Ethical Issues: KFC in India

Submitted by Arun Trikha

16 March 2013

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KFC Background
By 1964, Sanders franchised more than 600 outlets in the US and Canada and sold his interest in the company in the US for USD 2 MM to the group of investors

Founded by Harland Sanders in early 1930s in Corbin Kentucky, the US

In 1935, Sanders was awarded with the name of Kentucky Colonel by the State Governor, for his contribution to states cuisine

In 1952, Sanders started franchising his chicken business and called it as Kentucky Fried Chicken

In 1966, Company was listed on New Yorks stock exchange

In 1971, company was acquired by Heublein Inc.for USD 285 MM

In 1982, Heublein Inc. was acquired by Reynolds Industries and In 1986, the company was further acquired by PepsiCo for USD 840 MM

By 2004, KFC emerged as worlds most popular chicken restaurant chains with 11,000 restaurants in over 80 countries

KFC At Present
One of the largest food chain serving chicken

Part of global restaurant system known as Yum!

Companys headquarters are found at Louisville,

Kentucky in the US

Roger Eaton, Chairman and CEO of KFC

Operating 5200+ restaurants in the US and over 15,000

units around the world

Offering services to over 12 MM customers in 120

countries around the world

Earned a revenue of USD 15 Bn in 2011

KFC India
First fast food multinational food chain to enter India after the economic liberalization policy of the Indian government, in early 1990s

Received permission to open 30 new outlets across the country from the Indian government

Opened first fast-food outlet in Bangalore as it had a substantial upper middle class population

Planned to open 60 KFC and Pizza Hut outlets in the country in the next 7 years

Faced opposition and entangled in various controversies due to opposition from farmers, nationalists, and economists

KFC Problems Faced in India

Protest by angry farmers led by the Karnataka Rajya Ryota Sangha (KRRS). Farmer leader Nanjundaswamy led the protest and condemned KFCs entry to India

Protest by cultural and economic activists

Protest by PETA in the late 1990s

Support of celebrities in against of KFC

KFC Ethical Issues

Strict Vendor Engagement Policies

Suppliers have to adhere to the ethical policies of KFC which includes paying fair wages to the
labor, not employing under age labour, and avoid placing harmful chemicals in their commodities

Health and Safety of Workers

The company also looks out for the health and safety of their workers. KFC always ensures that
their employees work for them voluntarily. Company detests forced labour and ensures that their employees work for them voluntarily

Ethical Employment Policies

Kentucky Fried Chicken employment practices are also ethical. This is due to the fact that the
company does not discriminate against individuals on the basis of race, gender, disability or any other factor

The issue of wages is also top on KFC's list. The company believes that workers should be paid

Fare Wages

according to their efforts. Consequently, there is an element of fairness when it comes to the way the company treats its employees

KFC Ethical Issues (Negative)

Non-Conformity with Food Product Regulations

Regulatory authorities found that KFC's chickens did not adhere to the Prevention of Food
Adulteration Act, 1954. Chickens contained nearly three times more monosodium glutamate(popularly known as MSG, a flavour enhancing ingredient) as allowed by the Act

Ill-Treatment of Birds in KFC

PETA asserted that KFC'S suppliers normally mistreat chicken in the slaughter houses. They
claimed that the chicken are chained by metal shackles and placed in electric water baths

Birds were fed genetically modified feed in order to accelerate their growth rate

Improper Breeding

o As a result they suffer from ailments such as extreme obesity and fatty livers and kidneys,
heart attacks and other health problems

Overcrowded Farm

Chickens were stuffed by tens of thousands into over crowded sheds where they hardly find
space to move freely

PETA People for the Ethical Treatment of Animals

American animal rights organization based in Norfolk, Virginia

A non-profit corporation with 300 employees and 2 MM members and supporters

Claims to be the largest animal rights group in the world

Slogan says "animals are not to eat, wear, experiment on, or use for entertainment

Campaigns by PETA (1/3)

In late 1990s, PETA started a protest against KFC in India. PETA had been protesting for a long time against KFC at international level. PETA highlighted that KFC was extremely cruel toward chickens and did not keep the birds in hygienic conditions. The various steps taken by PETA are as follows:

Launched Extensive Program

PETA India launched an extensive protest program against KFCs Indian outlet. PETA
urged the Indian public to not to go to KFCs restaurants and demanded outlets closure in India

Introduced Mass Education Program

PETA started mass education program to educate people about the chickens condition
at KFC poultry farms. PETA distributed pamphlets with a graphic description of cruelty done to the chickens. PETA used a slogan KFC stands for cruelty for the protest

Released Video Documentation

PETA also released a video portraying the daily suffering of thousands of the chickens
in a factory farm

Campaigns by PETA (2/3)

"Each bird whom KFC puts into a box or a bucket had a miserable life and a frightening death. People would be shocked to see our footage of a KFC supplier's employee who walks through a barn, carelessly lighting lamps and letting flames fall on the terrified birds. The air inside these filthy barns reeks of ammonia fumes, making it difficult for the birds to breathe. No one with a grain of compassion should set foot in KFC. Ingrid Newkirk, Director, PETA

"The chicken they serve is full of chemicals, and the birds are given hormones, antibiotics and arsenic chemicals to fatten them quickly." Nanjundaswamy

In 2004, PETA accused KFC of cruelty towards chickens and released a video tape showing the illtreatment of birds in KFC's poultry farms. However, undeterred by the protests by PETA and other animal rights organizations, KFC planned a massive expansion program in India
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Campaigns by PETA (3/3)

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SWOT Analysis

Delicious and well-liked recipes First mover advantage/ global penetration

Close substitutes Franchising strategy is not culture sensitive Product innovations at long gaps Inconsistent services across the outlets Usage of added flavors such as MSG

Weaknesses

Strengths

Widely recognized brand image Strong cash flow generation Loyal customer Large number of outlets at prime locations Brand recognition

Retail boom in India

New entrants Health issues Change in customer demand

Opportunities

Growing Indian economy Adoption of western culture Increasing trends to have meals outside home Economy of scale

Threats

Organizations working for animal rights

Spread of diseases such as bird flu

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Conclusion

KFC has to deal with different ethical issues in their capacity as a business corporation. Any company worth its salt should have a code of ethics and must be prepared to stick by it KKC has breached a substantial number of their ethics codes

The purpose of this study was to provide an in-depth analysis of the fast food industry through two contrary ideas; the moral and legal obligations that KFC has adhered to and also the ethical misgivings that the company has engaged in too

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Sources
http://www.articlesbase.com/ethics-articles/ethics-at-kfc-1924425.html http://money.cnn.com/2004/07/20/news/fortune500/kfc/index.htm http://www.andhrauniversity.info/sde/case%20studies%20mba/044%20KFC%20in% 20India%20-%20Ethical%20.pdf http://www.icmrindia.org/PDF/Business%20Ethics.PDF http://multinationalmonitor.org/hyper/mm0196.03.html

http://www.nytimes.com/2003/01/06/us/group-says-it-will-begin-a-boycott-againstkfc.html
http://www.kentuckyfriedcruelty.com/h-campaign.asp http://www.peta.org/

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Questions ?

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