A broadening black middle class, increasing women employment rate and its impact on consumer lifestyles have increased the demand for Fast Food as consumers continue to rely on the convenience of Fast Food.
Considering such factors it is anticipated that SA fast food market will be valued at around USD 4.3 billion by 2026.
- Definition / Scope
- Market Overview
- Key Metrics
- Market Risks
- Market Trends
- Industry Challenges
- Technology Trends
- Other Key Market Trends
- Market Size and Forecast
- Market Outlook
- Technology Roadmap
- Competitive Landscape
- Competitive Factors
- Key Market Players
- Strategic Conclusion
Definition / Scope
Fast food is a type of mass-produced food designed for commercial resale and with a strong priority placed on speed of service versus other relevant factors involved in culinary science.
Fast food was created as a commercial strategy to accommodate the larger numbers of busy customers, travelers and wage workers who often did not have the time to sit down at a public house or diner and wait for their meal.
By making the speed of service the priority, this ensured that customers with strictly limited time (a commuter stopping to procure dinner to bring home to their family) were not inconvenienced by waiting for their food to be cooked on-the-spot.
The concept of ready-cooked food for sale is closely connected with urban developments. Homes in emerging cities often lacked adequate space or proper food preparation.
Additionally, procuring cooking fuel could cost as much as purchased produce. Although a vast variety of food can be “cooked fast”, “fast food” is a commercial term-limited to food sold in a restaurant or store with frozen, preheated or precooked ingredients, and served to the customer in a packaged form for take-out/take-away.
The fast food consists of pre-cooked meals kept in readiness for a customer’s arrival (chicken, pizza, etc.), with waiting time reduced to mere seconds.
Other fast-food outlets, primarily the hamburger outlets (McDonald’s, Burger King, etc.) use mass-produced pre-prepared ingredients (bagged buns & condiments, prewashed/sliced vegetables, etc.) but take great pains to point out to the customer that the meat and potatoes (hamburgers and french fries) are always cooked fresh and assembled to order.
Table: South Africa Fast Food Market Key Segments
|By Product Type||Processed Chicken |
|By Distribution Channel||On-trade store |
The South Africa fast food market size was valued at $2.7 billion in 2018 and is expected to reach $4.9 billion by 2026, registering a CAGR of 7.9% during the forecast period of 2019 to 2026.
The market made up roughly 13.3% of South Africa’s GDP in 2018 and contributed to a whopping 35.02% of income towards the food and beverage sector in 2018- and it’s said to be growing.
There is growing health and wellness awareness in South Africa with it suffering from high rates of overweight and obesity in both children and adults, with these rates continuing to rise at the end of the forecast period.
South Africa is the largest foodservice market in Africa with a large and highly competitive hospitality industry. Despite the negative impacts on several economic parameters of the country, the foodservice industry is expected to experience considerable growth during the forecast period.
Similarly, the country has a large number of domestic as well as international restaurant chains; thereby, fueling the growth of the fast-food segment. This is attributed to the increasing demand for different types of fast food products from the target customers.
As per the prediction, fast food items such as hamburgers, koftas, fried chips, and vetkoek, are expected to gain immense popularity and are anticipated to be consumed regularly as part of the daily diet.
Moreover, easy availability of fast food products is anticipated to influence the cooking practices, that is, decrease the frequency of home cooking; thereby, increasing the dependency on fast food products.
As incomes rise and all of the usual emerging market dynamics are in play, such as urbanization, more hectic lifestyles, many people in Africa are also gaining access to chained/branded restaurants for the first time.
However, while rich pickings are available in Africa this must be tempered with the knowledge of the trading risks such as the high operational cost, low-profit margin and poor supply and logistics chains.
The South Africa fast food market is segmented by product type, and distribution channel. Based on product type, the South Africa fast food market is categorized into the processed chicken, burger, processed fish, pizza, and sandwich, and others. By distribution channel, the South Africa fast food market is divided into the on-trade store and online channel.
