CAK okays Vivo Energy’s joint venture with KFC franchisee, expects competition to heat up

CAK okays Vivo Energy’s joint venture with KFC franchisee, expects competition to heat up

October 28, 2019 0 By mykenyancareers
KFC CHICKEN - CAK okays Vivo Energy’s joint venture with KFC franchisee, expects competition to heat up
CAK anticipates that the merged entity will face stiff competition from its competitors like Java and Innscor as well as supermarket outlets that are increasingly offering fast food services/AFP

NAIROBI, Kenya, Oct 28 – The Competition Authority of Kenya has unconditionally approved Vivo Energy Investment’s proposed investment in Kuku Foods Limited, which operates outlets franchised from American fast food chain Kentucky Fried Chicken (KFC).

In a statement, CAK the proposed transaction will lead to the acquisition of joint control of KUKU Foods Kenya Limited by VIVO Energy Investments.

According to the Authority, the two companies’ combined turnover for the preceding year was over Sh1 billion, which meets the threshold for full merger analysis as provided in the Merger Threshold Guidelines.

“Based on the foregoing, the parties’ business activities do not overlap. However, the lines of business are complimentary in nature since fast food outlets can be set up in petroleum retail outlets, providing convenience to motorists who frequent the strategically located stations,” the Authority’s statement says.

CAK anticipates that the merged entity will face stiff competition from its competitors like Java and Innscor as well as supermarket outlets that are increasingly offering fast food services.

Java is the leading market player with an estimated market share of 34 percent. This is based on number of outlets it owns across the country’s major cities/towns. Innscor and KFC (KUKU) are second and third placed, with a market share of 16 percent and 15 percent respectively.

“It is the Authority’s view that the proposed transaction will not have an impact on the market share of the merged entity given that 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.”

In July, Vivo Energy, which retails and distributes Shell and Engen-branded fuels and lubricants, agreed to accelerate the roll-out of KFC restaurants in Kenya, Uganda and Rwanda, leveraging on Vivo Energy’s retail footprint.

The 50:50 joint venture would manage and operate the restaurants in the three markets on behalf of Kuku Foods East Africa Holdings, the local KFC franchisee.

The restaurants, 22 in Kenya and 8 in Uganda, are in shopping malls, city centre locations, and service stations.