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

The Top 10 Most Expensive Digital Cameras to Snap Stunning Shots With

The 10 Highest Quality Fast Food Restaurants In America Today

The 8 Best Halloween Decorating Ideas to Spook Up Your House

10 Marvel Women that Should Get a Movie Right Now

The 20 Best Remixes of Popular Songs that Will Make You Forget the Originals

7 Most Expensive Cities in the World

5 Least Expensive Cities in the World

10 Celebrities Who Believe In Scientology

10 High Margin Food Products to Build a Business Around

The 10 Most Expensive Clothing Stores in the United States to Get Decked Out At

The 5 Biggest Kickstarter Scams That Swindled Backers’ Donations

The 10 Most Expensive Boarding Schools In the World

50 Crazy Facts About Japan You Won’t Believe

Top 10 Least Expensive Hybrid Cars to Save the Planet With

The 10 Biggest ‘Gate’ Controversies in History

The 10 States with the Highest Nursing Shortages Leaving Their Hospitals Depleted

The 10 Best Value Investment Blogs that Every Investor Must Read

The 6 Cheapest Boarding Schools in Europe 2015

The 5 Most Expensive Cars To Insure in the World

The 10 Most Common Genetically Modified Foods

10 Self-Made Billionaires Who Came From Nothing

The 10 Most Expensive Cities to Live in North America

The 13 Most Expensive Headphones in the World to Represent

The Top 20 Wealthiest Soccer Teams in 2014

4 BuzzWorthy Cannabis Stocks And Some Smoking Derivative Plays

The 10 Healthiest Fast Food Chains in America to Dine At

The 5 Most Expensive Cat Food Brands You Can Spoil Your Kitty With

The 6 Best eCommerce Platforms for Small Businesses

The 10 Worst Mistakes an Entrepreneur Can Make

The 5 Most OP Characters in League of Legends to Carry Games and Crush Foes With

The 5 Best Foods to Eat Before Running that Will Help You Pound the Pavement

10 Glaring Plot Holes in The Walking Dead that a Zombie-Filled Bus Could Drive Through

The 5 Biggest Celebrity Stoners Who Love Their Reefer

The 10 Most Overrated Movies Of All Time by Out-of-Touch Critics

Top 6 Least Expensive Cruise Destinations For 2015 that Will Take You to Paradise

10 States with Lowest Substance Abuse Rates in America

The 14 Most Watched TV Finales Ever

The 10 Best Selling Role Playing Games of All Time for PC

10 Most Influential Papers In Economics

Top 8 Biggest Charities in the US

10 Worst Celebrity Career Moves Ever

Top 10 Best Paid Tennis Stars in the World

Top 6 Cities For The Ultra Rich to Live in Comfort

10 Cities with High Demand for Nurses

6 of the Worst Greeting Card Messages Ever Crafted

How 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

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!