Key players operating in South Africa fast food industry include Yum Brands Inc., Famous Brands Inc., McDonald’s Corporation, Nando’s Group Holding Ltd., Taste Holding Ltd., Traditional Brands, King Pie Holdings, Burger King, Hungry Lion, Spur Steak Ranches, among others.
The foreign interest in the region’s fast-growing food industry is rising. The global players have an upper hand, years of experience and are efficient operators.
Fig: South Africa Fast Food Market Trend (in US$ Billion)
The increase in competition, rising input costs and operational costs, which have most noticeably been hit by electricity price hikes and power outages, threaten growth in the sector.
However, while rich pickings are available in the region this must be tempered with the knowledge of the trading risks such as:
High Operational Cost:
- The high initial investment associated with buying a restaurant franchise can be a major risk for potential franchisees. Potential franchisees are often expected to have between 35% and 65% of the purchase price of a restaurant in unencumbered, non-borrowed cash.
- In addition to the cost of purchasing the rights to a restaurant franchise, they also have to pay royalties. These royalties include the cost of advertising, printing menus and other franchising support the restaurant group provides.
- The current drought, which has had a direct impact on food price inflation, will significantly increase costs for franchises within the fast-food sector. With consumers already struggling due to shrinking disposable income, it will be difficult for franchises to pass on these costs to them.
- Furthermore, increasing electricity costs, interest rates, salaries, transport and maintenance costs are putting more strain on the bottom line of franchises.
Relatively Low-Profit Margins:
- The net margins of most food businesses are generally not nearly as high as other service-related franchises. Factors that are largely unique to the foodservice industry and affect margins include spoilage, pilferage, staff costs, etc.
- All of these factors play out against the backdrop of an environment that is very price-sensitive, especially in fast food outlets.
Adapting to consumer needs:
- The industry is being forced to evolve around the ever-changing needs of the consumer. Following a tried and tested model is no longer a guarantee for success in this sector. Convenience and innovation in technology are increasingly becoming important to customers.
- Consumers now want the option of ordering meals online and getting them delivered to their homes. Moreover, there is an emerging focus on wellbeing, with consumers opting for healthier food options and preferring to patronize businesses with ethical and sustainable business practices.
- The legal aspect of the fast-food business has seen important changes happening during recent decades. The pressure due to changing legal requirements has risen. Food quality and nutritive value are the major areas affected by the law.
- Apart from it, packaging and waste management are also critically impacted. Overall, the law imposed new demands on the fast-food industry. The entire sector changed its approach to marketing and sales.
- For fast-food brands, they must comply with the legal changes. Particularly, they should market responsibly to children under 13.
Top Market Opportunities
Considering continuing economic constraints, consumer needs of value-for-money and affordability will be key determinants directing the market environment.
Some of the top market opportunities are:
The rise in demand for processed chicken products:
- Some of the key players in the processed chicken segment such as KFC, Chicken Licken, and Nandos, have witnessed significant growth, in terms of value, over the past five years. The surge in demand for processed chicken products has also resulted in the entry of new players in this sector.
- For instance, Popeyes Louisiana Chicken, an American multinational chain, opened its first three stores in Johannesburg. Thus, the rise in demand for processed chicken products is creating lucrative opportunities for South Africa Fast Food market growth.
Targeting the millennial populations:
- The 20–35 years age group segment accounts for the highest South Africa fast food market share. Millennials have altogether a different kind of perception on fast food consumption as they generally seek factors such as food quality, customization, and ethics. These factors are readily provided by established fast-food restaurants, whereas traditional quick-service restaurants find it difficult to meet such criteria.
- Some of the key brands such as McDonald’s and Pizza Hut keep on revising their menu so that it appeals to the millennial customers. For instance, McDonald’s added premium smoothies, gourmet sandwiches as well as creative salads to its menu for specifically targeting the millennial.
