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P 211605Z MAY 09
FM AMCONSUL LAGOS
TO RUEHC/SECSTATE WASHDC PRIORITY 0780
INFO RUEHUJA/AMEMBASSY ABUJA 0382
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RUEATRS/DEPT OF TREASURY WASHDC
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UNCLAS SECTION 01 OF 02 LAGOS 000233 
 
SENSITIVE 
SIPDIS 
 
DEPARTMENT FOR EE/TPP/ABT/ATP SPECK 
TREASURY FOR PETERS AND HALL 
DOC FOR 3317/ITA/OA/KBURRESS, 3130/USFC/OIO/ANESA/DHARRIS 
 
E.O. 12958: N/A 
TAGS: ECON EAGR EAID ETRD NI
SUBJECT: Nigeria's Second-Largest Fast Food Chain Bullish on 
Prospects 
 
¶1. (SBU) Summary.  Nigeria's fast food industry has witnessed 
tremendous growth in recent years and the management of the 
country's second-largest chain, Chicken Republic, expects that pace 
to continue despite an economic slowdown and supply chain problems. 
Food Concepts Managing Director Deji Akinyanju told EconOff on May 
12 that Nigeria's middle class consumers have a large unmet demand 
for convenience food and have demonstrated little sensitivity to 
price increases.  Consistency and quality of supply present 
obstacles to expansion, but Akinyanju expressed confidence that 
attempts to integrate the firm's supply chain would allow the fast 
food establishment to increase in scale.  The rapid expansion of the 
fast food chain is indicative of Nigeria's emerging middle class and 
growing wave of consumerism.  End Summary. 
 
Nigeria's Middle Class Eager for Fast Food 
------------------------------------------ 
 
¶2. (U) Food Concepts Managing Director Deji Akinyanju told EconOff 
on May 12 his company anticipated continued expansion in the fast 
food industry and was about to embark on a rapid expansion of its 
flagship brand, Chicken Republic.  After starting in 2001 by 
franchising a South African chicken fast food chain in Nigeria, Food 
Concepts in 2005 launched the Chicken Republic chain that currently 
boasts 50 branches across Nigeria, three in South Africa, and one in 
Ghana.  Chicken Republic is now Nigeria's second largest fast food 
chain behind Mr. Bigg's, which has about 150 branches.  Akinyanju 
anticipated in the next few years Chicken Republic would expand to 
300 branches, with a mix of franchises and directly owned 
storefronts. 
 
¶3. (U) Akinyanju assessed that Nigeria's middle class had a rapidly 
expanding appetite for fast food that more than justified his firm's 
expansion plans.  Nigeria has a market for 2,000 to 3,000 fast food 
locations, according to Akinyanju, suggesting that the industry was 
now only scratching the surface of its potential.  Indicating that 
Nigeria's fast food consumers were relatively insensitive to rising 
prices, he said the chain was able to pass along higher raw material 
prices with little lasting impact on demand.  Nonetheless, to guard 
its market share against potential belt tightening, Food Concepts 
has begun to market less expensive meals, such as rice, in addition 
to higher cost chicken. 
 
¶4. (U) Indicating that Chicken Republic had yet to see sales slip, 
Akinyanju downplayed the risk that the economic slowdown might 
impact his firm.  He opined that food consumption would be one of 
the last expenses that Nigerians would cut and that, while fast food 
was not a necessity, the firm's successful branding initiative would 
continue to attract status conscious Nigerians.  Moreover, Food 
Concepts saw opportunities in the slowdown in the form of lower 
property prices that would aid growth.  Akinyanju did concede that 
the collapse of the Nigerian stock market derailed plans for an 
initial public offering last year, but said a consortium of local 
banks had willing stepped in with USD 50 million in financing plus 
USD 35 million from a private placement of equity.  Of recent 
concern, however, have been fuel shortages across Nigeria the past 
month that have slowed traffic to the restaurants, according to 
Akinyanju. 
 
Local Supplier Capacity Remains a Problem 
------------------------------------------ 
 
¶5. (U) Scaling the firm's supply chain to keep pace with this 
expansion poses Food Concepts' largest challenge, according to 
Akinyanju.  Lamenting the dearth of commercial agriculture, 
Akinyanju related that the other day he had negotiated with a farmer 
from Jos, who was only able to deliver a small batch of vegetables 
in a rickety truck.  Even where Nigerian farmers produced in 
sufficient quantities, Akinyanju noted quality control issues and 
that the lack of domestic processing capacity forced Food Concepts 
to import many inputs. 
 
¶6. (U) Akinyanju said Food Concepts was partnering with chicken 
producers and grain farmers - feed represents 70 to 80 percent of 
the cost of every bird - in an attempt to integrate its supply chain 
and guarantee supply and quality.  Food Concept has even partnered 
with US food conglomerate Cargill and a local NGO to draft a report 
for the Nigerian government on agriculture supply chain 
shortcomings.  Akinyanju acknowledged that vertical integration 
directly with farmers would distract Food Concepts from its core 
fast food concerns, but said it was the only way for his company to 
remain competitive in Nigeria.  Nevertheless, Akinyanju expressed 
 
LAGOS 00000233  002 OF 002 
 
 
confidence that the supply chain investment now would give the firm 
an advantage should the Nigerian fast food industry become saturated 
and price sensitively set in. 
 
¶7. (SBU) Comment:  The rapid expansion of Chicken Republic, with its 
trendy restaurants that appeal to young Nigerians with disposable 
income, is indicative of Nigeria's emerging middle class and growing 
wave of consumerism.  Even adjusting for Akinyanju's optimistic 
outlook, Chicken Republic's success shows few signs of succumbing to 
an economic slowdown or food price inflation.  The primary obstacles 
to Food Concept are essentially the same faced by all Nigerian 
investors: dubious value-added requirements, like micromanaging 
supply chain issues or generating electricity, that divert an 
entrepreneur's time and money from core business activities.  End 
comment. 
 
¶8. (U) This cable has been cleared by Embassy Abuja. 
 
Blair