What is the history of Americana Group and its operations in Kazakhstan?
Since its inception in Kuwait back in 1964, Americana Group has grown into one of the largest and most successful corporations in the Middle East, North Africa, and Central Asia region. Americana Group's main lines of business are operating food and beverage outlets, as well as manufacturing food products. With a network of over 1,550 outlets, it is not only the largest operator of restaurant chains in the region, but also one of the most successful franchise operators in the whole world. We commenced our operations in Kazakhstan in 2008 with the purchase of an existing fast food company called Rostik's, which consisted of two stores in Almaty and Astana. Rostik's was a fried chicken brand and, in 2010, we re-branded it to KFC. In 2009, we had also brought Pizza Hut to Kazakhstan for the first time with our restaurant in Almaty. In 2011 we brought Hardee's to Kazakhstan, and then we introduced Costa Coffee in 2012. Today, we have almost 50 restaurants and nearly 2,000 employees. We have worked mainly in Almaty and Astana. In 2015, we are opening in two new cities in Karaganda and the Pavlodar Provinces, and in 2016 we intend to open stores in Aktau and Atyrau.
Four out of the 12 brands that Americana Group operates internationally are present in Kazakhstan. Do you think there is demand for more brands to come here?
There is a huge opportunity for new brands, as Kazakhstan is still a virgin market compared to the Gulf. There are hundreds of international brands in the Emirates now, while there are less than 10 global brands operating in Kazakhstan's food industry. This provides a huge opportunity for growth. The Kazakhstani customer is unique. They had few choices and ate a limited range of products during Soviet times. There is now an opportunity for businesses to provide customers with something novel and desirable. We estimate that the influence of price on a customer's decision to return to a restaurant is less than 13% in Kazakhstan. In fact, our research indicates that Kazakhstani customers are the least affected by price across all of our market segments. They care more about service and quality, and new market players should focus on these two factors.
Do you have any specific brands in mind for Kazakhstan?
We were supposed to bring in some additional brands in 2015. However, we decided to first grow our existing brands here in order to ensure that they were stable before bringing in new brands. We decided to postpone the introduction of new brands to allow for the preparation of the right infrastructure and caliber of people to work with these brands. We have, however, brought in our sister company, Cairo Poultry, which specializes in chicken and beef processing. Without this in place, our new brands would lack adequate supplies, as we are not able to import everything required. We operate the Red Lobster brand in the Middle East, but it would be difficult to import lobsters into Kazakhstan. Therefore, we first have to analyze how we can supply our restaurants with the right raw materials. In 2013, Kazakhstan's contribution to total revenues was around 3%. We are still growing, and Kazakhstan is one of the markets with the most potential for Americana Group.
As a Kuwaiti company, Americana Group is listed on the Kuwait Stock Exchange and you have also become established locally in Kazakhstan. What potential do you see for other GCC investors to establish operations here?
There is a huge opportunity here for GCC investors and several have come in recently. Four years ago, the Zara and Massimo Dutti brands arrived. Now we have heard that Starbucks is coming via a Kuwaiti company. We have also seen a lot of investment in Astana coming from the Abu Dhabi government. There is considerable interest from GCC countries in Kazakhstan and it is continually growing. Many companies in the agricultural sector are also planning to launch operations here soon. This is because the government has recently been putting in place new procedures to attract foreign investment. These incentives include low-rate loans, reproducible returns on investment as high as 30%, and available infrastructure for all companies to utilize.
The 12 brands that you represent are highly renowned around the world, including some of the largest fast food brands, as well as fine dining restaurants. How does Americana Group plan to attract more brands globally?
Americana Group has an extensive history in the fast food market. We have managed to build a great reputation in developing and operating more than 1,000 restaurants over a period of more than 50 years. It is important for any franchiser that cares about brand reputation to only enter into partnerships with responsible partners. With our reputation, we have what every potential partner is looking for and it is by leveraging this reputation that we are able to work with any brand. That said, our shareholders and chairman usually pursue a balanced portfolio. In Kazakhstan, we have KFC as our chicken brand, Hardee's as our burger chain, Pizza Hut as our pizza brand, and Costa Coffee as our coffee operation. There is an intentional line of thinking in place to minimize cannibalization between our lines of business. We try to build a portfolio with a fundamental variety of brands.
What are your expectations for 2016?
It looks like 2016 will be a challenging year because of the economic situation and because of added competition entering the market. However, our expectation is that we can make significant progress and improvements in the company itself. We are still focusing on being the number one brand for quality and service, for which we won an award in 2014. We invest a great deal in our people. We have already started to expand outside of the traditional boundaries of Almaty and Astana, presenting us with an opportunity for significant growth in an area that could be called a virgin market, with little to no existing competition.