Japan’s KFC chains fall behind on profits, needs to up the spices to meet the prices

The Colonel’s company can’t convince enough customers to cram their chops with chicken, and that has cold hard cash consequences.

While nowhere near as plentiful as their eternal rival McDonald’s, it’s not uncommon to see one of KFC’s striped red-and-white chicken establishments when you’re out and about in Japan. Company mascot and founder Colonel Sanders is a popular enough fixture in Japanese culture that simply letting him sit down was newsworthy, and the chain is still as synonymous with Christmas as it ever was.

In spite of its strong brand, the Japanese edition of KFC has fallen on some hard times lately. While July showed some recovery, sales had decreased until then for period of nine-months, with recent declarations of sales showing a reduction of 6.3 percent in April, 4.9 percent in May and a 3.1 percent decrease in June. What’s more, this year showed a 1.7 percent decline in sales for the March period, compared to last year which only had a 0.9 percent decline; this could mean sales will plunge further.

Though the figures are complicated somewhat by how not all KFC stores are under the direct management of the company (KFC also runs franchise stores which account for about 70 percent of their 1,153 Japanese outlets), there is a definite issue if the customer base is shrinking across all stores.

It’s likely that one factor in the downwards trend was last year’s sale of the company’s Pizza Hut branches. The Pizza Hut chains started in 1991 and were plagued with a series of managerial problems, so it’s unsurprising that the company chose to sell them rather than hope for more profit. Unfortunately this leaves KFC with just one main business – their titular fried chicken – and business there is hardly booming, either.

▼ Maybe KFC just needs its own cute anime girl campaign?

KFC wasn’t slacking off during these turbulent times: 2016 saw the introduction of bar-style stores, as well as “KFC plus” outlets which served expanded menus with sandwiches and salads. There was even a more upmarket model of store unveiled in Sendai in 2017, “The Table” by KFC. Despite these efforts, and perhaps due to their small number and novelty, sales have remained at a static figure around 60 billion yen (US$540 million).

So where does the problem lie? For one thing, KFC hasn’t bumped up its number of stores in a long time – and those stores all serve the same mainstays, coasting along on its chicken buckets and buttermilk biscuits. Other fast food vendors in Japan like Mos Burger and Mister Donut have branched out beyond their star products in hope of drawing in more potential customers, and the sales reflect it. Even conveyor-belt sushi restaurants offer fried chicken, curries and ramen bowls in their lineup these days!

▼ Mister Donut promotes a tasty bowl of soba noodles

Global brands like KFC have a unique problem when it comes to adjusting their menu, though. Even in Japan the chain has a uniquely American appeal, and who knows if serving noodles and tempura would do more harm than good for their brand image? They seemed tentative with the safe option of a rice bowl with chicken on top, after all.

Then there’s the fact that KFC’s chicken is so much more expensive than other brands. Commenters on the business news explained how when they felt the urge for chicken they were way more likely to opt for cheaper offerings from a convenience store. Others mentioned that while the chicken is too greasy for them, the burgers are fine – but then, who goes to KFC for a burger when Mos Burger and McDonald’s are right next door?

The safest option for KFC’s company heads seems to be to invest in another project (and not a pizza-based one this time). Rather than tentatively rolling out upscaled chains based on the same old fried chicken, it might be time to head back to the drawing board and build up its repertoire. KFC does show willing in this area, at least: it’s planning to buff up its M&A (mergers and acquisitions) department over the next 15 years.

Feel like lending KFC a (greasy) hand? You can still grab as much chicken as you can eat at these locations, provided it’s a Friday.

Source: Nico Nico News via JIN
Top image: Flickr/JORRY BABSON
Insert image: Flickr/Kanesue



Credit:
at 07:14

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