Janice Kew and Christopher Spillane
PIZZA Hut knows a few things about fast expansion in emerging markets. In less than 25 years, the chain has added more than 1 300 restaurants across China.
But Randall Blackford, the general manager of Pizza Hut’s operations in Africa, said the restaurant operator was taking its time to expand on the continent.
In Africa, “we are a small company right now and will stay small for some time”, he said, eating pizza at one of his restaurants in Soweto.
“It gives us flexibility to respond to local tastes, to engage more. We can’t be first, can’t be the cheapest, so we got to be the best.”
Blackford has reason to be cautious: The world’s largest pizza purveyor, a unit of Louisville-based Yum! Brands, failed in sub-Saharan Africa seven years ago, after consumers were cool to its prices and dine-in model.
This time around, Pizza Hut is targeting takeout and delivery service. It will limit drop-off distances to a few miles, which means eventually it will have smaller stores in lots of neighbourhoods.
From its current eight stores in South Africa and Zambia, it aims to have 200 stores across the continent in three years.
While fast-food purchases in South Africa are growing, with about 34.8 million people expected to buy meals from such restaurants by 2017, up from 31 million now, much of that nation’s fast-food industry is homegrown, according to Euromonitor International analyst Elizabeth Friend.
In countries such as Ghana, Kenya and Nigeria, there is less competition than in South Africa.
So while supply chains were less reliable, those newer markets offer foreign restaurant players good growth opportunities, “at least for those chains that can survive until that investment starts to pay off”, Friend said.
Almost half of Africa’s fast-food restaurants are focused on chicken, then burgers.
Pizza is a distant third, accounting for about 5 percent of total spending.
One reason: the more moderate cost and wider availability of poultry supplies.
Some Pizza Hut toppings, such as air-dried pepperoni, have to be imported.
The Streetwise 5 meal from Yum’s KFC, which includes a large order of fries and five pieces of chicken, costs $5.50 (about R64) in South Africa, while a fully loaded large Pizza Hut pizza approaches $8.
In Zambia, the same pie costs about $10. “The pizza outlets are going to have to focus on pricing, bringing it more in line with what chicken costs,” said Wayne McCurrie, a money manager at Momentum Asset Management in Johannesburg.
Not only is Pizza Hut focusing on takeout and delivery this time around, it is also trying to resonate with locals through signage and napkins using slang such as laaik it local (like it local) and with toppings such as boerewors.
Debonairs Pizza, Africa’s biggest pizza chain with about 500 restaurants in more than a dozen African nations, is operated by South Africa’s Famous Brands, which owns pizza and burger chains.
It teamed with supermarket operator Shoprite to open its first restaurant in Angola this month.
The companies are in talks to expand into Nigeria and Zambia. – Bloomberg