Nov 23, 2016

KFC Myanmar Ponders Mountainous Shan State as it Considers a Future Beyond Major Cities

US fast food giant KFC will open its first store in outside of Yangon next year with a new outlet in Mandalay. But the company is already looking further afield in its bid to tap increasing demand for consumer goods following decades of isolation and economic stagnation.

The fried chicken giant’s plans for Myanmar’s second city herald the beginning of KFC's up-country expansion.

Three more stores are set to open in Yangon before the end of the year, joining seven already in operation, and the Colonel’s face is soon set to adorn store fronts in Myanmar’s less populated peripheral regions too.

After partnering with Yoma Strategic Holdings in July 2014, KFC's first Myanmar store opened in Yangon in July the following year to much fanfare, it being the first American fast food franchise to enter the market.

Since then, the public's appetite hasn't abated, the company says. Demand from people hungry for foreign brands is driving KFC's expansion outside of Yangon, said JR Ching, KFC Myanmar’s Managing Director.

“Based on our experiences here in Yangon, especially the phenomenal support and reaction we had from the local community here last year, we definitely see the ability and the opportunity to expand into Mandalay,” he told Myanmar Business Today.

“We'd always said Yangon was going to be our initial focus... but we were looking to Mandalay as soon as it became practical.”

KFC is not planning to limit itself to major population hubs in its mission to meet Myanmar’s growing consumer base. It is now also looking at the possibility of expansion to “secondary”or “tertiary” cities.

“Whether that’s up in Shan state, in Bago region, up in Napyitaw or even going toward Mawlamyine, we're looking constantly at various expansion opportunities,” said Mr Ching.

Quality control poses perhaps the biggest challenge when branching into remoter areas, as KFC adheres to strict international supply chain standards, he added.

KFC’s downtown branch is often heaving with customers, and the chain’s popularity presents a threat to established competitors. But Mr Ching said KFC's entry into Myanmar has caused a positive change within the market, with competitors raising their quality standards.

“We are seeing impact on the competition in terms of some of their competitive dynamic behaviors, whether it’s pricing, product offering or store location.”

At one CP Fried Chicken outlet in a busy area of Sanchaung township, just a short stroll from a KFC, it has been business as usual since the fast food giant’s arrival, said a staff member.

“The amount of customers has remained the same, we still have our regulars. I don't see it affecting us in the future,” she said.

Achieving market dominance could take some time. A report published last week by Daiwa Capital Markets found that Mandalay and Yangon has enough demand to accommodate up to 350 fast food stores, or 23 outlets per million people. In neighboring Thailand, including its rural areas, there is the capacity for 220 stores per million people.

Myanmar’s consumer base is still tiny. Even within the major cities, one of the biggest challenges to KFC’s ambitions is the fact that the army of shoppers that feeds its business model in other countries simply doesn’t exist yet.

Source: Myanmar Business Today

 
Copyright