Setting up shop in South Africa will give brands access to other emerging markets in the region. One example is Nigeria, where the fast-food industry has maintained an annual growth rate of 40 percent, according to a report by the U.S. Commercial Service. In the coming years, its expected to continue expanding at a rate of 20 percent. A presence in South Africa could act as a springboard into other hot spots.
South Africa is also establishing itself as a world destination. In 2006, 8.5 million foreign travelers visited the country. Thats up more than 13 percent from the previous year.
I think youre going to expect growing tourism in the coming years, Drum predicts.
More visitors to South Africa means more exposure for brands that set up shop there.
In addition to its more than 180 stores, Maponya Mall also houses at least 20 restaurants, including South African and American quick-service chains. In its foodcourt, KFC and McDonalds compete directly with homegrown chains like Nandos, a fried chicken concept, and Wimpy, a burger chain. And though American brands are no strangers to competition, South Africas native chains are definitely a force to be reckoned with.
Nandos is very popular in the upper half of the market, and a brand like Wimpy has over 380 restaurants, I believe, across South Africa, says Miller, who once worked for a company that did marketing and public relations for Wimpy. These brands are part of South African life.
Any fast-food brands looking to enter the South African market need to consider that they will also be up against big-name American chainsMcDonalds, Subway, and KFC, to name a fewthat have already established their presence in the country.
Brands like KFC that stayed to do business during the apartheid years have a foundation here that newcomers would truly struggle to challenge, Miller says.
Add to the mix a host of informal street vendors selling traditional food at very low prices, and the fast-food market in South Africa gets pretty crowded.
Saturation is a key issue, Miller explains. There are a lot of fast-food chains competing on the same turf. My belief is that South Africa is pretty saturated fast food-wise and that new entrants from the USA would need to put in a significant effort in terms of research and hard capital to make it happen.
Americas tarnished image abroad is another factor working against chains that want to move in, he says.
Where a few years ago, being an American brand would have been an asset, today anti-American sentiment following the Iraq War means that USA brands dont have the benefit of the novelty factor they might have had a few years back, Miller says. In many instances, people now favor local over American brands. This is not a decisive factor in the purchase decision-making process, but it does count.
Many South Africans also harbor the same health concerns about fast food as American consumers. A 2005 Internet poll conducted by South African broadcaster News24 revealed that 40 percent of respondents believe KFC should be avoided for health reasons. Thirty-nine percent said the same for McDonalds. By contrast, South African chains fared much better. Pizza chain St. Elmos came out on top, with only 2 percent reporting its food is unhealthy. Nandos, pizza chain Debonairs, burger joint Steers, and Wimpy were all considered unhealthy by no more than 7 percent.
All this creates a branding challenge for chains looking to leap into South Africa.
They will need to do a lot of research as to South Africas popular culture and will need to tailor everything accordingly, Miller says. From popular colloquial language (we have 11 official languages) to menu items, a lot of research will be required.