Yum! Brands Plays Chicken With KFC

Sometimes, doing nothing is better than doing something wrong. While executives at Yum! Brands (NYSE: YUM  ) are clucking that Kentucky Fried Chicken's grilled chicken promotion was a huge success, more casual observers note that running a meal giveaway, then cancelling it when the system was overwhelmed by the response, just might put the eatery's reputation in the deep fryer.

Finger lickin' not-so-good
KFC teamed up with the queen of product-plugging, Oprah Winfrey, to promote a coupon download for two free pieces of grilled chicken, two side orders, and a biscuit. On cue, the Big O's devotees jammed checkout lines and backed up drive-thrus in a mad dash for free eats, only to have their feathers ruffled after restaurants ran out.

But rumors of rioting and people running around like, well, chickens with their heads cut off, were a little overdone.

Still, executives should have been prepared; after all, Oprah's stock club has been picking winners for years. Deckers Outdoors (Nasdaq: DECK  ) , for example, is still a thriving business because of her endorsement of its Uggs sheepskin boots, even when every indication suggests that fashionistas should be over the fad by now. The Kindle also remains a top gadget at Amazon.com (Nasdaq: AMZN  ) after Oprah put the e-reader on her bestsellers list.

Of course, not everything Oprah touches turns to gold. She couldn't save the Pontiac brand from the junkheap, even after giving away 276 of the General Motors (NYSE: GM  ) brand's cars. And XM still got folded into Sirius XM Radio (Nasdaq: SIRI  ) , despite her show being on its airwaves. Even so, since Yum! executives were betting on the daytime diva to turn up the heat, they should have been ready for the gluttonous response.

A rose by any other name
Worse for KFC, however, might be the harm it's causing to its brand by switching from its beloved fried chicken to healthier grilled fare. Marketing annals are littered with examples of failed "rebranding." Even blue-chip stalwarts have to be careful: McDonald's (NYSE: MCD  ) has occasionally fled from its own bad marketing (the Arch Deluxe, anyone?), and New Coke was never able to gain a place in the public's cupholders, either.

Not-so-yummy results
Rebranding can be successful if it's done in an evolutionary way. Campbell Soup, for example, has slimmed down its iconic Campbell Kids to stay relevant with leaner waistbands, while Shell has changed its logo at least 10 times over the past 110 years, so that the iconic pecten is immediately recognizable even without the oil company's name. But these are cosmetic changes, rather than mammoth reinventions of the brand.  

Of course, restaurants are right to try new things, especially in the current market. The U.S. Census Bureau says retail and food sales fell 10% in April from the year-ago period, while Yum!'s own first quarter same-store sales dropped 2% in the U.S. -- primarily as a result of slack KFC and Pizza Hut sales. 

Yet because it's going with a radically different approach to its food offerings, Yum! might have taken a page from the playbook of Burger King's (NYSE: BKC  ) largest franchisee, Carrols Restaurant Group.

When this chain operator wanted to get into the chicken market, it didn't flip the burgermeister's menu; instead, it purchased Pollo Tropical, a grilled-chicken chain primarily serving Florida, and expanded it. Then, instead of diluting that Latin-flavored concept when it wanted to expand its Hispanic business segment, it bought Taco Cabana, providing a bit of Tex-Mex that challenges McDonald's own spin-off, Chipotle Mexican Grill (NYSE: CMG  ) .

Too many eggs in one basket
The giveaway brouhaha may not make KFC a cracked egg, a la Humpty Dumpty. After all, it did manage to give away millions of free grilled chicken pieces to customers. And this isn't the first time KFC's tried to project a healthier image. A few years ago, it dropped trans fats from its menu, when public perceptions about hydrogenated oils' nutritional pitfalls changed.

The bigger risk is trying to change how consumers think of your restaurant. If they get confused about what you're actually selling, they may not think of you at all.

Chipotle Mexican Grill is a pick of Motley Fool Rule Breakers and Motley Fool Hidden Gems, and the Fools owns shares of it. Amazon.com is a Motley Fool Stock Advisor recommendation. Unlike KFC, the Fool can offer everyone a sample any of our Foolish newsletters today, free for 30 days.

Fool contributor Rich Duprey does not have a financial position in any of the stocks mentioned in this article. You can see his holdings here. The Motley Fool has a disclosure policy.


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  • Report this Comment On May 26, 2009, at 10:32 PM, AAG100 wrote:

    The geniuses at Chipotle and Dave & Busters seem to be thinking the same way. Chipotle enjoyed a near decade of great results, thanks to the smartest approach to branding in the category. So what are they doing now? New logo, new look, new value menu, new everything. It's a terrible message to send to their core loyalists who have made them what they are.

    Likewise D&B, who managed to get their brand's act together a year or so ago, only to make an amateurish left turn with their message and image. Both brands will likely get stung by these moves, as will KFC.

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