Beaufort Analysis 268 – Why did the chicken cross the road?

It’s no joke though. Disruption for KFC restaurants across the country continued last week, as the company looked to solve a disastrous breakdown in its supply chain, that forced almost 600 outlets to temporarily close; almost two-thirds of their British eateries. The issue lies with a change in distribution partner to DHL and the logistics of supplying fresh chicken to over 900 restaurants in the UK.

We doubt the repercussions will be significant for KFC, and more importantly, the company handled itself well, apologising quickly and unreservedly. Whilst the problem was firmly with the new contractor, KFC did not try to shift the blame and took out advertising to highlight the problem, accepting all responsibility. It may seem an obvious step for companies to take, but many fail to take this first step.

Of course, the tribulations of the UK’s favourite fried poultry chain could be a symptom of how companies are looking to cut costs in an increasingly tougher and competitive retail environment. On the back of what is now seen as an inarguably sanguine 2017, this year is proving to be uncertain in its outlook and expectations. This is predicated on the back of change and a shift in central bank policies. The world does not know how Jerome Powell will react as chair of the Federal Reserve and the minutes released last week were scrutinised within an inch of their lives. The conclusion was that a rate hike in March is still on the table, and that there is no deviation from the schedule laid down by Janet Yellen.

It was a reminder that we are in the midst of a monetary tightening period and the previously synchronised actions of the world’s central banks are starting to loosen. The European Central Bank (ECB) is being coy about when it will start to raise rates, having already taken its foot off the quantitative easing accelerator. Instead, it is deflecting attention to the US, with a thinly disguised accusation of currency manipulation. In its recent minutes, the ECB noted that, concerns were expressed about recent statements in the international arena about exchange rates which relate directly to comments from the US Treasury Secretary that a weak dollar was good for the US economy.

To finish the week, we stay with Europe and politics, where European Commission President Jean-Claude Junker warned that the EU should be prepared for the worst scenario when Italy head to the polling booths for its election on 4th March. This prompted a fall in the Italian stock market and the last polls point to a hung parliament. It feels strangely comforting to be concerned about populist politics once again.