Rise of social media marketing:
- Social media channels became the most important venue for engaging customers. The use of digital displays and kiosks have affected ordering and the costs of labor. Technology has helped brands serve customers through innovative channels and in innovative ways.
- Fast food brands have become innovative in other areas too. They engage their customers on social media and collect feedback through several channels. Competition in the industry is heavy. This is also a reason that social media has become important for fast food brands.
The popularity of fast food does not cease to increase. Despite rising health consciousness in society, the fast-food industry has shown healthy growth.
A broadening black middle class:
- Despite high unemployment threatening the consumer sector, the per capita food consumption grew at a compound annual rate of 7% over 2015-2019. The emerging black middle class has a big role to play in the development of fast-food brands.
- Now numbering about 4.5-million people, the black middle class has more than doubled over the past decade, according to a 2013 study by the University of Cape Town’s Unilever Institute titled Four Million and Rising.
- The numbers show that, as people earn more, their plates get fuller. It is estimated that the growing black middle class will see South Africans out-eat inflation.
Increasing women employment rate:
- Africa remains the poorest continent and is arguably stuck in a poverty trap with over 410 million poor people (using the international poverty line of US$1.9 PPP)
- However, the market of fast-food brands is developing rapidly; one of the reasons is an increase in the number of women in the labor force. This means more double-income homes and more disposable cash overall.
The rise in the urbanization:
- Urbanization is one of the major factors that drive the demand for fast food products in South Africa. More than 60% of South Africa’s population lives in urban areas. Out of which, more than half of the population relies on fast food products, owing to the increase in the rate of employment and adoption of a busy lifestyle. This has resulted in an increase in several transactions from fast-food chains in recent decades.
- McDonald’s Corporation, one of the key players in the fast-food industry states that South Africa was one of the most successful markets in 2014. A record was set when South Africa opened 30 restaurants in just 23 months.
Increase in demand for convenience food:
- As households’ change and out-of-home employment increases, consumers have more money and less time for traditional food purchases and preparation. The proportion of adults who buy fast-food at least once a month has grown significantly, increasing from 66% in 2009 to over 80% in 2015.
- It’s estimated that the number of consumers in this sector increased to 42 million people in the course of 2017-18. In 2014, 134 new takeaway stores were founded in the country, which figure is set to increase by 4% every year
Increased prominence of healthy options:
- Changing trends have affected the industry deeply. In the most recent decades, consumers have grown more and more health-conscious. People are trying to stay in good shape and avoid junk food. However, the fast-food industry has responded well to these changing trends.
- The restaurants have adopted healthier menus. They included more and more low-calorie options. Moreover, the attack on junk food led to people adopting low-calorie foods. Such changing social trends impact the sales of the entire industry. The industry was held liable for increasing childhood obesity. As a result, it had to adopt measures like showing nutritional content on the label and reducing calories in the items.
- The recession influenced the fast food industry to some extent. However, since it passed, spending per consumer has increased. To better adjust to the recession and low economic activity, brands included low priced items. They increase the variety of products on the menu.
- The customers availing of QSRs and other outlets are looking to cheaper options. Cheap fast food has become the trend with consumers wanting it and fast food brands all having to supply it. Restaurants that offer cheaper options such as KFC are doing exceptionally good business in South Africa. Offering cheaper menu items allows restaurants to cater to a broad range of demographics.
Shrinking disposable income:
- As the cost of living increases due to several economic factors, consumers are beginning to spend even less. This is one of the biggest threats facing the fast food industry.
- The real incomes per person are contracting as economic activity is grinding slower. Business confidence is low and unemployment remains in the region of 25%.
Challenging Trading Environment:
- Sustainability is an important factor to impact the fast-food industry in South Africa. Changing government rules and regulations pressed the brands to adopt a greener approach. Food-related regulations grew stricter. The quality standards have become stiffer everywhere. Targeting children and waste management were some areas where brands were forced to change their approach.
