Fast food sector takes off

Photo by: Wesley Monts

Young diners enjoy food at Swensen's in Sorya Mall, Phnom Penh.

via CAAI

Sunday, 19 December 2010 18:39 Matthew Backhouse and Sen David

Competition is heating up in Cambodia’s growing fast-food sector, with international chains Pizza Hut and Burger King set to go head-to-head in the Kingdom.

But the industry’s rapid expansion is a cause for concern among street vendors and local restaurateurs, some of whom are feeling the pinch from increasing competition and changing customer expectations.

The market for fast food in Phnom Penh is estimated to be worth US$40 million a year, which accounts for 5.3 percent of the capital’s $744 million annual food expenditure, according to Tep Virak, general manager of Express Food Group – which runs Pizza Company and Swensen’s franchises in the Kingdom.

But while fast food still has a relatively small market share, competition within the sector has increased significantly in the past five years.

Tep Virak said business was becoming “tougher and tougher every day”.

That trend looks set to continue as Cambodia’s fast-food heavyweights expand their existing franchises and introduce new international brands.

Express Food Group is currently negotiating for the rights to run a franchise of American fast-food chain Burger King, while KFC’s investors are planning to open the Kingdom’s first Pizza Hut early next year.

“Competition is going to be tougher when more international brands come, but I believe that we can still be competitive,” Tep Virak said. “We are well-prepared. We’ve built a good foundation to step on.”

Express Food Group, a subsidiary of Thai company RMA Group, plans to build two new outlets of Swensen’s and Pizza Company next year, bringing the total number of each store to six and eight respectively. It also plans to expand its newest brand, Korean franchise BBQ Chicken, by three shops.

Tep Virak said the Burger King deal was moving forward, but the launch was still some time away.

“We are still discussing, negotiating. We are progressing but I cannot give any timeline,” he said.

He said the company was performing well and would seek to be listed on Cambodia’s planned stock exchange, but he declined to give revenue details.

Meanwhile, business at KFC is picking up following the economic crisis.

Benjamin Jerome, general manager of KFC franchisee Kampuchea Food Corporation, said revenue growth was expected to reach 5 percent per annum.

The company, a joint venture between Kith Meng’s Royal Group, Malaysian company QSR and Hong Kong firm Rightlink, has pumped $10 million into its KFC franchises since the first outlet opened in 2008. It plans to build three new stores next year, bringing the total to 13.

The company is also putting $3 million towards its Pizza Hut franchise, with the first outlet due to open on Phnom Penh’s Monivong Boulevard early next year. Ten more Pizza Hut stores are planned over the next five years.

Jerome said the sector had recovered well from the recession and was “still vibrant as before”.

“The recovery of the world economic situation, which impacted the domestic consumer spending, did help the recovery of the industry,” he said.

He said the fast-food sector was “a challenging environment”, but he welcomed further competition.

“More competition will improve the industry’s standards, which benefits consumer choice and satisfaction.”

But not everyone stands to benefit from greater consumer choice.

Street vendor Chan Thouen said the growing popularity of fast food had contributed to a decline in sales at the barbecue chicken stall that she and her mother have operated on Phnom Penh’s Sihanouk Boulevard for 10 years.

“Prior to five years ago, I sold 80 to 90 chickens per day. I sold very well,” she said. “Business has gone down. Right now I sell just 40 chickens per day.”

Tep Virak also concedes the fast- food industry has had an impact on local businesses, noting a decline in the number of local restaurants across Phnom Penh’s Japanese bridge in recent years.

But he said that was due to changing consumer expectations, rather than customers rejecting traditional Khmer food.

Fast-food restaurants offered better hygiene, faster service and a more modern dining experience than traditional restaurants, he said.

Customers were mostly Cambodians, and included middle-class professionals, young families with children, and educated youths who readily engaged with Western culture.

Norton University student Song Srey Kouch, 23, is among the young Cambodians who have embraced fast food.

“When I have free time after school, I like to eat chicken at KFC with friends. It is comfortable to eat [in], it has good service,” she said.

But her friend Toun Lomong, 23, a student at the Royal University of Law and Economics, said she preferred to eat traditional Cambodian chicken.

“I like to eat Khmer chicken because it is delicious and it is cheaper than the chicken at KFC,” she said.

That sentiment is good news for Khmer food vendors like Chan Thouen, who said she expected her barbecue chicken business to survive despite declining sales.

While Tep Virak agreed that the fast-food sector was unlikely to threaten the survival of traditional Khmer cuisine.

“I don’t think we are going to replace any Cambodian food any time soon. They eat the traditional food every day, so when they go out they want to try something new – that’s it,” he said.