health and safety of their workers. KFC always ensures that their employees work for them voluntarily. Company detests forced labour and ensures that their employees work for them voluntarily

Ethical Employment

Policies

Kentucky Fried Chicken employment practices are also ethical. This is due to the fact that the company does not discriminate against individuals on the basis of race, gender, disability or any other factor

Fare Wages The issue of wages is also top on KFC's list. The company believes that workers should be paid

according to their efforts. Consequently, there is an element of fairness when it comes to the way the company treats its employees

KFC – Ethical Issues

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Regulatory authorities found that KFC's chickens did not adhere to the Prevention of Food Adulteration Act, 1954. Chickens contained nearly three times more monosodium glutamate(popularly known as MSG, a flavour enhancing ingredient) as allowed by the Act

Non-Conformity with Food Product

Regulations

Ill-Treatment of Bird’s in KFC

PETA asserted that KFC'S suppliers normally mistreat chicken in the slaughter houses. They claimed that the chicken are chained by metal shackles and placed in electric water baths

Improper Breeding

Birds were fed genetically modified feed in order to accelerate their growth rate

o As a result they suffer from ailments such as extreme obesity and fatty livers and kidneys, heart attacks and other health problems

KFC – Ethical Issues (Negative)

Overcrowded Farm Chickens were stuffed by tens of thousands into over crowded sheds where they hardly find

space to move freely

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PETA – People for the Ethical Treatment of Animals

American animal rights organization based in Norfolk, Virginia

A non-profit corporation with 300 employees and 2 MM members and supporters

Claims to be the largest animal rights group in the world

Slogan says "animals are not to eat, wear, experiment on, or use forentertainment”

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Campaigns by PETA (1/3)

Launched Extensive Program

Introduced Mass Education Program

In late 1990s, PETA started a protest against KFC in India. PETA had been protesting for a long time against KFC at international level. PETA highlighted that KFC was extremely cruel toward chickens and did not keep the birds in hygienic conditions. The various steps taken by PETA are as follows:

PETA India launched an extensive protest program against KFC’s Indian outlet. PETA urged the Indian public to not to go to KFC’s restaurants and demanded outlets closure in India

PETA started mass education program to educate people about the chickens condition at KFC poultry farms. PETA distributed pamphlets with a graphic description of cruelty done to the chickens. PETA used a slogan “KFC stands for cruelty” for the protest

Released Video Documentation

PETA also released a video portraying the daily suffering of thousands of the chickens in a factory farm

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Campaigns by PETA (2/3)

"Each bird whom KFC puts into a box or a bucket had a miserable life and a frightening death. People would be shocked to see our footage of a KFC supplier's employee who walks through a barn, carelessly lighting lamps and letting flames fall on the terrified birds. The air inside these filthy barns reeks of ammonia fumes, making it difficult for the birds to breathe. No one with a grain of compassion should set foot in KFC.” – Ingrid Newkirk, Director, PETA

"The chicken they serve is full of chemicals, and the birds are given hormones, antibiotics and arsenic chemicals to fatten them quickly." – Nanjundaswamy

In 2004, PETA accused KFC of cruelty towards chickens and released a video tape showing the ill-treatment of birds in KFC's poultry farms. However, undeterred by the protests by PETA and other

animal rights organizations, KFC planned a massive expansion program in India

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Campaigns by PETA (3/3)

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SWOT Analysis

Delicious and well-liked recipes

First mover advantage/ global penetration

Widely recognized brand image

Strong cash flow generation

Loyal customer

Large number of outlets at prime locations

Brand recognition

Close substitutes

Franchising strategy is not culture sensitive

Product innovations at long gaps

Inconsistent services across the outlets

Usage of added flavors such as MSG

Retail boom in India

Growing Indian economy

Adoption of western culture

Increasing trends to have meals outside home

Economy of scale

New entrants

Health issues

Change in customer demand

Organizations working for animal rights

Spread of diseases such as bird flu

Str

engt

hsO

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tuni

ties

Weaknesses

Threats

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Conclusion

KFC has to deal with different ethical issues in their capacity as a business corporation. Any company worth its salt should have a code of ethics and must be prepared to stick by it KKC has breached a substantial number of their ethics codes

The purpose of this study was to provide an in-depth analysis of the fast food industry through two contrary ideas; the moral and legal obligations that KFC has adhered to and also the ethical misgivings that the company has engaged in too

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Sources

http://www.articlesbase.com/ethics-articles/ethics-at-kfc-1924425.html

http://money.cnn.com/2004/07/20/news/fortune500/kfc/index.htm

http://www.andhrauniversity.info/sde/case%20studies%20mba/044%20KFC%20in%20India%20-%20Ethical%20.pdf

http://www.icmrindia.org/PDF/Business%20Ethics.PDF

http://multinationalmonitor.org/hyper/mm0196.03.html

http://www.nytimes.com/2003/01/06/us/group-says-it-will-begin-a-boycott-against-kfc.html

http://www.kentuckyfriedcruelty.com/h-campaign.asp

http://www.peta.org/

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Questions ?