PUBLIC AWARENESS OF THE DANGERS OF COUNTERFEITING AND THE EFFECT ON THE REVENUE OF A NATION;A BRAND OWNERS PERSPECTIVE

1. PUBLIC AWARENESS OF THE DANGERS OF COUNTERFEITING AND THE EFFECT ON THE REVENUE OF A NATION;A BRAND OWNERS PERSPECTIVE A PRESENTATION BY MARC J.B. SCHREUDER CEO KENTUCKY FRIED CHICKEN DEVYANI INTERNATIONAL (NIGERIA) LIMITED

2. Lack of global QSR brands in Africa Reasons: • No Intellectual Property protection for brand owners • “fear factor’’ by foreign brand owners • No proven protection by judicial precedence and slow court proceedings thus eroding brand equity in case of dispute • (KFC only operates in RSA, Namibia, Botswana)

3. Lack of global QSR brands in Africa Reasons (cont): • Lack of infrastructure to support brand owners minimum standards with regards to manufacturing, food safety standards, logistics • Significant import challenges • Start up costs very high due to high training costs at all levels as well as importation, and duties on equipment • Cumbersome legislation approvals and permitting is a ‘’minefield’’ with parameters changing very frequent

4. A WORLD OF OPPORTUNITIES • African market still largely unexplored and a distinct “hunger” for established international brands exists. • An entrepreneurial middle class is establishing in stable countries • Skills training will be heavily invested in • Wealth creation for all stakeholders and bringing in foreign capital in market • Empowering local citizens • Raising standards in the QSR industry to benefit of all by creating a healthy competition and raising food safety and quality awareness

5. A WORLD OF OPPORTUNITIES cont • Large labor force available although mainly unskilled • Banks although not usually interested in financing start up businesses are having considerable comfort in a global brand as operating models are proven and tried • Brand owners technical and operational know how builds skills in contractors and suppliers thus enabling them to grow business potential

6. Challenges for new global brands in developing countries • High cost of finance pan Africa • High cost of equipment and shipping • Lack of skills in labor force • Real estate costs often lead to a store model to fail • “Starry eyed” expectation of franchisees on returns and input required • Lack of recognition by authorities on advantages of foreign start up brands with regards to tax and duty concessions

7. Challenges continued • Vendors often not willing to improve facility standards to meet new brand standards • Infrastructure, logistics, and lack of understanding by brand owner can lead to an over promise and under delivery if brand owner fails to take local culture taste profile and perceptions into account

8. Why support foreign QSR brands coming into themarket? • It is a proven model and brand owners have paid “school fees” in perfecting the model although each country will have its own peculiarities • No need to re invent the wheel • Banks are more willing to finance a global brand then a totally new model/brand /business to the African markets • Creates skills build, investment employment and innovation

9. Counterfeiting impact on Nation • The fear of IP protection and unscrupulous operators using trade names etc makes QSR brands especially vulnerable. • WHY: • To prepare food is less technically complicated then manufacturing for examples, mobile phones, a Mercedes Benz etc. This can easily lead to copy cats as seen prolifically in the Nigerian QSR markets which has resulted in a poor level of operating and quality standards in general. The ‘’Chicky’’ brand name of KFC is used in Nigeria and litigation is costly and slow

10. Counterfeiting impact cont: • It has taken KFC 7 years to grant the rights for Nigeria and on an initially very limited scale • Brand owner will be monitoring brand standards very closely till full confidence is given by franchisee • Store roll out will be slower then other markets due to high risk of counterfeiting brand and brand standards

11. Success story-China • First roll out failed due to lack of understanding of China market • After a few years brand was re launched and is now the biggest foreign QSR brand in China operating more then 1200 stores • KFC’s logistics network in China is only second in size to that of the Chinese Army • KFC employs directly approx 45000 staff in its stores alone. • Its buying power alone and local adaptation to culture has created a large boost for small scale manufactures et al.

12. A success waiting to happen- Nigeria ( 2 giants meet each other) • Development of vendors thus creating employment • Skills building of staff by training ( 32 Nigerians in training in India currently) • New building and finishing standards set for store design and build • Flexibility in menu for local preferences (Jolof and Fried rice) • 1 minute service time at counter thus promoting higher service standards in all QSR’s to benefit of consumer • Local manufacturers encouraged to manufacture shop fitting etc as long a standards can be met • Full commitment to training of both team members and supplier staff and management on food safety and GMP’s • Shareholders committed to plough all dividends back into the brand for the next 5 years • 55 Nigerians employed per store and great development potential for performing staff to Snr positions. Expatriate workforce to be limited and scaled down as from end of year 1 once skills have been transferred • Enormous store potential in Nigeria first store to open December 09 with 2nd and 3rd before end March 2010 and 8 stores by end 2010 and future stores planned already

13. Thank you for your kind attention Questions and answers