- A green approach has helped brands enjoy improved customer loyalty. For instance, McDonald’s has innovated its approach to recycling and waste management. Sustainability too became an important requirement for the entire industry. Some of the brands have even focused on having sustainable and compliant supply chains.
Supply Chain Uncertainty:
- Supply chains reduce risk, improve productivity, improve access to capital and markets and help to reduce waste. Rabobank advises to locate processing close to raw material production, and ensure that production increases in a sustainable manner.
- For example, there is no point in building a state-of-the-art food processing and packaging plant in an African country if raw material supply is in doubt.
The industry is being forced to evolve around the ever-changing needs of the consumer. Some of the challenges faced by South Africa’s fast-food market today are:
Increase in health issues due to the consumption of fast food:
- Health and lifestyle trends also influence the fast-food industry. Health awareness has affected the entire food industry. In South Africa, as in many other developed nations, the modern food consumer is nutritionally conscious and literate and puts a great deal of thought into the nutritional content of the food they buy and how it will impact their health.
- Consumers’ changed attitude pressed the restaurant brands to include low-calorie options. The social perception of health has changed vastly. Media has played an important role in creating this perception. The fast-food industry has faced heavy criticism for targeting young children.
Environmental friendliness and local sourcing:
- Hand in hand with the increased focus on healthy eating and vegetables among South African consumers is a growing concern about the environmental impact their buying choices have. Environmental concerns are visible in just about every South African industry, and the foodservice industry is no exception to this rule. Major food franchises such as Subway have made major efforts to decrease their environmental footprint, such as by switching to recyclable packaging or environmentally-friendly ingredients, oil and cleaning supplies.
- A major way South African consumers are contributing to the environment is by showing an increased preference for locally-sourced foods, both due to their health value and due to the reduced carbon emissions associated with transporting them. Taking account of this, many large franchises such as McDonald’s and Burger King have already begun to advertise that their beef is locally sourced.
Increasing competition (market share):
- Several foreign-owned brands such as Starbucks, Burger King, and Domino’s Pizza have now been incorporated into the local market. While this has a positive economic impact and gives consumers more choice, it significantly increases competition and puts more pressure on the performance of established brands.
- Franchise fees can hit as high as US$ 15,000 for a Nando’s franchise or even 45,000 for McDonald’s, while monthly royalty and marketing payments range between a combined 4% and 12% of net income
- South Africa’s biggest food chain, KFC, with 771 stores across the country, carries the second-highest start-up costs at US$ 0.5 million; but the group notes that it is not currently open to new franchise opportunities.
Technological factors are an important force driving the growth of the fast-food industry. The fast-food sector does not depend only on the attractiveness of its menu and food quality.
Customer service and convenience are also major factors affecting sales. Technological factors have already changed the way brands served and engaged their customers. They also affect the marketing and advertising of the brands. Social media and online ordering have changed the style of customer service.
The key technology trends that will help stimulate growth include the health food trend, mobile ordering and delivery services (like UberEats, Mr D and NOW-NOW), and creating more engaging customer experiences
Some establishments are implementing text-based notifications, which send a text alert to the customers when they are near the coffee shop or restaurant, when their take-out is ready, or even when their table reservation is ready, allowing them to shop and run other errands instead of waiting in line.
Others are installing easy-to-use kiosks and tablets that help streamline the ordering process and can speed up the service. Digital menu boards allow restaurants or bar owners and managers to change their menus regularly to feature specials and to adjust prices for different times.
For example, fast food outlets can set lower prices during slow periods to entice customers to visit and use higher prices during busy periods to boost profits.
There’s no end in sight when it comes to technological advancements and therefore, all operators, regardless of size or segment, must have their hand in the game and innovate regularly.
The political factors affecting the fast-food industry can vary from country to country. Compliance is of utmost importance. Globally, fast food brands have to comply with these requirements.
