McDonald’s Corporation (MCD), Burger King Worldwide Inc (BKW): It’s Time for Africa

Page 1 of 2

Residents of Cape Town in South Africa recently saw an intriguing sight. The queue in front of the city’s first Burger King Worldwide Inc (NYSE:BKW) was longer than municipal polling booths. People were waiting for hours to sample Whopper burgers for the first time.

So, Burger King has set up shop in South Africa to leverage the rapid growth opportunities of this emerging market. More store additions in South Africa and other parts of Africa are in the cards. Fast food lovers all over Africa are cheering. Should investors join them? Let’s find out.

International expansion makes sense

The fast food scene in the US is quite challenging. According to NPD, the Quick Service Restaurant (QSR) segment has grown at just a 3% rate over the last 10 years. In 2013 most chains reported weak first quarter results.

McDonald's Corporation (NYSE:MCD)

In the US, McDonald’s Corporation (NYSE:MCD) reported just 1.2% comps growth and Burger King saw a decline of 3%. Yum! Brands, Inc. (NYSE:YUM) had 1% declines in both KFC and Pizza Hut. Taco Bell, however, reported a 6% rise riding on the success of its Doritos Locos Tacos and Cantina bell menu.

In order to boost traffic most QSRs are engaging in store modernization, promoting value items priced around $1, and pepping up the menu with new food offerings. Burger King has also taken similar initiatives, but since the chain does not report monthly comps we would need to wait for the quarterly results to see the effects.

It is encouraging, though, that riding on similar strategies McDonald’s Corporation (NYSE:MCD) has reported 2.4% growth in same store sales numbers in May after six consecutive months of flat or negative comps.

However, with similar strategies adopted by most chains the QSR segment will become even more competitive. All fast food joints would look good, provide more value, and serve good food. In such a situation it would be difficult for any chain to make a clean sweep.

This is where new emerging markets outside the US come into the scene. There are such huge untapped markets in Asia, Africa, and parts of Europe that even if all fast food chains were to head there, it would take years before their full potential is exhausted.

Emerging markets

Burger King Worldwide Inc (NYSE:BKW) derives around half of its revenue from US and Canada. Aside from the US, only Germany accounts for more than 10% of sales. So, there is considerable scope for increasing penetration in emerging economies across the world. And this is what the company is doing.

In Europe, Burger King Worldwide Inc (NYSE:BKW) has established its presence in fast-growing Turkey and Russia while in Latin America it is present in Brazil, Mexico, Colombia and Central America. It is building a presence in the entire Asia-Pacific region with big plans for China. China had just 86 restaurants at the end of 2012 but Burger King intends to ramp this to around 1,000 outlets.

The only piece that was missing was Africa, and now the company has fixed that. The Cape Town store is just the beginning, with the opening of 12 branches in the cards for next year. It helps that Burger King Worldwide Inc (NYSE:BKW)’s partner in South Africa, Grand Parade Investments, owns hotels and casinos which the company can leverage. The size of the South African fast food market is around $1.9 billion.

The company also sees exciting possibilities in sub-Saharan Africa. Likely focus areas would be Botswana, Mauritius, Mozambique, Namibia, Zimbabwe and Zambia.

Africa will see explosive growth

Experts from across the world agree that, buoyed by a growing middle class population, Africa is about to see some explosive growth in consumer spending over the coming periods. Apart from South Africa and Nigeria, sub-Saharan markets that stand out are Kenya, Ethiopia, Ghana, Tanzania, and Cameroon.

Page 1 of 2
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

10 Cities with High Demand for Nurses

6 of the Worst Greeting Card Messages Ever Crafted

6 Ways to Make Money in ArcheAge and Build Your Empire

10 Foods To Eat To Lower Cholesterol Levels

The 10 Most Hated Television Characters of All Time

The 30 Worst Halloween Costume Ideas Ever Brought to Horrible Life

10 Vocational Skills in Demand Today with Jobs Waiting to be Filled

10 Best Places to Visit in Central and South America

The 10 Greatest Empires in History Which Nearly Conquered the World

The 6 Cheapest Boarding Schools In America 2015

5 Clear Reasons LoL is Better than DotA, Continues to Rule MOBAs

The Only 9 Teams with a Chance to Win the Super Bowl

The 15 Most Common Phobias in America that Induce Fits of Panic

Top 6 Least Expensive Tourist Destinations in 2014

Jim Goetz, Peter Fenton, Jim Breyer: Top 6 Venture Investors for 2014

Top 15 Billionaires in 2014

5 Pitfalls To Avoid When Buying a Franchise

Top 20 Medical Schools in the US – 2014 Rankings

4 Business Strategies that Turned Jamie Oliver into the World’s Richest Chef

6 Qualities That Make You A Good Team Player

10 High Paying Seasonal Jobs in America this Holiday Season

The 10 Busiest Shipping Lanes in the World

5 Most Valuable Brands in China

The 10 States with Highest Substance Abuse Rates Crippling Their Populace

The Top 10 Things to Do Before You Die That Will Echo for Eternity

The 10 Best Selling Items on Etsy

Top 10 Things to Do in Tokyo, the Greatest City in the World

10 Mistakes on Social Media that Can Harm You and Will Probably Get You Canned

The 10 Best Cities to Find Jobs in 2014

The 10 Most Controversial Songs Of All Time to Hit (and get Banned from) the Airwaves

The 20 Biggest IPOs in US History

The 10 Best Places to Visit in Mexico that Are Beautiful and Safe

7 Bad Habits that Age You Beyond Your Years

The 40 Best Fortune Cookie Sayings That Will Leave You Bemused, Befuddled, or Beguiled

10 Foods to Eat Before a Workout to Make Every Drop of Sweat Count

The 5 Best Documentaries On Netflix You Must See

The Most Heartwarming and Inspirational Story Of This Halloween Season, It Will Make You Cry and Jump For Joy

10 Best Party Songs of All Time to Bring the House Down With

5 New World Order Conspiracy Theories that Will Strangle the World

The 10 Highest Rated Movies of 2014

The 10 Largest Container Shipping Companies in the World

The 10 Largest Armies in the World: Who Should We Be Afraid Of?

Best Warren Buffett Quotes on Money You Need to Hear

The 10 Highest Suicide Rates by Profession

The 20 Most Underrated Movies of All Time

The 10 Fastest Growing Companies in America

The 10 Biggest Outlet Malls in USA

The 5 Most Popular Rap Songs of All Time

The 10 Countries that Eat the Most Meat

The10 Most Expensive Countries to Fly To

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!