Kentucky Fried Chicken and Global Fast Food Industry

8/11/2019 Kentucky Fried Chicken and Global Fast Food Industry

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KENTUCKY FRIED CHICKEN AND

GLOBAL FAST FOOD INDUSTRYPRESENTED TO: PRESENTED BY:

BABER KHAIRI RABEEKA KHAN ALI

BASIT JAWED

MOHAMMAD FARAZ

ARSALAN MALIK

AMINA SHEIKH

FARIYA NISAR


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Heublein, I nc:

In 1971, Heublein were in negotiations with the KFC

Heublein was in the business of Producing vodka, mixed cocktails

and other alcoholic beverages Conflicts started between the managements

By 1977, new restaurant opening was lowered to 20, remodeling of

restaurants started as the services standards fell drastically.

This strategy enabled KFC to gain better control of the existing

franchises and then expand

R.J. Reynolds I ndustries, I nc.

In 1982, R.J Reynolds Industries acquired Heublein

This acquisition for a part of their corporate strategy of

diversification.

R.J Reynolds believed the KFC management were well versed to

manage this business hence they had no interferences, which avoided

various operating problems of KFC

In 1985, RJR acquired Nabisco Corporation and sold KFC to Pepsi

Co one year later


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PEPSI CO PROFILE

Pepsi Co, Inc was formed in 1965 with a merger of Pepsi Co. and Frito-lays, Inc.

Business lines

Soft drinks

Pepsi Cola

Diet Pepsi

Mountain Dew

Snacks

Lays Potato Chips

Doritos tortilla Tostitos tortilla chips

Ruffles Potato Chips


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RESTAUTRANT BUSINESS AND AQUASITION OF

KFC

Why did PepsiCo entered the Restaurant Industry?

Because,

Same Patterns of Marketing

Additional venue for the Sale of the Pepsi Co brands (Soft drinks)

Management Skills could be transferred and will be compatible in

these business.

So the acquisition initiated,

1977: Pizza Hut

1978: Taco Bell

1986: KFC

This acquisition gave them the leading market share in all the

segments.


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HUMAN RESOURSE RESTRUCTING

It was a collision between two different cultures.

PepsiCo: Performance OrientedKFC: Laidback and Loyalist

Harsh Comments were exchanged between the managements.

Two massive downsizings.

Immense Pressure on KFC management and employees


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POOR RELATION WITH FRANCHISE

In 1989, John Cranor was appointed the President and CEO of KFC. John Cranor in the same year addressed the Franchisees to explain

the details of new franchising contract. These were:

PepsiCo can takeover the weak franchises

Relocate Restaurants

Existing KFC outlets will not be protected against

competition from new outlets.

PepsiCo will have a right to increase royalty fees

This address of the Cranor backfired and resulted in the Protest of the

franchisees. However in 1996, the most object able parts were removed by KFCs

new president David Novak.

A new contract was ratified by KFCs Franchisees in 1997.


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PEPSI CO DIVESTITURE

Between 1990 and 1996, PepsiCo sale grew by 10% surpassing $31

billion. However troubles were faced in the fast food segment where the

margin reduced from 8% to 4% in 1996.

As a result, PepsiCo food division absorbed half of the companys

capital

spending and generated one-third of the cash flows, declining itsROA and stock price as compared to competitor Coca Cola.

In 1997 PepsiCo decided to forward its restaurant business to a new

company called Tricon Global Restaurant.

PepsiCos objective was to reposition itself as a soft drinkand snack

brand.

Later PepsiCo acquired Tropicana Products.

By the divestiture of Pizza Hut, KFC and Taco Bell sales fell down

by $11.3 billion and asset fell by $7 billion.


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CHICKEN INDUSTRY

KFC is the market leader in the Chicken Industry with the MarketShare of 55.2% and sales of $ 4.4 billion in 1999.

However it has witnessed a decline of 15% in the last 10 years.

The competitors like Chick-Fil-A and Boston market increased

combined market share by 17%.

It was assumed that KFC will face competition from Boston Market

but the company filed bankruptcy due to mounted debt problem.


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KFC Future Strategies

Drive aggressive international expansion and build strong brandseverywhere

Dramatically improve U.S. brand positions, consistency and returns

Drive industry-leading, long-term shareholder and franchisee value


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KFC CURRENT STRATEGY

Marketing Strategy

In 1990, they focused on three types of Chicken: Fried, Extra Crispy,

and Tender Roast.

Launch of Buffet

Launch of Crispy Strips and Chicken Sandwich

Drive through and delivery points at nearby locations Introduction of 2 in 1 and 3 in 1 restaurants


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Major objective

Product development

Introduction on the Neighborhood Program

Expansion of franchise operation beyond Central America

Continued promotion of healthier image through removal of the word"fried" from the name

Improve menu selection of rotisserie


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Major issue

Low profitability and high risk of doing business


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Minor issue

No defined target market.

Saturation of the U.S. Market.

Health Conscious Consumers.

Increased Start Up Costs.


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Kentucky Fried Chicken and Global Fast Food Industry

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