There are regulations related to wages, hygiene, and food quality that need to be complied with. The minimum wage standards can differ from country to country. In countries where wage rates are higher, the costs of labor are also high. Apart from it, packaging regulations have also changed.
SA government is also pressing the fast-food chains to include healthier items on their menus. These are the most important political factors that affect the fast-food industry. The attitude of governments towards businesses has a definite effect on their performance.
In South Africa, the modern food consumer is nutritionally conscious and literate and puts a great deal of thought into the nutritional content of the food they buy and how it will impact their health.
Some new quick-service franchises are specializing in healthy food and offering an increasing number of vegetarian options, but even multinational fast-food franchises such as McDonald’s, Domino’s Pizza and Pizza Hut have recently taken steps to diversify their menus, decrease the salt or sugar content of their products, and other measures to promote healthier eating.
The move towards healthier eating and nutritional awareness has been heavily promoted by the South African government via initiatives such as the National Nutrition Week.
Other Key Market Trends
Increasing eating-out trends:
- South Africa is also typified by high meat consumption and a strong eat-out culture, both of which are driving factors for fast-food companies. Buying ready-made meals, especially from popular brand names, has become aspirational. This means that even those living close to the breadline might spend what little disposable income they have on fast-food.
- The All Media and Product Survey (Amps) showed that 16.4% of the adult South African population said that they “never buy fast-food”. This was almost half the number from five years before when 28.1% of the population made the same claim
- Most restaurants need to employ a significant number of relatively unskilled employees to conduct their business.
- Staff turnover in these job categories tend to be very high; recruiting and retaining enough high caliber employees for these positions is often listed as the biggest challenge in any food franchise.
Market Size and Forecast
The South Africa Fast Food Market is valued to be a $2.7 billion market in 2018. With a growing population and incomes of consumers in this region, coupled with urbanization, the Africa region is expected to exhibit growth in the fast-food market.
The market is anticipated to expand with a CAGR of 7.9% over the forecast period from 2019 and 2026.
Alongside the increase in the rate of employment and adoption of a busy lifestyle are the reasons for the gain of the estimated market size of approximately US $ 4.9 billion by 2026.
The South Africa fast food market is segmented by product type, and distribution channel. Based on product type, the South Africa fast food market is categorized into the processed chicken, burger, processed fish, pizza, and sandwich, and others. By distribution channel, the South Africa fast food market is divided into the on-trade store and online channel.
Market Size by Product Type
Based on product type, the South Africa Fast Food market size is segmented into the processed chicken, burger, processed fish, pizza, sandwich, and others. The processed Chicken segment dominates the South Africa Fast Food market and is expected to retain its dominance throughout the forecast period (2019-2026).
- In 2018, the processed chicken was the leading segment in the market due to the rise in demand for various types of chicken products. The market is estimated to grow from over $1.26 billion in 2018 to over US$ 2.34 billion in 2026 at CAGR of 8.8%.
- The processed Chicken segment is anticipated to account for market share close to 50% of the fast-food market primarily due to a rise in demand for processed chicken products.
- Burger segment is the second-largest fast-food category among all the fast-food product types. The market was worth the US $600 million in 2018 and will reach $1,030 million in 2026, growing at a pace of 7.8%.
- Along with the processed chicken, the burger is the most favorite fast food category in South Africa.
- The market was valued at the US $370 million in 2018 and will reach $720 million in 2026, growing at a CAGR of 7.5%.
- As South Africans are getting healthier the processed fish segment is strongly driving the growth of the fast-food market.
- This segment is expected to grow at a CAGR of 7.4% in the forecast period due to the growth of the pizza segment as it’s taking its place as a universally popular food among consumers.
- In South Africa, the pizza industry is one of the fastest-growing sectors, with South Africa is expanding its consumption levels to become one of the most regularly eaten fast foods in South Africa, with millions of pizzas being consumed every year, is estimated to grow from over $300 million in 2018 to over US$ 490 million in 2026.
