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Business

KFC shows how to change Myanmar's eating habits

YANGON -- For international restaurant chains, the race is on to get into Myanmar. Following the recent opening of a KFC restaurant, Japanese trading house Sojitz Group announced a partnership with a Myanmar company to provide logistics for refrigerated deliveries of temperature-sensitive foods.

A crowd gathers outside Myanmar's first KFC, in Yangon.

     Myanmar's first KFC opened July 7 in the Yangon commercial hub of Bogyoke Aung San Market. A long line quickly snaked out the door, and it has yet to disappear. Inside, workers in black shirts and red hats tear around the 240-seat eatery. "When I travel to Bangkok for business," Thein Htut, a Yangon-based consultant, said with a big smile, "I always go to KFC restaurants there. Now I can go to one near my office."

     The Yangon KFC offers a standard set -- two pieces of fried chicken, french fries and a drink -- for 3,500 kyat ($3). It also does a little fusion, using its chicken in a traditional curry and rice dish that goes for 2,000 kyat. This is on the expensive side. Yangon residents spend an average 1,000 kyat to 1,500 kyat for lunch.

     Yoma Strategic Holdings, a real estate development conglomerate, obtained its KFC franchise license from Yum Brands of the U.S. It plans to open several more KFCs in Myanmar this year.

     At the eatery's grand opening, Melvyn Pun, CEO elect of Yoma Strategic, stressed that KFC will usher Myanmar into its fast-food future. Pun is to be approved as CEO at Yoma Strategic's annual general meeting on July 27.

     Myanmar, which began moving away from direct military rule in 2011, has long been a challenging market for foreign restaurant chains. Street stalls that cook and sell noodles and other dishes as well as small diners that offer curry and other regional specialties have pretty much had the dining-out market to themselves.

     This begun to change when Lotteria opened Myanmar's first foreign fast-food store in April 2013. The South Korean hamburger chain backed up the opening by airing TV ads featuring Sai Sai Kham Leng, a hip-hop celebrity here. The chain now has eight stores in the country.

     Western fast-food chains that might covet Myanmar have also had U.S. sanctions to contend with. The U.S. first slapped economic sanctions on Myanmar in 1997 due to the military government's repression of its democratic opposition. In 2012, the U.S. began easing those sanctions.

     Now as Myanmar steps toward democracy and its ties with the U.S. improve, its market dynamics are changing.

     Yum Brands is even considering introducing Pizza Hut restaurants to the country.

     But just because foreign fast-food chains are eager to open in Myanmar, it does not mean Myanmar people are eager to eat what might be on all the new menus. Freshness Burger, a Japanese chain, opened a branch in Myanmar last August. The Yangon shop closed earlier this year, partly because beef burgers just aren't popular in the country, according to an industry source.

     Other eating and spending habits will also test foreign fast fooderies. The average Myanmar native spends around $60 a year eating out, roughly one-fifth what his or her brethren in Thailand and Vietnam and other Southeast Asian nations spends.   

     But the people of Myanmar are showing a new fondness for dining out. And according to a projection by the Boston Consulting Group, the country's medium-to-affluent population, made up of those who earn 500,000 kyat a month, is expected to double from the 2012 level to some 10.3 million by 2020. As more people carry around fatter wallets, they are likely to nourish the restaurant industry.

     There is also the matter of government restrictions against foreign businesses. Although there are no specific rules against foreign companies operating restaurants, a law firm representative warns that it would be difficult for an overseas operator to gain authorization to independently invest in a local business. It would be better, the representative said, for "foreign businesses to consider partnering with locals."

     On the other hand, Myanmar's government has recently relaxed a ban on foreign wholesalers, allowing them to operate in special economic zones. The ban may also be lifted in regard to the restaurant industry, though any additional relaxations would come in stages.

     Foreign businesses are carefully watching the changes taking place in Myanmar.

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