AURORA: KFC was among the first fast food franchises to open in Pakistan in the nineties. What has the customer experience been like over these many years?
M. RAZA PIRBHAI: Pizza Hut opened in 1993 and it was the brand then. It was followed by KFC in 1997 and in 1998 by McDonald’s, and all three enjoyed good times until 2010. KFC started to lose their edge around 2007.

A: What happened?
MRP: Pizza Hut and KFC gained acceptability from the very beginning and they were a huge success in the market. But then they started to lose their way on how to take their brand forward. Pizza Hut got lost somewhere between the dining and delivery concept and they began losing ground when they started to compete with Domino’s. KFC was a very acceptable brand, especially in terms of their taste palette, but in terms of price, positioning, marketing, assets and people, they failed to evolve. Part of the reason why this happened was because their original customer base started getting older and the brand was aging with them rather than innovating. They continued to live with their legacy model, and then when Cupola started venturing into different directions, they failed to focus on how KFC was evolving globally and how consumer dynamics were changing. By 2007, the brand was in decline and when I took over in 2014, it was on a ventilator. People had stopped going to KFC because the experience was so bad. The challenge was to revive a dying brand and I call KFC a ‘crocodile brand’ because it would not die. It was literally being killed but it was not dying, and in my opinion, the reason why it refused to die was because it had a very strong local taste acceptability. Fried chicken, spicy, fried, whole muscle – everything was so correct. It is so close to the local consumer tastes. We cannot go wrong with this product.

A: The local taste was there from the start?
MRP: Fried chicken is a very Asian product; it is the food that we like to eat. And acceptability increased further when KFC introduced spicy and crispy in Pakistan. It was an all-time hit. The problem was that the product was wrongly priced and wrongly positioned. QSRs (Quick Service Restaurants) globally are at the bottom of the food ladder and their offerings have to be priced in such a way to reflect this. Starting from the bottom, you have QSRs, fast casual dining, casual dining and finally fine dining. Globally, QSRs are the most affordable, and therefore consumer expectations are not very high. The expectation is to be served a quick hygienic meal at an affordable price along with a reasonable experience. In Pakistan, KFC was positioned as the place to go, but the experience was miserable, and on top of it the prices were premium because it was an American brand. We had to change the entire landscape. We are in a business of scale and of high number volume. I don’t want people to come to me only to celebrate special occasions like birthdays, I want them to think about me every day as a habit. Our first step was to launch an everyday value menu, and it was a game changer because we opened a price space that allowed us to welcome more consumers.

A: By how much did you drop your prices?
MRP: We did not drop them. We changed our product offerings and introduced a new range of menus. We introduced a smaller sized burger and a two-pieces of chicken and fries combo. For the mid-tier pricing category, we provided added value through disruptive offers and for the upper family end we created a menu letter. The point is that only four to five percent of the market is affluent and you cannot survive on that. To survive, you have to go deep and we went deep with pricing, value and the right offering, and this is what gave us the leverage to expand. In 2014, we had 58 stores and we cut them down to 52 and remodelled them. Then we began opening new stores and currently we have 119 stores and we are targeting 15 to 18 new ones every year. This is the kind of space we have created for ourselves.

A: How did the rising trend in home ordering change the market dynamics?
MRP: The digital food arena started to expand with aggregators such as Foodpanda and EatOye and they created new behaviours which provided us with a new space.

A: What was this new behaviour?
MRP: At dinner time, three separate riders come to my house. Earlier, what would typically happen was that Dad would decide what to order. Today, my son decides what he wants to order, my daughter decides what she wants to order, and luckily my wife and I both agree on what we want to order. That is the extent to which consumer habits have changed. There is much more independence of choice.

A: How has this affected trends in dining in-store?
MRP: Dining in-store is still a trend in Pakistan; it is the reason why I spend a lot of money on bricks and mortar. Delivery is basically an offshoot of dine-in; if people don’t see the dine-in, they will not have believability in the delivery. Globally the trend is different and they have started to spend less on the dine-in experience. In Pakistan, it is still a very strong reality.

A: In percentage terms, how would you classify your sales mix?
MRP: The mix is 40% dine-in, 35% delivery and the remaining 25% is made up of take-away and drive-through.

A: And your dining breakdown over 24 hours?
MRP: Noon to 4 p.m. accounts for 23 to 24%, and this has been forever; I have not seen this change. Dinner accounts for 30 to 35%. The snacking period in the evening is eight to 10%. What has really grown is the late hour window post 10 p.m., and which accounts for another 20 to 30%. The late-hour window has been supported by Foodpandas of the world; they have given consumers that kind of access and luxury in terms of the service available, particularly to Gen Z. Gen Z have become so much more opinionated about their food preferences and what they order. The access and the opportunity to order has given them that power.

A: Which age group constitutes your core target market?
MRP: Thirteen to 35 is our bull’s eye, although the data says the profile is between 19 and 45. When we came in 2014, we asked consumer research to define us as a brand personality and the reply was Atiqa Odho.

