KFC Franchise in Joint Venture With Vivo Energy Given Green Light

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Joint venture with Vivo Energy meant to accelerate the growth of the first food chain in the region.

Kuku Foods East Africa Holdings, the owner of KFC franchises in East Africa joint venture with Vivo Energy to accelerate the growth of the first food chain in the region has been approved by the Competition Authority of Kenya.

In a statement Monday, the CAK says “The acquirer is an oil importer and marketer in Kenya where it distributes and markets Shell branded fuels, lubricants and Liquefied Petroleum Gas (LPG) to both retail and commercial consumers. The target is a fast food restaurant chain franchise. Based on the foregoing, the parties’ business activities do not overlap.”

According to CAK, the proposed transaction will not have an impact on the market share of the merged entity given that the target is only active in the fast-food restaurant business locally. “The acquirer is seeking to increase the target’s outlets by providing access to its outlets across the country. Based on the foregoing, the proposed transaction is unlikely to raise competition concerns,# said the Authority.

The 50:50 joint venture is anticipated to face stiff competition from its competitors like Java and Innscor as well as supermarket outlets that are increasingly offering fast food services.  Additionally, stand-alone restaurants like Pronto, Peperoni, Charlies, and CJs are offering similar services and will also offer competitive restraint.

“From the foregoing, it is the Authority’s view that the proposed transaction is unlikely to lessen or prevent competition in the market for the provision of restaurant services in Nairobi, Mombasa, Nakuru, Eldoret and Nanyuki.”

The fast-food business is dominated by Java with a market share of 34%, followed by Innscor that comprises Pizza Inn, Galitos and Creamy Inn with a market share of 16 percent while KFC is third with a market share of 15 percent.

Vivo operates about 2,100 service stations across under the Shell and Engen brands in Africa. Under the joint venture, Vivo Energy will take a 50 percent stake in Kuku Foods to help the growth of KFC through the opening of new outlets at Vivo’s properties in Kenya, Uganda, and Rwanda.

This will enable Vivo to manage and operate the restaurants in the three markets on behalf of Kuku Foods, which would remain the local KFC franchisee.

On the other hand Pledge Holdco Limited is wholly-owned by Texas Pacific Group that controls several entities in Kenya including Dodla Dairy Limited and Cellulant Corporation. Post-transaction, the merged entity will have a market share of 3.9%.