- This segment is expected to grow at a CAGR of 7.2%. The segment was valued at the US $170 million in 2018 and will reach $310 million in 2026.
- Sandwiches are also on the rise, with many restaurants embracing healthy initiatives, consumers are flocking to fast food businesses that will offer such alternatives.
Market Size by Distribution Channel
Based on the distribution channel, the South Africa Fast Food market is segmented into on-trade stores and online channels. On-trade stores account for a higher value share for South Africa’s fast-food market.
- On – Trade distribution segment dominates the South Africa Fast Food market and is expected to grow with a CAGR of 4.6% over the next seven years. The fast-food operators make the most of it when they promote or sell food products in their restaurant premises.
- They provide counter service (like the takeaway place) and offer more customized, freshly prepared and high-quality food than traditional QSR (Quick Service Restaurants), facilitating all these in an upscaled and inviting ambiance. The on-trade stores fast food market is expected to grow from over $2.16 billion in 2018 to almost US$ 3 billion in 2026.
- The online channel segment is presumed to witness the highest growth following an estimated CAGR of 10.7% from 2019 to 2026. The market is expected to reach US$ 1.95 billion by 2026.
- With more than half of the population relying on fast food products, owing to an increase in the rate of employment and adoption of a busy lifestyle has resulted in an increase in several transactions from fast-food chains in recent decades.
- McDonald’s Corporation, one of the key players in the fast-food industry states that South Africa was one of the most successful markets in 2018. A record was set when South Africa opened 30 restaurants in just 23 months.
Fig: South Africa Fast Food Market Trend by Product (in US$ Billion)
Fig: South Africa Fast Food Market Trend by Distribution Channel (in US$ Billion)
South Africa’s overall fast food spending is projected to reach US$ 4.9 billion by 2023 from US$ 2.7 billion in 2018. The market is anticipated to expand with a CAGR of 7.9% over the forecast period from 2019 and 2026.
Growth in processed chicken fast food:
- The processed Chicken segment dominated the South Africa Fast Food market and is expected to retain its dominance throughout the forecast period (2019-2026). This segment was the most dynamic category within fast food in 2018, which was partly chicken is by far the most popular type of fast food in South Africa and franchising is seen to have plenty of potential within the country.
- The processed Chicken segment is anticipated to account for market share close to 50% of the fast-food market primarily due to the growth of leading players KFC, Chicken Licken and Nandos, but also due to the US chain Popeyes Louisiana Chicken opening its first three stores in Johannesburg. The market is estimated to grow from over $1.26 billion in 2018 to over US$ 2.34 billion in 2026 at CAGR of 8.8%.
Fast Food Distribution channel migration:
- The On – Trade distribution segment is anticipated to dominate the South Africa Fast Food market and is expected to grow with a CAGR of 4.6% during the forecast period, accounting for around 60% of the overall market revenue by 2026. The fast-food operators make the most of it when they promote or sell food products in their restaurant premises.
- However, with the new online platforms making inroads around the world, the food-delivery market is in the midst of dramatic channel migration. The online channel’s penetration of the total food-delivery market broke 30 percent in 2016. The online delivery is expected to grow by 30.0 percent per year from 2019 to 2026 in the fast-food market.
- The pattern has seen a dramatic channel migration over the past 10 to 15 years, as well as for selected food-delivery players, such as Domino’s Pizza in the United States. It is quite likely that the SA fast-food category will follow these patterns.
Fig: South Africa Fast Food Market Future Outlook (in US$ Billion)
Technology advancements will continue to influence SA fast food chains deeply.
As automated dining experiences are becoming more common from face-recognition bots manning concierge desks, to machines flipping burgers and mixing cocktails, robots will be delivering food and laundry to hotel rooms, and “self-driving” bots taking orders and escorting customers to tables at fast-food restaurants.