A: Meaning?
MRP: That we were still graceful but we have aged. When we asked what we should be, the response was Ali Zafar. Consumers wanted us to look young, vibrant, colourful and communicate in their language. Don’t just give product shots; show us colour, humans; show us people we can relate to. We had to make our brand younger. Today our brand scores have significantly improved. We were on 2.4; our rating is now at 6.4, and in the last nine years our sales have grown 20 times and we have become the largest food retail operator in Pakistan.

A: When it comes to Gen Z, are they ordering stuff that is really different from what older people are ordering?
MRP: They generally prefer boneless chicken. They are also more experimental when it comes to new flavours.

A: So the big change is their ability to order independently?
MRP: Definitely. To order what they want when they want it.

A: Do socio-economic indicators affect Gen Z’s behaviour when it comes to when and what they order?
MRP: Not in terms of when they order; in terms of flavours, there is maybe a little bit of a difference; for example, barbecue sauce would work better in Defence and Clifton than elsewhere.

A: What about price?
MRP: They all are price sensitive. Of course, the dynamics differ according to their socio-economic category, but that is not confined to Gen Z.

A: When it comes to advertising, is TV or digital the more important medium?
MRP: I would rank TV as number one. I get a lot of criticism for this, but I think TV still holds a huge viewership, and that viewership is not only on TV; it can be on any screen, so the TVC will get into so many different formats and different media. However, TV still has a lot of reach in Pakistan.

A: Potentially, how large is the QSR market?
MRP: It is a 250 million people market and with 120 stores I have not even reached the addressable market, which I estimate at 24 million.

A: How did you reach the base number of 24 million?
MRP: From a total population of 250 million people, we take families who earn Rs 50,000 a month as KFC customers and according to research, this would account for 11% to 14% of the population.

A: What is preventing further expansion?
MRP: Limitations in our capacity to open that many stores; find that many sites, deal with landlords and a lot of other capacity constraints. In Karachi for example, how can I open in Lalukhet or on M.A. Jinnah Road without the kind of proper infrastructure where I can place my brand? I have been looking for a building in Shah Faisal Colony, yet I cannot find one with a decent infrastructure. Sindh and Karachi are very difficult areas to expand in terms of the right infrastructure. Punjab is very different.

A: Has the economic situation made your customers more price sensitive?
MRP: There has been a 40 to 45% depreciation of the rupee and inflation is now at 40%. How does one pass this on to the consumer, especially when I am sitting at the bottom of the pyramid trying to be affordable? I cannot pass on everything to my customer.

A: What did you do?
MPR: Absorb.

A: You did not increase your prices?
MRP: We did. But given the rupee depreciation and the inflation rate, I have only taken an eight or nine percent price increase.

A: Has there been a drop in your footfall?
MRP: Not so far. We have been able to attract a lot of share from elsewhere because we are still the most affordable. People still have to go to work and eat. What will happen is that the one who absorbs the most and passes on the least will divert the share, because the market is not going to grow. During times of inflation, the overall pie cannot grow, so it is going to be about who will take whose share. That is the game.

A: In terms of developing new flavours and recipes, how much input does KFC Pakistan have?
MRP: We create our own local innovations and we also take a lot from the global library if we think that it will be relevant to our market. We created Zingeratha which was then taken globally. It’s a chicken paratha roll, done with zinger, chutney and onions. That is the magic of KFC. We are about real food; we don’t do freezer to fry.

A: Where do you source your chicken from?
MRP: All four major suppliers are my vendors; K&N, Sabroso, Big Bird and Menu, and they are all approved by KFC global.

A: What about your potatoes?
MRP: We used to import them, but this is now being localised. All our Category A vendors have to be approved by KFC global. So chicken is a Category A, where the customer directly consumes the product and we need to know who the bird’s parents were; was it given any antibiotics in the last 15 days; what is it fed? All this is a part of KFC’s sustainability improvement process.

A: What about potatoes? I ask this because, unlike chicken where there are several suppliers who rear their chickens to a certain standard, potatoes all come from the central Sabzi Mandi.
MRP: You are right, and that is why we resisted having to suddenly source our potatoes locally and we now have a few months’ space to source them. We are working with Fauji Foods to develop our own product and start seeding our potatoes.

A: What about your buns?
MRP: They are from Dawn Bread; they are the only approved vendor.

A: Do you think companies like KFC and McDonald’s should be localising further and encouraging competition among local suppliers to raise their standards?
MRP: We would consider working with anyone who is ready to invest; we are working with Dipitt for our sauces. But we just don’t approach the big names, we are ready to consider anyone willing to invest and who can qualify and clear their audits. It is important to keep in mind that any company that supplies a brand like KFC must also have a large local retail base. The four chicken suppliers I mentioned earlier have that large local retail base and that is how they are surviving and the same goes for our bread vendor. If they were only supplying KFC, they would not be able to survive; they would not be able to compete on costs for a start. But there are not many Pakistanis who want to go into manufacturing because there is so much unpredictability.

M. Raza Pirbhai was in conversation with Mariam Ali Baig. For feedback: aurora@dawn.com