Israel seems to repel American fast food
chains. Starbucks. Subway. Dunkin Donuts. They've all had to call it quits there.
KFC has actually tried and failed three times to appeals the Israeli market. But
unlike its rivals, KFC is refusing to admit defeat. In fact, the American fried
chicken chain is trying again for a fourth time. The Calculus reported the
KFC plans to open 100 locations within five years of reentering the market.
That's especially ambitious considering that at its peak it had just 10
restaurants in the country after spending 20 years trying to build a following. KFC started as one branch in Tel Aviv in
the 1980s. It didn't last but was revived in 1993. Ownership then changed hands
again in 2003 but by 2012, Euromonitor says KFC had closed up shop for good in Israel. KFC's failure isn't all that shocking because of one simple foot very
big problem, its menu. Israel is a notoriously difficult market to crack
because roughly 60% of the Jewish population keeps kosher, meaning they
follow a set of religious laws that restrict them from eating certain foods.
One of the major rules: don't mix meat and dairy products and that happens to
be the very definition of classic Kentucky Fried Chicken. There have been
all sorts of reasons that have been offered through the centuries that's why
that the case and I think most people generally agree that that milk is that
the substance of life but all mammals suckle when they're born. Whereas need of course represents death and so perhaps the prohibition of eating
milk and meat together have to do with valuing valuing life and not mixing
tangible symbols with life and death. To be fair, KFC did try to pivot to
accommodate Israeli taste buds. Israel's Ynetnews reported that food
scientists in Dallas spent two years perfecting a formula to make its fried
chicken kosher. Normally when you make fried chicken, the process looks
something like this. You dunk the chicken, scatter and bread it, seesaw it, rack it,
and then fry it for 10 minutes. The kosher KFC looks more like this.
Here's the stuff that changes. Instead of coating the chicken with milk powder, you
use a milk flavored soy powder is a substitute, which supposedly has the
exact same flavor as the original recipe. In 2009, KFC rolled out this kosher friendly fried chicken to try to tap into a wider clientele but the customer base just wasn't there. So when they become kosher in 2009, they changed it to a non-dairy, or we call it a milk alternative, soy milk and that changed the flavoring of the coating. So again, that didn't seem to help them in the market because KFC's about their taste. Patrons complain the soil turn it just didn't taste as good and that the batter didn't stick properly to the chicken. In every household, in Israel chicken is eaten at home. Its like a staple food. So you need to really give them a good reason to eat chicken, you know, in a fast food restaurant or a fast food chain. The year before KFC launched its kosher menu, it's Israeli locations were pulling in 4.6 million dollars but by 2012, it was generating just a million
dollars according to Euromonitor estimates. The problem was not that people don't like KFC. They like KFC a lot. The problem was that, with KFC, you see, there are some restrictions in the product. The product from KFC is very complicated, their products, and they couldn't get the product right here. So, the company, they weren't willing to compromise. These religious dietary laws also get into the ethics of how you have to treat animals when they're live and how they're slaughtered.
The animal should be should be relatively cared for. You know, some of
the modern cattle practices, for example, raise questions for the modern thinker
and to whether or not that practice can lead to a kosher slaughter. But
ultimately where the, where the tradition lies on the at the moment that the
slaughter the animals should be very quick. Plus methods to ensure that the
poultry is raised and killed in accordance with kosher standards can get expensive. Because the process by which it's slaughtered and then brought to the market, has more
steps involved in it then than what we find in the non-kosher food industry. But
other foreign chains have managed to master the kosher formula. Yum! Brands
owns both KFC and Pizza Hut and unlike its sister company, Israelis love Pizza
Hut. It ranks third out of all fast food options in Israel and you'd think that a
kosher version of the Big Mac would be a hard sell but McDonald's has actually
ranked number one in Israel and that includes its local rivals. Branches given
kosher certificates have slashed dairy from the menu and used custom blue and
white signage. So, KFC clearly seems to be struggling to strike the right formula
for the kosher market but when it comes to Halal, or Islamic dietary laws, KFC has
been met with way more success. It has nearly a thousand Halal certified
outlets across the Middle East and it's also caught on in the Palestinian
territories. KFC has nine locations in the West Bank and according to the New
York Times back in 2013, there was apparently an underground network that
smuggled buckets of 12-piece chicken into Gaza from Egypt for a marked up
price of $27. There are certain parallels to the religious rules
that govern kosher and halal dietary practices, with one very big exception:
meat and dairy. Halal, in general, you don't have the
issue of mixing meats with dairy. So you don't need to change the powder milk of the coating and hince its just about the way the product is slaughtered. The dairy factor doesn't play a role and hince it doesnt change the flavor Euromonitor tells us things may be different for KFC this
time. There's currently a seismic shift underway in Israel from fine dining to
fast-food. There are also more international consumers to capture. Since
2000, not only have more than 30,000 Americans moved to Israel but the
country has also received an influx of Europeans, many of whom are more
accustomed to Western cuisine. CNBC reached out to KFC to find out what
they're planning to do differently this time around but they're keeping their
plan under wraps. For now, they just say they're very optimistic about the
Israeli market and strongly believe in KFC success there. Analysts tell us that
if KFC makes a few tweaks to its menu, that could also make a big difference. So
maybe fourth time will be the charm for KFC and Israel
