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And Now, Finger Lickin' Good For Ya?

Posted on February 17, 1991

Kentucky Fried Chicken. Its powerful brand name summons up images of white-bearded Colonel Sanders, steaming fried chicken, biscuits, and gravy. But to many health-conscious Americans, it also stands for cholesterol, sodium, and fat. Hence a paradoxical problem for Kentucky Fried Chicken Corp.: As an alternative to beef, chicken consumption is soaring. But fear of frying has helped curb the company's growth while demand jumps for grilled, broiled, and baked poultry.

So, the Pepsico Inc. unit has decided to change its image and its menu. Under the leadership of Kyle Craig, president of the U. S. business, and his boss, Kentucky Fried Chief Executive John M. Cranor III, the chain is trying to reposition itself in consumers' eyes in hopes of attracting more careful eaters to its 5,000 restaurants. The goal is to turn the $3.2 billion business into a chain of one-stop chicken eateries offering both fried chicken and such nonfried items as broiled chicken and chicken salad sandwiches. To sell this change, Craig and Cranor are planning a gradual replacement of the original name with just the initials KFC. "The key is to reduce dependence on the word `fried,' " says Craig. Some marketing analysts question the wisdom of shedding a well-known name. "Initials are a passport to anonymity," says Clive Chajet, chairman of Lippincott & Margulies Inc., a New York corporate identity consultant. "It's very hard to fashion a restaurant's identity based on initials." But Craig and his franchisees disagree. "The name KFC got over 99% recognition when shown with the Colonel's mug," says James Cornett, a franchisee based in Culpeper, Va. Others say they figure the name change is irrelevant: "They have a product problem, not a name problem," says Ron Paul, head of marketing consulting firm Technomic Inc.

Kentucky Fried Chicken is starting to address the product problem with a nationwide rollout of a menu item that has been prepared specifically for calorie counters. The dish, Lite'n Crispy chicken, is still fried, but without the fat-rich skin: According to the Center for Science in the Public Interest, Lite'n Crispy contains 20% less fat than the Colonel's original recipe. Jayne Hurley, a nutritionist at the Center, says skinless, nonfried chicken is still a healthier meal. But Lite'n Crispy, she admits, "is a big improvement."

Franchisees love the new dish. "In test markets, we did gangbusters," says John Neal, who owns 88 restaurants. Cleveland franchisee Leonard Stein-Sapir reports 25% sales increases in restaurants featuring the dish. The franchisees are also looking forward to a broiled item, Monterey Broil Chicken, which is in test market in Nevada.

Kentucky Fried Chicken has needed these changes. Pepsi bought the chain from RJR Nabisco Inc. in late 1986. But while sales and earnings in international operations kept growing fast, in the U. S., higher chicken costs--and consumers' preference for charbroiled chicken restaurants such as California's El Pollo Loco chain--squeezed Kentucky Fried's sales and margins. In 1989, its U. S. sales grew 4.4% and profits dropped.

HOME DELIVERY. Last year, though, the company introduced a spiced-up snack item, Hot Wings, that took off. Stores were repainted and brightened up. And the company advertised discounted meals that imitated the successful low-price strategies at Pepsico's Pizza Hut and Taco Bell. As a result, systemwide U. S. sales grew almost 7% (chart).

Craig also is looking for future profits from higher-priced items such as the skinless chicken, which goes for 10~ more per piece than the original variety. For the longer term, he is expanding home delivery to compete with the pizza makers, and he is testing sandwich and snack items to draw more customers at lunch, the meal burger chains dominate.

It's a good strategy. But there still are potential problems, including the general industry slowdown and the competition from other chains that are already serving chicken lunches--most notably Burger King Corp. with its BK Broiler. Nevertheless, Kentucky Fried Chicken has to diversify: The Colonel's recipe may still taste good, but it needs help to flourish in the nutritious Nineties.Christopher Power, with Mark Landler, in New York, and bureau reports