BUSINESS CONSUMER INSIGHTS

Kenya's quick-service restaurant (QSR) industry has become a dynamic and competitive market landscape, attracting both international brands like KFC and Domino's, Papa John's, Subway and regional powerhouses like Simbisa Brands, which operates Chicken Inn, Pizza Inn, The Grill Shack, Ocean basket, RoccoMamas , Galitos & Creamy Inn. For Investors and key decision-makers looking to tap into this industry through penetration with new offerings or gain bigger marketshare ,understanding market share trends, regional dynamics, operational strategies and leveraging consumer insights is critical. Here’s a deep dive into the QSR industry’s secrets, challenges, and opportunities in Kenya, a case perspective of KFC vs Simbisa.

Kenya’s QSR Landscape: A Snapshot

To understand the QSR landscape from a regional point of view from Simbisa Brands, a case of Zimbabwe , Kenya and Eswatini there were 493 stores as at 31st December 2022 cumulatively in the three(3) countries and saw an increase to 568 stores as at December 31st 2023.

To understand the Kenyan market, the focus is on Nairobi which is the biggest middle class market plus the biggest cash cow market for these brands and holds the largest number of outlets . As at 31st December 2023, Simbisa brands had 252 counters in Kenya compared to KFC's 37 reported outlets.

As at the Third Quarter Ended 31 March 2024, Simbisa brands customer counts increased 4% year-on-year from 3.1million in Q3 FY 2023 to 3.2million in Q3 FY 2024, buoyed by new store openings as a result of 14 net new counters opened between 31 March 2023 and 31 March 2024. By the end of the financial year 2024, Simbisa had added 29 new outlets in Kenya, highlighting aggressive expansion

Decoding the Numbers: Market Share & Demographics In Nairobi:

Nairobi represents Kenya's largest QSR market, but how do the major players stack up : KFC vs Simbisa ?

Despite a slightly larger target market per store distribution & coverage, Simbisa lags in premium urban zones where KFC has optimized its property placements to attract higher-spending customers. To dive into the data, here's a competitive outlook performance of Nairobi store locations

Nairobi Market Share and Store Coverage : A Comparative Overview

KFC:

Target Market Size Per Branch Network: 1,680,571 individuals.
Demographic Penetration: 81.91%.
Average Coverage per Store: 62.95 km².
Delivery: Leveraging platforms like UberEats and Glovo for superior coverage.

Simbisa (Chicken Inn):

Target Market Size Per Region Branch Network : 2,068,593 individuals. : Countrywide by end of June 2024, the brand had increased it's customer count to 3.2million driven by new stores.
Demographic Penetration: 81.94%.
Average Coverage per Store: 71.49 km².
Delivery: A growing proprietary app strategy (Dial-a-Delivery) complemented by aggregators.

It is key to track the target market size so as to understand your conversion opportunities from footfall to each store, understand the gaps and cannibalization from other competitor brands. This will in turn inform resource allocation in terms of marketing spend through personalization & messaging or technology investments that drive growth. For example Let's drill it down in terms of 1 store for example KFC at the HUB Karen vs Chicken Inn Karen at Shell that doubles as a dine inn and drive through.

The total population size per the HUB Karen store location is 13,990 per 3km radius. Out of this the Adult population between ( 25-59) years is 34.82 % of the population, while the youth consists of (15-24 ) consists of 20.86 %, and children who are the biggest segment are between 0-14 years consist of 40.28%. This showcases that the area has a big family population, of which marketing messaging and personalization should focus on this data.

To drive higher conversion patterns and drive, both brands could invest in IOT devices to leverage AI to track footfall, vehicle traffic for drive through deliveries, instore demographics and link with their branches point of sale systems to understand consumer traffic insights, predict future traffic to optimize sales and enable dynamic promotions based on peak times and demographic trends.

Identified Gaps in the Market

1. Limited Digital and Delivery Optimization

Challenge: While KFC leads with strong partnerships (UberEats, Glovo), Simbisa is still limiting its promotion with other delivery app external aggregators like Glovo & UberEats ,thus limiting its reach, but optimizing for higher ROI with it's own delivery platform. This is driven by their strategic focus on the delivery Segment as they seek to position their own Dial a Delivery App and brand-specific apps to drive growth and profit.

As at the year end 2024, Simbisa's App-based delivery services grew by 25% year-on-year, with delivery revenues contributing 19% to Kenya's total market revenue which was buoyed by delivery being a strong strategic growth driver for the brand.

However, it is key to note that most Kenyan consumers prefer GLOVO and UBER EATS and BOLT Food as their preferred delivery platform, with higher traffic to their sites & app downloads & usage though most brands look to push their own branded apps for higher margins.

For Simbisa their key focus on the QSR segment is focused on :

✔Strengthening existing infrastructure ✔Mobile app rollout • : ✔Leverage Dial a Delivery IP ✔Feature enhancements •Targeting on-time deliveries (maximum 30-minute target)

Mombasa: Untapped Coastal Potential

Mombasa’s QSR market has historically lagged behind Nairobi’s but presents significant growth opportunities. Key observations from this market include:

Brand Market Share in Mombasa

KFC: has a base operation of two stores targeting a premium demographic accounting for 83.92% of the population in their catchment area.

