Kfc Case Study

Case Details: |Price: | |
|Case Code |: |BECG044 |For delivery in electronic format: Rs. 500 ; |
| | | |For delivery through courier (within India): Rs. 500 + Rs. 25 |
| | | |for Shipping & Handling Charges |
| | | |Themes |
| | | |Business Ethics |
|Case Length |: |17 Pages | |
|Period |: |1995-2004 | |
|Pub. Date |: |2004 | |
|Teaching Note |: |Available | |
|Organization |: |KFC | |
|Industry |: |Fast Foods | |
|Countries |: |India | |

Abstract:
The case highlights the ethical issues involved in Kentucky Fried Chicken's (KFC) business operations in India. KFC entered India in 1995 and has been in midst of controversies since then. The regulatory authorities found that KFC's chickens did not adhere to the Prevention of Food Adulteration Act, 1954. Chickens contained nearly three times more monosodium glutamate (popularly known as MSG, a flavor enhancing ingredient) as allowed by the Act. Since the late 1990s, KFC faced severe protests by People for Ethical Treatment of Animals (PETA), an animal rights protection organization. PETA accused KFC of cruelty towards chickens and released a video tape showing the ill-treatment of birds in KFC's poultry farms.
However, undeterred by the protests by PETA and other animal rights organizations, KFC planned a massive expansion program in India.

Issues:

» Understand the significance of cultural, economic, regulatory and ecological issues while establishing business in a foreign country

» Appreciate the need for protecting animal rights in developed and developing countries like India

» Understand the importance of ethics in doing business

» Examine the reasons for protests of PETA

» Identify solutions for KFC's problems in India

Contents:

| |Page No. |
|Protest Against KFC |1 |
|Background Note |2 |
|KFC's Entry in India |3 |
|Problems for KFC |4 |
|The Aftermath |8 |
|Exhibits |10 |

Keywords:

KFC, Business Ethics, International Business, People for Ethical Treatment of Animals (PETA), Food Adulteration, Selling Junk Food, Cruelty against Animals, Animal Welfare Legislation, KFC's Poultry Welfare Guidelines
Each bird whom KFC puts into a box or a bucket had a miserable life and a frightening death. People would be shocked to see our footage of a KFC supplier's employee who walks through a barn, carelessly lighting lamps and letting flames fall on the terrified birds. The air inside these filthy barns reeks of ammonia fumes, making it difficult for the birds to breathe. No one with a grain of compassion should set foot in KFC." 1
- Ingrid Newkirk, Director, PETA.2
"The chicken they serve is full of chemicals, and the birds are given hormones, antibiotics and arsenic chemicals to fatten them quickly." 3

Protest Against KFC

On August 20, 2003, a five-foot tall chicken complete with an ensemble of feathers and beak hobbled on a pair of crutches outside Kentucky Fried Chicken's (KFC) Indian outlet in Bangalore.
The chicken was brought by PETA (People for Ethical Treatment of Animals) activists, who carried placards reading, "Quit India" and "Stop Playing Fowl" (a pun on "Foul"). The chicken was placed at the centre and a peaceful protest was held against the alleged ill treatment of birds in KFC's poultry farms. Media persons were called to give the demonstration a wide coverage (Refer Exhibit I for a visual on the protest by PETA activists).

Explaining the rationale behind the protest, Bijal Vachcharajani, special projects coordinator of PETA, said, "Ours is the land of Gandhi. Just as 61 years back our leaders gave a call for colonizers to quit India, we too are saying we will not tolerate cruel multinationals."5
On the 61st anniversary of the 'Quit India' movement,6 PETA India wrote a letter to the Managing Director of Tricon Restaurant International, the parent company of KFC, asking them to close their sole KFC outlet in India.
They got no reply. PETA activists decided to protest against KFC by carrying crippled chicken, which represented the birds suffering in the KFC's farms. PETA claimed that after two years of intensive campaigning to increase animal welfare standards in poultry farms, other foreign fast food restaurants operating in India like McDonald's7 and Burger King8 had improved the treatment of animals specially raised and slaughtered for food.

Only KFC had not acted. Though PETA had organized other protests earlier, the crippled chicken campaign became the precursor for more intensive protests. PETA's was one of the many shows of protest against KFC's Indian outlet.

Background Note

KFC was founded by Harland Sanders (Sanders) in the early 1930s, when he started cooking and serving food for hungry travellers who stopped by his service station in Corbin, Kentucky, US.
He did not own a restaurant then, but served people on his own dining table in the living quarters of his service station. His chicken delicacies became popular and people started coming just for food.

Kentucky Fried Chicken was born. Soon, Sanders moved across the street to a motel-cum-restaurant, later named 'Sanders Court & Cafe,' that seated around 142 people.

