Kenya, has in recent times seen an influx of Quick Service Restaurants (QSR’s) over 2022, with new entrants into the market like the Halal certified, ChicKing, Chicken Cottage, and Papa John’s Pizza, all UK and US firms, according to Fitch Solutions.
Convenience food items spending, such as packet food, will grow quickly over the medium term, with spending growing from KES9.0 billion (US$78.5 million) in 2022, to KES16.8 billion (US$142.3 million) by 2026, Fitch noted.
“As more consumers enter the workforce, they become increasingly time-poor, yet have higher disposable incomes. This gets reflected in packet food spending through the Mass Grocery Retail channel, but also through the food services sector.”Fitch
According to Fitch Solutions, growth in packet food spending is forecasted to average 16.7% between 2022 and 2026. This reflects both the increased spending power that Kenyan consumers now have, but also show a westernisation of consumption trends towards convenience.
Packet food snacks such as potato chips, plantain chips and noodles have grown in popularity, while Kenya also has a variety of maize derived snacks. Frozen, ready to eat meals have also become more popular in the frozen aisles of stores, while soya derived packet foods are also more common. Due to rising real incomes, convenience is something that more consumers will budget for.
Shift from Essential Spending
Over the medium-term, Kenyans will slowly shift away from essential spending and move towards non-essential categories. In 2022, restaurant and hotel spending accounted for 8.3% of total consumer spending, which we forecast to grow to 9.1% by 2026.
The segment of non-essential spending is expected to grow by an annual average of 14.2% over the 2022 to 2026 period, growing from KES851 billion in 2022 to KES1.5 trillion in 2026. We believe this increase in restaurant and hotel spending will be felt predominantly in the fast food and convenience food stores.
Total household spending is forecasted to amount to KES10.2 trillion (US$89.7 billion) in 2022, and grow to KES16.0 trillion (US$135.7 billion) by 2026. Fitch’s Country Risk team forecasts Kenyan inflation to moderate over the medium-term, with annual average expected inflation around 6.1%.
Disposable income per household, over the 2022 to 2026 period, will have a five-year CAGR of 9.0%, outpacing inflation. Fitch noted that while Kenyan households will still have relatively low disposable incomes, in 2022 it forecasts the average household to have a disposable income of KES290,000 (US$2,157), which will grow to KES410,000 (US$3,492) by 2026.
Consumption of convenience and fast foods is far more common amongst the urban population due to greater time constraints and higher disposable incomes. Unemployment over the medium-term will also be favourable.
“We forecast unemployment (as a % of the labour force) to fall from 5.1% in 2022, to 4.1% in 2026. This bodes well for the convenience and fast food segments, as a greater number of employed people means there is a greater consumer base to sell to.”Fitch
Poultry Demand Is Rising
Beef and poultry are staple animal proteins amongst Kenyan households and we believe the growth in poultry spending bodes well for fast food retailers, such as ChicKing.
Through the Mass Grocery Retail channel, poultry spending is set to be the outperforming category over the medium term (2022-2026), with spending set to grow from KES151.0 billion (US$1.3 billion) in 2022, to KES232.4 billion (US$2.0 billion) by 2026. The five-year annual average growth for poultry spending will sit at around 11.2%, while meat and poultry spending will have a growth rate of 8.9%.
The growth of poultry spending highlights the demand by consumers, largely due to the higher affordability and the greater quantity that can be purchased. Poultry is also far cheaper than beef, therefore making poultry derived convenience and fast food more affordable for Kenyan consumers.
The Halal certified QSR, ChicKing, has recently announced it will be entering the Kenyan market. ChicKing announced plans to open stores both in the coastal city of Mombasa, and the capital Nairobi, with further plans of opening 30 stores across East Africa over the next 5 years.
Fitch noted that ChicKing, will face competition from the UK-based fast food chain, Chicken Cottage, who has also recently entered the Kenyan market. Papa John’s, the US pizza QSR has also opened stores in Kenya and aims to open 60 stores across Kenya and Uganda over the next five years.
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