As Guyana develops exponentially, fuelled by the oil revenues – albeit relatively small, because of the lopsided contract signed by the PNC; but relatively large compared with our traditional revenue streams – pouring into our Natural Resource Fund (NRF) and then into our Consolidated Fund, we must be aware of global macro forces impacting that development under the radar, so to speak. For instance, it has become commonplace for Guyanese to boast about the number of foreign food chains entering our country as a sign of our reaching developed country status “like the US”. But there are wheels within wheels spinning even in this seemingly mundane area.
Take KFC for instance, which, not coincidentally, was one of the first US international fast-food brands to enter Guyana. According to an Alex Park report, on which this editorial is based, it was also the first to open in Africa, with a restaurant in South Africa in 1971, and the first to open in China in 1987. In 1997, KFC’s parent company, PepsiCo, spun off the fried chicken giant along with Taco Bell and Pizza Hut to form a separate company, eventually named Yum! Brands. While the United States — its core place of business — was already saturated with fast food, and the deleterious effects of fast foods became more well-known, financial analysts were skeptical.
But as household incomes rose in developing countries, Yum! found new customers to make up for any losses in the US. However, it was not just the consumption of chicken that made money, there was also the production of the chickens to keep the KFC fryers going. Simultaneously, developing countries, led by Brazil and China, rapidly expanded poultry production. In a matter of years, Yum! went from a risky bet to a Wall Street darling by channelling the global poultry boom into its network of restaurants and satiating a rising appetite for American fast food. In 2014, there were about 40,000 restaurants in 125 countries in the Yum! system. Today, that has increased to around 55,000, with developing countries accounting for most of the growth.
Poultry already holds the top spot in global meat production. Given its myriad cost efficiencies; adaptability across regions, religions, and cultures; and its relatively low emissions per unit of meat when compared to beef or pork, we can only expect chicken to take up an even greater role in humanity’s diet in the future. While Yum! does not buy chicken or finance producers itself, like most fast food companies, it requires franchisees — the companies that own the restaurants carrying its brand names — to buy chicken from suppliers it designates. Suppliers tend to be large, vertically integrated operations, often complete with facilities for manufacturing chicken feed and processing and packaging chicken meat.
For poultry companies, a Yum! contract is one of the most lucrative prizes attainable, as it virtually guarantees sales at quantities that few, if any, other buyers can match. Suppliers to our local KFC outlets will become aware that, with its unparalleled purchasing power and exacting demands, fast food has long shaped agricultural systems in the United States, Europe, and China. And like KFC expand into our so-called “frontier markets,” development banks have made their global expansion possible by underwriting the factory farms that supply them with chicken, and these can be tapped for our expansion of poultry production that can also be exported to Caricom in our 25 by 25 commitment.
The International Finance Corporation (IFC), the private-sector lending arm of the World Bank Group, have financed several mega producers of poultry in developing countries to supply KFC, and they therefore are already aware of financial derisking with such contracts. In South Africa, they helped one KFC supplier bolster its operations across the region.
In 2013, the bank loaned the company US$25 million to expand existing operations in South Africa, Botswana and Zambia, where it supplies KFC in all three countries, as well as Mozambique and Zimbabwe. Three years later, in 2016, the company also became KFC’s sole franchisee in Zambia.
The opportunity must be seized.