Two tiers for online food delivery:
- Online food-delivery platforms are expanding choice and convenience, allowing customers to order from a wide array of restaurants with a single tap of their mobile phone. Two types of online platforms have risen to fill that void. The first type is the “aggregators,” which emerged roughly 15 years ago; the second is the “new delivery” players, which appeared in 2013. Both allow consumers to compare menus, scan and post reviews, and place orders from a variety of restaurants with a single click.
- The aggregators, which are part of the traditional-delivery category, simply take orders from customers and route them to restaurants, which handle the delivery themselves.
- In contrast, the new-delivery players build their own logistics networks, providing delivery for restaurants that don’t have their drivers. Despite the higher costs of maintaining delivery vehicles and drivers, the new-delivery players achieve a margin of more than 30 percent. Players include brands that operate globally such as Deliveroo and Foodora, which are continuing to capture new regions.
Distribution Chain Analysis
Based on the distribution channel, the South Africa Fast Food market is segmented into on-trade stores and online channels. The on-trade fast food outlets are take-away or take-out providers that promise quick service.
Such fast food outlets often come with a “drive-through” service that lets customers order and picks up food from their vehicles. Others have indoor or outdoor seating areas where customers can eat on-site.
- Convenience stores located within many petrol/gas stations sell pre-packaged sandwiches, doughnuts, and hot food.
- Many gas stations in the SA also sell foods such as pizza, sandwiches, and chocolate bars, which are easy for a customer to access while on their journey.
Street vendors and concessions:
- Traditional street food is available around SA, usually through small and independent vendors operating from a cart, table, portable grill or motor vehicle.
- Depending on the locale, multiple street vendors specialize in specific types of fast food characteristics.
The SA fast food market is highly competitive. The industry has seen many mergers and acquisitions over recent years. The market is fragmented in nature and is headed towards consolidation.
The global players have an upper hand, years of experience and are efficient operators. That said, global tastes differ from local tastes so, even though an international operator might be a more sophisticated operator, if Chesa Nyama appeals more to local tastes, it will win in the end.
KFC maintains a dominant position in SA fast food market:
- KFC maintained a dominant position in fast food in 2018, which is thanks to the widespread popularity of fried chicken in South Africa and the strength of the brand, with its special recipe.
- The franchise offers a wide range of options, including meal deals and promotions, mini-meals and sharing meals, with it adding new items regularly, such as its new range of Zinger burgers.
Burger King invests in promoting brand awareness:
- Burger King witnessed the most dynamic growth in current value terms in 2018, having only entered South Africa in 2013.
- The chain has invested heavily in marketing and promotion to generate brand awareness, with it running a humorous television advertising campaign in 2017 for its Tendercrisp chicken burger which featured a couple acting out sketches that relate to the qualities of the burger.
The SA fast food market is highly fragmented and fairly competitive. There are currently a large number of players in the SA Fast Food market making it a competitive industry. The lucrative prospects within this market are also attracting a large number of new industry players.
This competition is resulting in heavy investment by the top players into research and development to differentiate themselves from the rest. Over the last two years, the growing target audience has seen an increase in international brands setting up shop on the continent to tap into the growing middle-income segment.
Increased international interest through direct investment by players such as Yum Brands have also played a key role in shaping supply chains and opening up the markets to new entrants
Players look to compete through variety and localized menus:
- Fast-food operators continued to broaden their menus to offer a wider selection of meals and snacks at a wider range of price points to attract customers of all budgets in 2018.
- Many opted to offer value for money in the form of promotional pricing, targeted meal time deals, weekly specials, and loyalty programs, while some fast-food chains continued to offer smaller menu items at lower prices.
- Moreover, the service provided is of higher efficiency, availing its food products at slightly lower prices than any usual sit-down restaurants. As a result, the majority of target customers prefer going to fast-food restaurants to experience such services.
- As of 2016, KFC reported the highest number of outlets in South Africa i.e. 828 outlets.
