When Pizza Hut decided to offer a deep pan pizza unbelievably ringed by mini cheeseburgers this past April, it didn’t sell it anywhere in the U.S. Instead, the “Crown Crust Pizza” made its debut in Dubai. Americans took notice, and the caloric monstrosity became the butt of jokes on late night talk shows. One American flew in from New York just to have the pizza. (He couldn’t finish it.) Others, though, wondered why such a fantasy fast food concoction was being sold only in the Middle East.
What few Americans know is that the Arab World’s love for Western-branded fast food is seemingly bottomless, to the extent that in the region’s wealthiest oil exporting countries, high-end fast food restaurants offering $US40 hamburgers and French fries can find a willing clientele. Even ubiquitous brands such as McDonald’s and Burger King can sell their meals at 5 to 10% markups from their cost in the U.S.
Recently, the Gulf has seen the launch of several Western niche fast food brands, including Danny Meyer’s Shake Snack from New York City, South St. Burger from Canada, Denver-based Smashburger, and New Zealand-based Burgerfuel. Now that the violence is over in Libya, it has been targeted by fast food franchises: its first Cinnabon opened in July, which also happened to be the first U.S. franchise of any kind to open in the country. Johnny Rockets will soon follow, having signed franchise rights there.
Many of these fast food brands see Middle East expansion as a way to make up for softness in Western markets. The prize is Saudi Arabia, which analyst firm Euromonitor expects to develop into a US$4.5 billion fast food market in the next three years. But doing business in the region means having to join a local partner, who invests and executes on the ground, tweaking products to suit regional taste and a largely Muslim customer base, and maintaining a novelty factor to stand out in an increasingly crowded market.
“As companies look for growth in sales, it is natural for them to look to new markets,” says Wharton marketing professor Barbara Kahn. “Some retail products are more universal than others, and the ones that are, are more likely to go global. Also, if they have some kind of differential advantage relative to the local competition, you’ll see more global outreach. In this case, American cuisine is presumably the draw.”
Published September 04, 2012 in Arabic Knowledge@Wharton