“It is going to be about who will take whose share. That is the game.”

AURORA: KFC was amongthe first fast food franchisesto open in Pakistan in thenineties. What has thecustomer experience been likeover these many years?
M. RAZA PIRBHAI: Pizza Hutopened in 1993 and it was thebrand then. It was followedby KFC in 1997 and in 1998by McDonald’s, and all threeenjoyed good times until 2010.KFC started to lose their edgearound 2007.

A: What happened?
MRP: Pizza Hut and KFCgained acceptability from thevery beginning and they werea huge success in the market.But then they started to losetheir way on how to take theirbrand forward. Pizza Hut gotlost somewhere between thedining and delivery conceptand they began losing groundwhen they started to competewith Domino’s. KFC was a veryacceptable brand, especially interms of their taste palette, butin terms of price, positioning,marketing, assets and people,they failed to evolve. Part of thereason why this happened wasbecause their original customerbase started getting olderand the brand was aging withthem rather than innovating.They continued to live withtheir legacy model, and thenwhen Cupola started venturinginto different directions, theyfailed to focus on how KFCwas evolving globally and howconsumer dynamics werechanging. By 2007, the brandwas in decline and when Itook over in 2014, it was on aventilator. People had stoppedgoing to KFC because theexperience was so bad. Thechallenge was to revive a dyingbrand and I call KFC a ‘crocodilebrand’ because it would notdie. It was literally being killedbut it was not dying, and inmy opinion, the reason why itrefused to die was because ithad a very strong local tasteacceptability. Fried chicken,spicy, fried, whole muscle –everything was so correct. It isso close to the local consumertastes. We cannot go wrongwith this product.

A: The local taste was therefrom the start?
MRP: Fried chicken is a veryAsian product; it is the food thatwe like to eat. And acceptabilityincreased further when KFCintroduced spicy and crispyin Pakistan. It was an all-timehit. The problem was that theproduct was wrongly pricedand wrongly positioned. QSRs(Quick Service Restaurants)globally are at the bottomof the food ladder and theirofferings have to be pricedin such a way to reflect this.Starting from the bottom, youhave QSRs, fast casual dining,casual dining and finally finedining. Globally, QSRs are themost affordable, and thereforeconsumer expectations are notvery high. The expectation is tobe served a quick hygienic mealat an affordable price along witha reasonable experience. InPakistan, KFC was positionedas the place to go, but theexperience was miserable,and on top of it the prices werepremium because it was anAmerican brand. We had tochange the entire landscape.We are in a business of scaleand of high number volume. Idon’t want people to come tome only to celebrate specialoccasions like birthdays, I wantthem to think about me everyday as a habit. Our first stepwas to launch an everydayvalue menu, and it was a gamechanger because we opened aprice space that allowed us towelcome more consumers.

A: By how much did you dropyour prices?
MRP: We did not drop them.We changed our productofferings and introduced a newrange of menus. We introduceda smaller sized burger anda two-pieces of chicken andfries combo. For the mid-tierpricing category, we providedadded value through disruptiveoffers and for the upper familyend we created a menu letter.The point is that only four tofive percent of the market isaffluent and you cannot surviveon that. To survive, you haveto go deep and we went deepwith pricing, value and the rightoffering, and this is what gaveus the leverage to expand. In2014, we had 58 stores andwe cut them down to 52 andremodelled them. Then webegan opening new stores andcurrently we have 119 storesand we are targeting 15 to18 new ones every year. Thisis the kind of space we havecreated for ourselves.

A: How did the rising trendin home ordering change themarket dynamics?
MRP: The digital food arenastarted to expand withaggregators such as Foodpandaand EatOye and they creatednew behaviours which providedus with a new space.

A: What was this newbehaviour?
MRP: At dinner time, threeseparate riders come to myhouse. Earlier, what wouldtypically happen was that Dadwould decide what to order.Today, my son decides whathe wants to order, my daughterdecides what she wants toorder, and luckily my wife andI both agree on what we wantto order. That is the extent towhich consumer habits havechanged. There is much moreindependence of choice.

A: How has this affectedtrends in dining in-store?
MRP: Dining in-store is still atrend in Pakistan; it is the reasonwhy I spend a lot of money onbricks and mortar. Delivery isbasically an offshoot of dine-in;if people don’t see the dine-in,they will not have believability inthe delivery. Globally the trend isdifferent and they have startedto spend less on the dine-inexperience. In Pakistan, it is stilla very strong reality.

A: In percentage terms, howwould you classify yoursales mix?
MRP: The mix is 40% dine-in,35% delivery and the remaining25% is made up of take-awayand drive-through.

A: And your dining breakdownover 24 hours?
MRP: Noon to 4 p.m. accountsfor 23 to 24%, and this hasbeen forever; I have not seenthis change. Dinner accountsfor 30 to 35%. The snackingperiod in the evening is eightto 10%. What has really grownis the late hour window post 10p.m., and which accounts foranother 20 to 30%. The late-hourwindow has been supported byFoodpandas of the world; theyhave given consumers that kindof access and luxury in terms ofthe service available, particularlyto Gen Z. Gen Z have becomeso much more opinionated abouttheir food preferences and whatthey order. The access and theopportunity to order has giventhem that power.

A: Which age group constitutesyour core target market?
MRP: Thirteen to 35 is our bull’seye, although the data says theprofile is between 19 and 45.When we came in 2014, weasked consumer research todefine us as a brand personalityand the reply was Atiqa Odho.