- Brands are focusing on attracting and retaining customers. They have made their menus and services customer friendly. Apart from it, they have adopted new channels and styles of marketing. Increased staff hospitality and better delivery options have again brought customers flocking to fast food joints.
- The fast-food brands like McDonald’s, KFC, Dominos, Subway and Wendy’s have focused on building a stronger reputation, providing better service and healthier food.
Key Market Players
Key market players operating in South Africa fast food industry include Yum Brands Inc., Famous Brands Inc., McDonald’s Corporation, Nando’s Group Holding Ltd., Taste Holding Ltd., Traditional Brands, King Pie Holdings, Burger King, Hungry Lion, Spur Steak Ranches, and others.
The clear market leader is Yum! Brands’ KFC. The Euromonitor report pitched its 2014 value share at 22%. It was followed by Famous Brands, Nando’s and McDonald’s, with shares ranging from 6% to 13%
Company Profiles of Key Market Players:
Yum Brands Inc.:
- Yum! Brands, Inc, owns and franchises quick-service restaurants worldwide.
- The Company develops, operates, franchises, and licenses a worldwide system of restaurants which prepare, package, and sell a menu of food items.
- McDonald’s Corporation franchises and operates fast-food restaurants in the global restaurant industry.
- The Company’s restaurants serve a variety of value-priced menu products in countries around the world
Nando’s Group Holding Ltd.:
- Nando’s Group Holdings Ltd. establishes, develops and operates a chain of fast-food restaurants that serve Portuguese-style flame-grilled chicken and associated food items.
- The Company operates through approximately 260 restaurants under the “Nando’s Chickenland” and “Nando’s Tasca” brand names primarily in South Africa
Taste Holding Ltd.:
- Taste Holdings Limited operates as a holding company.
- The Company, through its subsidiaries, owns and licenses a portfolio of franchised and owned QSR and retail brands. Taste Holdings serves customers in South Africa
King Pie Holdings:
- King Pie, the well known South African household brand, opened its first franchise outlet in December 1993.
- King Pie is a successful pie franchise in the world and is now a member of the listed Mvelaphanda Group Limited as one of the biggest BEE companies in South Africa.
- Pie has afforded the necessary means to become an even bigger force within the fast-food market.
- Burger King Corporation retails food products.
- The Company offers food items including hamburgers, chicken, breakfast foods, french fries, onion rings, and beverages. Burger King serves customers worldwide.
Spur Steak Ranches:
- Spur Corporation (doing business as Spur Steak Ranches) is a steakhouse franchise restaurant chain originating from South Africa with a focus on family dining. The head office of Spur Corporation is situated in Century City, Cape Town.
- Although the founding and flagship brands are the Spur steakhouse restaurant, the company owns several other, predominantly South African, restaurant brands
The growing popularity of fast food, coupled with the growing trends for convenience and value for money, have opened up opportunities in the South African Fast Food market.
Fast food is big business in South Africa; in fact, it’s one of the fastest-growing sectors and one of the largest contributors towards franchise turnovers and opportunities.
Moreover, food is a basic need. This understandable human weakness will continue to aid the growth of the industry. However, competition is now higher than ever. In this competitive market, brands need to be open to change, to evolve and keep up with the trends.
So, brands have to focus more on engaging customers. Some other things too cannot be ignored any longer. Hygiene, sustainability, and compliance are at the top of the list.
South African consumers are focusing heavily on the nutritional value of their food, where it comes from and how it is prepared, so those in the food business need to be conscious of these issues as well if they want to succeed.
Environmental awareness and locally sourced food look certain to be two trends that will stay as far as the South African foodservice market goes, so food service franchises would do well to take account of these in planning their businesses and advertising.
Technology will continue to influence fast-food chains deeply. South African consumers want convenience, but not at the expense of quality. Fast food service brands will have to find innovative ways to combine convenience, low price and healthy, quality food to attract their customers.
List of abbreviations
- CAGR: Compound Annual Growth Rate
- SA: South Africa
- US$: United States Dollar