KFC Results Leave Ad Age With a Helping of Crow

Bashed for Grilled-Chicken Launch, Chain Outperforms Industry

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CHICAGO (AdAge.com) -- KFC's launch of grilled chicken was widely pilloried by the advertising community for staid creative that asks consumers to "unthink" the brand, by marketers who claimed consumers might never make the switch and by PR pros for its ham-handed execution of an Oprah-promoted giveaway. Advertising Age even projected that the launch may "go down as a case study of what not to do." But KFC may have the last laugh. Early returns on Kentucky Grilled Chicken show heavy trial, strong repurchase intent and signs of a turnaround at the long-ailing brand.

"This has to be the best product launch in our history," Yum CEO David Novak said during the company's second-quarter earnings call this morning. "And I don't know of any of our product in our industry that has changed the brand so much for the good."

KFC also posted positive same-store sales for the first time in two years, up 3% during the second quarter from last year -- better than a 1% improvement at sibling Taco Bell, where value-menu wars have taken a toll, and an 8% spiral at sibling Pizza Hut, as more consumers are eating dinner at home. KFC's 3% gain also represents a 10-percentage-point swing, from a drop of 7% in the first quarter. Javier Benito, KFC's exec VP-marketing and food innovation, said the chain's same-store-sales increase is unlike anything it has seen in at least 10 years. This is also the first time in many years that KFC is outperforming overall growth in the fast-food industry, which is estimated at 1%.

Keys to success
Mr. Benito credited grilled chicken's success to KFC's advertising and accompanying celebrity endorsements; product-placement deals in properties such as "Gary Unmarried"; and even the Oprah giveaway, which yielded a response too big for the marketer to handle. He said that the single event drove trial from 13% to 19%. TV ads from DraftFCB, Chicago, featuring celebrity endorsers such as Sandra Lee resulted in internal tracking that was "off the charts," Mr. Benito said.

Robbie Vorhaus, a crisis-communications expert, said while the chain's handling of its Oprah tie-in can only be classified as a mistake, one mistake doesn't kill a brand. "Grilled chicken is a big hit," he said. "You've got to give [Mr. Novak] and this leadership team a lot of credit, because they know if they're going to win, they've got to swing big in this environment."

Mr. Novak added that of the 220 million people (about 20% of the fast-food market) who have tried grilled chicken, 85% have expressed repurchase intent. And since KFC consumers are "light users" who may visit only once a year, he expects more of them to be converted before the end of the year. The grilled product already comprises 40% of what KFC calls "chicken-on-the bone" sales, which make up 60% of the chain's total sales.

'Too early to tell'
Ron Paul, president of Technomic, the Chicago-based restaurant-industry consulting group, said KFC might want to keep the champagne on ice for now. "I'd say it's still too early to tell," he said, adding that while the trial numbers are very strong, "purchase intent and what people do is often different." Still, he said, "I'd be encouraged if I were them."

Mr. Novak acknowledged that sales dropped off toward the end of the quarter but blamed emphasis on a $9.99-bucket offer, which proved too expensive, and dropping the emphasis on grilled chicken too quickly. KFC's latest TV spots, also via DraftFCB, focus on grilled chicken as part of a $5 lunch deal, with a biscuit, soda and sides. Mr. Novak said KFC will be "hammering on Kentucky Grilled Chicken for a long time to come."

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