Three international fast food chains have in the past week launched operations in Nairobi, sending the clearest signal yet that the past 10 years of steady economic growth and the accompanying expansion of Kenya’s middle class is beginning to get noticed.
American fast food chain Domino’s Pizza, ice cream seller Cold Stone Creamery and South Africa-based Ocean Basket – a sea food diner - opened outlets in the Kenyan capital in what is seen as the very first fruits of the larger GDP figures released in September that moved Kenya to the club of middle-income nations.
The three have followed in the footsteps of two well-known American chains, KFC and Subway, who set up shop in Nairobi 2011 and 2013 respectively.
The attractiveness of any location around the globe to fast food chains is often seen as an acknowledgement of the rise in the number of people with disposable incomes, a shift that investors in the outlets say has occurred in Kenya.
“This economy has a growing middle class with a higher spending power, and who just like their Nigerian counterparts, are highly adventurous and want to try out new things,” said Eric Andre, a director and co-founder of Om Nom Nom, the franchise holder of Cold Stone Creamery and Domino’s Pizza.
“Besides, the infrastructure in Kenya, although not perfect, stands out in the region and the same can be said about education standards.”
Most of the food chains have picked popular addresses in Central Nairobi or malls located in leafy suburbs such as Westlands and Upper Hill. The food chains invest heavily in market research before choosing to enter a new market, down to the details of identifying specific locations for the stores.
The presence of a growing middle class that guarantees sales is one of the key factors that inform such decisions, making countries like Kenya attractive as new frontiers that can guarantee maximum profitability with the least investment. The global brands are also known to consider infrastructure, cultural influences and trade regulations, among other factors.
“The most important considerations for any big brand is scale,” said Christopher Bak of Liberty Eagle, the franchise holder of the Subway brand. “It is very expensive to develop a supply chain, and to ensure that a market can operate at the proper standard, we need to be able to spread those costs over many stores.”
The latest arrival of the international food chains come just a couple of months after Kenya freshly computed its economic data and moved to become Africa’s ninth-largest economy.
Newly released figures showed that Kenya’s GDP was 25 per cent higher at Sh4.75 trillion in 2013 or nearly a trillion shillings more than old the figure of Sh3.8 trillion. Nairobi’s ranks of people with disposable incomes have in the past been mainly made of its large expatriate community working in diplomatic missions and in the United Nations offices.
But more recently, the continued rise in the city’s status as a regional economic hub has attracted some of the world’s largest multinational corporations such as IBM, Google, Visa and MoneyGram who have established regional offices from where they manage Africa operations.
Gavin Bell, who midwifed KFC’s entry into Kenya as managing director until September, reckons that a positive economic outlook for East Africa is the key attraction for international companies, adding that he expects more such investments in the next five years.
X. N Iraki, a senior lecturer at the University of Nairobi’s School of Business, reckons that any serious company or investor who is able to look beyond the headlines would not miss the fact that Africa, especially the big economies such as Nigeria, South Africa and Kenya, is the place to be.
He singled out the recent oil finds in Kenya and Uganda as well as gas in Tanzania as factors that are increasing East Africa’s attractiveness as an investment destination.
“The fact that these companies are investing here is a strong vote of confidence in the economy,” Mr Iraki said, adding that most of the multinationals see Kenya as a testing ground from where they can penetrate other markets in the region.
Kenya’s youth – normally described as those aged between 18 and 34 years old – constitute more than a third of the population, increasing the country’s attraction to fast food chains. Official statistics show that nearly 80 per cent of Kenyans are aged below 35 years and a significant part of it is steadily building enough incomes to enter the middle class with changing eating habits in favour of fast foods.
Some Kenyans, through exposure on the Internet or via television, associate with particular exotic brands while others view frequenting foreign food joints as an expression of their new status. One clear signal of the changing tastes has been the mushrooming of shopping malls in the main cities, locations that fast food chains are now opening outlets.
KFC has outlets in Nairobi’s Junction Mall, Galleria Mall and Woodvale Groove in Westlands and is planning to open two more on Limuru Road and Mombasa Road by end of year.
“Our outlets at Galleria and Junction serve relatively high-priced foods but this matches the purchasing power of the shoppers who frequent these malls,” said Mr Bell.
Subway is located on Nairobi’s Kenyatta Avenue, Junction Mall and in the leafy Gigiri suburb that is mainly populated by international civil servants and diplomats. The chain has plans to open two new branches at Thika Road Mall and in Timau Plaza on Argwings Khodek Road.
Om Nom Nom is planning to open new Domino’s Pizza and Cold Stone Creamery outlets at the upcoming Garden City mall and in four different malls in Mombasa.
“Cold Stone Creamery works best in malls where customers can make a purchase and proceed to do their shopping while eating their ice cream. Domino’s Pizza is well suited to street locations and drive-in shopping areas,” said Mr Andre.