KFC LURES LUNCHERS WITH SANDWICHES: $75 MIL LAUNCH IS BIGGEST EVER FOR CHICKEN CHAIN BATTLING FLAGGING SALES

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KFC embarks on its biggest product launch to date in an effort to woo the lunch crowd.

The $75 million launch campaign for the chain's newest menu addition, a line of five chicken sandwiches, kicked off Sept. 19 via Y&R Advertising, New York. TV ads show KFC's animated colonel challenging the "burger boys" -- Burger King Corp., McDonald's Corp. and Wendy's International -- in the chicken sandwich war.

One ad even compares the dry taste of competitors' chicken sandwiches to an old shoe.

"We do chicken right, in the bucket and now on the bun," is the campaign theme line.

DOUBLING SPENDING

The advertising and promotional budget is double the amount KFC traditionally spends on fourth-quarter advertising, and more than the company has ever spent before on a product launch.

"We've made a huge commitment financially to this," said Denny Post, KFC's VP-concept innovation marketing. Fifty percent of the fourth-quarter launch budget will be spent on national media, while the other half will go to local buys. Radio, print, outdoor and couponing efforts will support.

KFC is also putting its money where its consumer's mouth is, with the offer of a money-back guarantee. "It's better or it's free," boasts the challenge.

The new chicken sandwiches are aimed at increasing KFC's lunch sales. With its big buckets of chicken and "comfort foods" such as mashed potatoes, a majority of KFC's business is during dinner.

"Twenty-five percent of our heartiest users tell us there's nothing appropriate on the menu for lunch," Ms. Post said. "People just don't think of KFC for lunch. There's a lot of mind-changing that has to go on here. Reach is critical, trial is critical."

PEPPERIDGE FARM

CO-BRANDING

Three of the sandwiches will be fried: Triple Crunch, Triple Crunch Zinger and Original Recipe. The other two varieties are Tender Roast and Honey BBQ. All will be served on a Pepperidge Farm bun, in a co-branding deal with the Campbell Soup Co. product.

While KFC hopes its new line will add sales, observers say there's a risk the sandwiches may cannibalize existing sales. Instead of buying more meals, consumers may simply trade down from high-ticket buckets of chicken and family meals to the less-expensive sandwiches, priced at $1.99.

But Ms. Post predicts KFC's 5,200-store system will be selling close to 1 million chicken sandwiches a day during this launch period.

She also forecasts increasing profits: "This launch will take our average [per restaurant sales] over $1 million," she said.

Stung from disappointing results from its summerlong "Star Wars" tie-in, KFC is looking to sandwiches to revive flagging same-store sales.

3% RISE POSSIBLE

Analyst David Rose, of Jefferies & Co., projects the sandwiches could fuel a rise in same-store sales for the fourth quarter to about 3% above the same period last year.

For the second quarter of 1999, KFC'S same-store sales were up 2%. Sales have dipped since then to flat or slightly negative numbers, according to several Wall Street analysts.

KFC insiders have long said they don't want to allow the burger chains to excel at selling chicken sandwiches since KFC considers itself the nation's chicken expert.

"There is no reason they shouldn't be in this category," Mr. Rose said. "They have a license for chicken sandwiches as far as the consumer is concerned."

The burger chains aren't ignoring KFC's new assault. Burger King next month is slated to launch its first major new sandwich in two years: the Chicken Club. And McDonald's is readying a new chicken sandwich for next year.

Wendy's continues its practice of promoting chicken sandwiches with distinctive flavors. All are aimed at giving burger buyers another choice to keep them from straying to a chicken, taco or pizza place.

The KFC chicken sandwiches have been in test markets since May 1998, also when the idea came up to resurrect the colonel in ads. Y&R's initial test market ads flopped. The second time around, when the agency conceived the animated colonel, KFC decided to make it part of its overall campaign. Since then, the cartoon

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