A: Meaning?
MRP: That we were still gracefulbut we have aged. When weasked what we should be,the response was Ali Zafar.Consumers wanted us to lookyoung, vibrant, colourful andcommunicate in their language.Don’t just give product shots;show us colour, humans; showus people we can relate to. Wehad to make our brand younger.Today our brand scores havesignificantly improved. We wereon 2.4; our rating is now at 6.4,and in the last nine years oursales have grown 20 times andwe have become the largest foodretail operator in Pakistan.

A: When it comes to Gen Z,are they ordering stuff that isreally different from what olderpeople are ordering?
MRP: They generally preferboneless chicken. They arealso more experimental when itcomes to new flavours.

A: So the big change is theirability to order independently?
MRP: Definitely. To order whatthey want when they want it.

A: Do socio-economicindicators affect Gen Z’sbehaviour when it comes towhen and what they order?
MRP: Not in terms of whenthey order; in terms of flavours,there is maybe a little bit ofa difference; for example, barbecue sauce would workbetter in Defence and Cliftonthan elsewhere.

A: What about price?
MRP: They all are pricesensitive. Of course, thedynamics differ according to theirsocio-economic category, butthat is not confined to Gen Z.

A: When it comes toadvertising, is TV or digital themore important medium?
MRP: I would rank TV asnumber one. I get a lot ofcriticism for this, but I think TVstill holds a huge viewership,and that viewership is not onlyon TV; it can be on any screen,so the TVC will get into so manydifferent formats and differentmedia. However, TV still has a lotof reach in Pakistan.

A: Potentially, how large is theQSR market?
MRP: It is a 250 million peoplemarket and with 120 storesI have not even reached theaddressable market, which Iestimate at 24 million.

A: How did you reach the basenumber of 24 million?
MRP: From a total populationof 250 million people, we takefamilies who earn Rs 50,000a month as KFC customersand according to research, thiswould account for 11% to 14%of the population.

A: What is preventing furtherexpansion?
MRP: Limitations in our capacityto open that many stores;find that many sites, deal withlandlords and a lot of othercapacity constraints. In Karachifor example, how can I openin Lalukhet or on M.A. JinnahRoad without the kind of properinfrastructure where I can placemy brand? I have been lookingfor a building in Shah FaisalColony, yet I cannot find one witha decent infrastructure. Sindhand Karachi are very difficultareas to expand in terms of theright infrastructure. Punjab isvery different.

A: Has the economic situationmade your customers moreprice sensitive?
MRP: There has been a 40 to45% depreciation of the rupeeand inflation is now at 40%.How does one pass this on tothe consumer, especially whenI am sitting at the bottom of thepyramid trying to be affordable?I cannot pass on everything tomy customer.

A: What did you do?
MPR: Absorb.

A: You did not increaseyour prices?
MRP: We did. But given therupee depreciation and theinflation rate, I have only takenan eight or nine percent priceincrease.

A: Has there been a drop inyour footfall?
MRP: Not so far. We have beenable to attract a lot of share fromelsewhere because we are stillthe most affordable. People stillhave to go to work and eat. Whatwill happen is that the one whoabsorbs the most and passeson the least will divert the share,because the market is not goingto grow. During times of inflation,the overall pie cannot grow, so itis going to be about who will takewhose share. That is the game.

A: In terms of developingnew flavours and recipes,how much input does KFCPakistan have?
MRP: We create our own localinnovations and we also take alot from the global library if wethink that it will be relevant to ourmarket. We created Zingerathawhich was then taken globally. It’sa chicken paratha roll, done withzinger, chutney and onions. Thatis the magic of KFC. We are aboutreal food; we don’t do freezer to fry.

A: Where do you source yourchicken from?
MRP: All four major suppliers aremy vendors; K&N, Sabroso, BigBird and Menu, and they are allapproved by KFC global.

A: What about your potatoes?
MRP: We used to importthem, but this is now beinglocalised. All our Category Avendors have to be approvedby KFC global. So chickenis a Category A, where thecustomer directly consumesthe product and we need toknow who the bird’s parentswere; was it given anyantibiotics in the last 15 days;what is it fed? All this is apart of KFC’s sustainabilityimprovement process.

A: What about potatoes? I askthis because, unlike chickenwhere there are severalsuppliers who rear theirchickens to a certain standard,potatoes all come from thecentral Sabzi Mandi.
MRP: You are right, and thatis why we resisted having tosuddenly source our potatoeslocally and we now have a fewmonths’ space to source them.We are working with Fauji Foodsto develop our own product andstart seeding our potatoes.

A: What about your buns?
MRP: They are from DawnBread; they are the onlyapproved vendor.

A: Do you think companieslike KFC and McDonald’sshould be localising furtherand encouraging competitionamong local suppliers to raisetheir standards?
MRP: We would considerworking with anyone who isready to invest; we are workingwith Dipitt for our sauces. Butwe just don’t approach thebig names, we are ready toconsider anyone willing toinvest and who can qualifyand clear their audits. It isimportant to keep in mindthat any company thatsupplies a brand like KFCmust also have a large localretail base. The four chickensuppliers I mentioned earlierhave that large local retailbase and that is how theyare surviving and the samegoes for our bread vendor.If they were only supplyingKFC, they would not be ableto survive; they would not beable to compete on costs for astart. But there are not manyPakistanis who want to go intomanufacturing because thereis so much unpredictability.

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