Simbisa:

Simbisa has the largest coverage for it's coverage with it's store network having seven stores, with 83.63% of this population being within the target demographic

Demographics Market Share Per Brand- Mombasa

Target Demographic Breakdown:

Youth (15-24) and Adults (25-59) form the largest segments across all brands, representing a significant portion of the target population in every location.
Gender distribution is nearly even, with slight variations between male and female populations in catchment areas.

Advantages of Simbisa Over KFC in Mombasa

1. Superior Store Network

More Locations: Simbisa brands (Chicken Inn and Pizza Inn) operate seven stores in Mombasa, compared to KFC’s two outlet.
Broader Coverage: Simbisa’s network covers a larger population across diverse urban and suburban catchments, providing greater accessibility for customers.

2. Diverse Menu Offerings

Multi-Brand Strategy: Simbisa offers complementary food categories through Chicken Inn, Pizza Inn, and Creamy Inn, catering to various tastes and occasions, while KFC's primarily focuses on fried chicken.
Affordability: Simbisa’s menu pricing is often more accessible to middle- and lower-income consumers compared to KFC's premium positioning.

3. Local Adaptation

Simbisa is more attuned to local tastes, with menu options reflecting regional preferences, such as spicy flavors and family-friendly combos.

4. Delivery and Convenience

Established Delivery Infrastructure: Simbisa’s standalone delivery brand, “Dial a Delivery,” gives it an edge in logistics and operational efficiency with higher ROI.
High Penetration: With more stores, Simbisa can ensure faster delivery times and a broader reach compared to KFC’s two (2) outlet, hence higher consumer satisfaction.

Leveraging Network Effects

Network effects occur when a product or service becomes more valuable as more people use it. Simbisa can amplify its advantage through strategic actions, which we will not delve in today but can be amplified due to it's higher store network coverage.

Demographic Overlaps:

All brands target a similar demographic, leading to competition for younger, mobile consumers aged 15-24, and middle-aged adults who are primary spenders.

Gaps in the Market

Limited Suburban Penetration
Underutilized Family and Elderly Segments
Specialized Offerings
Consumer Convenience

Financial Performance:

From both brands, we were only able to lay a hand on Simbisa brands financial statements and these were the key take aways

Financial Trends: Kenya's Resilience

The brands performance has been challenged by Kenya’s macroeconomic environment in 2024, which has been a double-edged sword being affected by

Currency Dynamics: The Kenyan Shilling appreciated by 18% between January and March 2024, easing earlier devaluation pressures.
Inflation Trends: Inflation cooled from 7.5% in January to a two-year low of 5.7% in March.
Revenue Growth: Simbisa reported a 15% year-on-year increase in local currency revenue, despite a 5% decline in USD revenue due to earlier currency challenges.

Key Insight: These trends highlight the importance of pricing strategies and operational efficiency, particularly in a market sensitive to inflation and exchange rates. To foster growth and those looking to navigate the market, leveraging on a technology to unlock value is one ingredient brands in the QSR industry can tap.

Growth Opportunities for QSR Brands

1. Strengthen App Optimization

Improve user experience on owned Apps by integrating predictive ordering features (e.g., suggesting repeat orders).

2. Leverage IoT and Footfall Insights

Deploy IoT devices in stores to measure customer traffic, vehicle traffic, demographics vs sales and purchasing trends.

3. Expand Delivery Hub Operations & Country Presence

Goal: Establish dedicated delivery hubs in high-demand zones beyond traditional center to capitalize on high density populations.
Grow into untapped markets : Simbisa & other brands could look to increase it's store count into new territories like Dar Es Salaam & Arusha that houses the same demographics of it's target market in Kenya.

4. Adopt Subscription Based Platforms For Their Apps & Websites.

These brands could implement Subscription based platforms to drive revenue growth in Kenya by creating recurring revenue streams, upsell consumers, improve customer retention, and enhancing operational efficiencies with delivery demand optimization and stock management through our own branded platform with local payment gateways as well as international or go for International branded subscription SaaS platforms.

Conclusion: Unlocking the Future of QSR in Kenya

Kenya’s QSR industry is evolving rapidly, driven by technology and consumer demands. Simbisa and KFC both have unique strengths, but the key to long-term success lies in digital adoption, delivery excellence, and localized engagement. For decision-makers, investing in customer insights and leveraging emerging technologies like IoT , Subscription based platforms will be instrumental in staying ahead.

The future of QSR in Kenya isn’t just about selling food—it’s about creating experiences. How is your brand aligning with these trends? Let’s discuss innovative solutions to unlock new growth opportunities, what are your thoughts?

For Competitor Insights, Market Research & Subscription Software As A Service let's engage @ info@sosnetworks.co.ke

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