Dec 17, 2019 | Report Announcements

KFC is a leader in traditional hand-breaded, bone-in Southern fried chicken with considerable brand equity around its Original Recipe seasoning (top selling menu option) and Extra Crispy option. This iconic brand is distinguished by red & white striped buckets featuring the Colonel’s portrait and its increased relevancy reflects expansion into tenders, nuggets, wings, bowls, pot pies and sandwiches while also democratizing foodie trends (like Nashville Hot flavor profile). The brand’s creative innovation helps break-through the clutter with “mash-ups” like chicken & “raised dough” waffles, Cinnabon Dessert Biscuits and a Cheetos-crusted chicken sandwich. KFC’s value strategy offers consumers price certainty for complete, “real” meals across a broad range of price points (including $5/$20 Fill-Ups & two for $6) and these platforms allow KFC to keep things fresh & relevant as channels for new product news. Messaging centers around the high standards of the “Colonel” with taste representing a key brand differentiator (finger lickin’ good/doing things the hard way), and, following in the footsteps of the showman Colonel Sanders, KFC will do anything attention worthy to sell chicken. To this end, the brand has been leveraging a constantly rotating roster of celebrity Colonels to communicate KFC’s “real” history, cultivate anticipation and break-through the clutter with humor & juxtaposition. The brand also benefits from very creative social media marketing generated by KFC’s innovations lab. Having said all this, KFC’s market share has declined by almost -20% over the last 10 years and the system has incurred 15 consecutive years of domestic net unit count declines. Further, comp growth over the last couple of years has not been as robust as would be expected given the totality of its brand improvements. This reflects that KFC continues to struggle with overcoming the challenge of: turning-around an older system (KFC was essentially built out nationally in the 1980’s with 5,000+ locations); Millennial oriented advertising which is intended to grow another wave of customers but, perhaps, at the expense of its core urban, lower-income demo; and volatile chicken PPI swings that challenges its value equation in an increasingly price oriented market. Also, the brand is faced with strong competition from QSR sandwich players with compelling chicken offerings as well as grocery stores selling rotisserie chickens and buckets of their own. Notably, Popeyes’ huge marketing success around its new chicken sandwich provides a stark reminder that KFC has been unable to gain sufficient traction around its own sandwiches. In conclusion, while KFC is making Southern fried chicken cool again with its holistic, 360 degree “re-Colonelization” concept upgrade, it must be mindful that sustainable comp outperformance likely requires a solution that also includes a strategy to drive frequency with its core customer base who maybe simply looking to feed their kids on the fly with something other than pizza or burgers.

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