Over the next nine years, he perfected his secret blend of 11 herbs and spices and the basic cooking technique of chicken. Sanders' fame grew and he was given the title Kentucky Colonel by the state Governor in 1935 for his contribution to the state's cuisine
Sanders' restaurant business witnessed an unexpected halt in the early 1950s, when a new interstate highway was planned bypassing the town of Corbin. His restaurant flourished mainly due to the patronage of highway travellers.
The new development meant the end of this. Sanders sold his restaurant operations. After settling all his bills, he was reduced to living on a meagre $105 social security cheque. But Sanders did not lose hope. Banking on the popularity of his product and confident of his unique recipe for fried chicken, Sanders started franchising his chicken business in 1952. He called it Kentucky Fried Chicken. He travelled the length and breadth of the country by car, visiting as many restaurants as possible and cooking batches of chicken. If the restaurant owners liked his chicken, he entered into a handshake agreement that stipulated payment of a nickel9 for each plate of chicken sold by the restaurant. By 1964, Sanders franchised more than 600 chicken outlets in the US and Canada...

KFC's Entry in India

Foreign fast food companies were allowed to enter India during the early 1990s due to the economic liberalization policy of the Indian Government. KFC was among the first fast food multinationals to enter India.
On receiving permission to open 30 new outlets across the country, KFC opened its first fast-food outlet in Bangalore in June 1995. Bangalore was chosen as the launch pad because it had a substantial upper middle class population, with a trend of families eating out. It was considered India's fastest growing metropolis in the 1990s. Apart from Bangalore, PepsiCo planned to open 60 KFC and Pizza Hut outlets in the country in the next seven years. However, KFC got embroiled in various controversies even before it started full- fledged business in India. When the issue of granting permission to multinational food giants to set up business in the country came up for discussion in the Indian parliament, some members from the opposition parties were vocal in their displeasure...

Problems for KFC

From the very first day of opening its restaurant, KFC faced problems in the form of protests by angry farmers led by the Karnataka Rajya Ryota Sangha (KRRS).
The farmers leader, Nanjundaswamy, who led these protests, vehemently condemned KFC's entry into India, saying that it was unethical to promote highly processed 'junk food' in a poor country like India with severe malnutrition problems. Nanjundaswamy expressed concern that the growing number of foreign fast food chains would deplete India's livestock, which would adversely affect its agriculture and the environment. He argued that non-vegetarian fast-food restaurants like KFC would encourage Indian farmers to shift from production of basic crops to more lucrative varieties like animal feed and meat, leaving poorer sections of society with no affordable food. KRRS held a convention on November 01, 1995 to protest the entry of fast food multinationals and the Westernization of local agriculture

The Aftermath

By late 2003, PETA further intensified its campaign against the cruel treatment meted out to chickens by KFC through protests at regular intervals. Celebrities like Anoushka Shankar, daughter of the legendary sitar maestro Ravi Shankar, directly supported the cause of PETA.
Anoushka, a sitarist herself, wrote a letter to the top management of PepsiCo condemning the continued cruelty of KFC in spite of repeated requests of PETA. The organization also had the support of other celebrities like the famous cricket player Anil Kumble (based in Bangalore), popular Indian models like Aditi Govitrikar, the late Nafisa Joseph and John Abraham, who promoted vegetarianism. Film actresses like Raveena Tandon and Ameesha Patel also took up the cause of animal abuse. Undeterred by the continued protests, KFC added three more outlets to its existing one at Bangalore. KFC also announced a major expansion programme for 2005. Sharanita Keswani (Keswani), KFC's Marketing Director, said that as the retail business was poised for a boom in India, they considered it the right time for expansion...
Feeling positive about the flourishing malls in all big cities, Keswani revealed that this time KFC planned to have a presence in prime locations or in a mall where turnout would be assured.

The company aimed at targeting cosmopolitan cities like Chandigarh, Pune, Kolkata, Chennai and Hyderabad, where mall culture was fast developing.

PepsiCo also decided to concentrate on the expansion of KFC since its other brand, "Pizza Hut", had successfully established a strong foothold in India.

Vegetarianism was predominant and was a way of life in India. Many people ate non-vegetarian food only occasionally and avoided it during festivals or religious occasions...

Exhibits

Exhibit I: Protests by PETA Activists
Exhibit II: Definition of Adulterated Food
Exhibit III: KFC's Cruelity, Camera Shots
Exhibit IV: PETA'S Fact Sheet of KFC's Cruelty
Exhibit V: Relevant Provision of the Animal Welfare Legislation
Exhibit VI: KFC's Poultry Welfare Guidelines