Why global fast-food chains love the Indian market

New Delhi: The love-affair between India’s burgeoning middle-class and branded international fast food products appears increasingly to be heading towards the stage of a mature mutual relationship of understanding that might soon become a marriage. That should explain why despite negative market indicators in the short term, international chains like McDonald’s and Domino’s are here to stay alongside the likes of a local Haldiram’s and also explain the optimism of other big players like Burger King and Wendy’s to enter the Indian market with a big bang.  

Everyone wants a piece of the pie, no-one wants to miss the bus and everyone seems happy to be in the same boat. That’s the story of the quick service restaurant (QSR) market in India. Burger King, the world's second largest hamburger chain, opened its first outlet in Delhi on Sunday, 9 November, while Ohio-based Wendy's is likely to set up shop in the first half of next year. This, while the American fast-food giant McDonald’s has already been a household name in India since 1994 and Domino’s and KFC continue to be popular. 

The key to their success in what is potentially a difficult market would be their ability to adapt and localise, just as McDonald’s has done. 

The BBC’s Shilpa Kannan reports that Amit Jatia who is the local partner in the south and west of India, running the chain as a joint venture with the global McDonald's company is a staunch vegetarian. When he walked into a McDonald's for the first time, it was in Japan and he was only 14. All he could have was a milkshake. That’s why when the American fast-food chain first contacted him in 1994, Amit's first challenge was close to home, convincing his vegetarian family to invest in the business.

"From my family's point of view we thought through this carefully," he said.

"What convinced us was that McDonald's was willing to localise. They promised that there would be no beef or pork on the menu.

"Nearly half of Indians are vegetarian so choosing a vegetarian to run their outlets here makes sense.

Across the world the Big Mac beefburger is the company's signature product. Amit and his partners had to come up with their own signature product for India, so the Chicken Maharajah Mac was born.

Originally Amit was the local partner in the south and west of India, running the chain as a joint venture with the global McDonald's company.

Later he bought out the McDonald's stake and now solely runs the chain in the south and west of the country.

"Whether you love or hate McDonald's, they deliver a formula very well," says Edward Dixon, chief operating officer of Sannam S4, which provides market entry advice and support for multinationals in India, Brazil and China.

"Localised menu, delivered with precision quality at a price that works. One other trick they have used very effectively [is] an entry level ice cream which fuels the ability for consumers who might not ordinarily be able to afford to become a customer.” This also explains the runaway success of the 20 rupees (20p) burger called Aloo Tikki Burger, a burger with a cutlet made of mashed potatoes, peas and flavoured with Indian spices- essentially the McDonald's version of Indian street food. 

The kind of customers McDonald's attracts in India is very different from other countries. There are still families with young children who frequent it. But diners also include many young people, aged between 19 and 30, with no kids. During the week, Amit says, this crowd dominates the restaurants.

Following in McDonald’s very big footsteps, competition is trying to now sneak in: Domino's Pizza has more than 500 restaurants across India, KFC has more than 300 restaurants, Dunkin Donuts has more than 30 outlets in India, Burger King has just opened its first restaurant in Delhi and other outlets are reported to be opening shortly - it too has dropped pork and beef from its menu

NDTV reports that the new entrants are not deterred by the fact that margins of existing players are under stress amid a prolonged economic slowdown or that consumers have held back spending amid the economic slowdown in India. Low spending has weighed on demand, forcing companies to come up with promotional offers despite a sharp jump in input prices. High attrition and real estate rental costs have also impacted profitability, analysts say.

In the September quarter, Westlife Development, a company whose subsidiary Hardcastle Restaurants is a master franchisee of McDonald's in India, reported a 600 per cent year-on-year drop in operating margins. Jubilant FoodWorks, which operates the Domino's Pizza and Dunkin' Donuts brands in India and whose shares are well tracked, reported a 280 points drop in year-on-year margins in the September quarter. Its same-store sales growth (SSSG) also declined 5.3 per cent during the quarter.

Most companies see tough days ahead despite signs of early recovery. Jubilant FoodWorks' management said it is not seeing any positive change in consumer buying patterns and expects the weakness in consumer demand to continue in the near term. Current market environment has impacted shares of listed companies. Jubilant FoodWorks shares are up just 13.50 per cent, while Westlife Development shares are down 17 per cent over the last one year. In contrast, the Sensex has gained over 38 per cent during the same period.

But despite the negativity, new entrants believe that a recovery is around the corner. Raj Varman, chief executive of Burger King India, says the food business is a recession-proof business. Mr Varman's Burger King is coming up with 12 restaurants in Mumbai and Delhi over the next few weeks. 

The biggest draw for these new players is the massive growth prospects in India, analysts say. According to a report by Technopak, the QSR segment in India is set to grow at a compound annual growth rate of 25 per cent to reach revenues of $3.2 billion by 2018 from $1.06 billion in 2013.

There's also a growing belief that demand will come back quicker-than-expected as inflation cools and disposable incomes rise. "The Indian market is on the verge of substantial recovery... Growing disposable income and rising number of dual income families mean the headroom is enormous," Mr Varman says.

A sharp fall in inflation will also bring down input costs and increase profitability. Analysts also say that most big foreign brands have deep pockets and they can afford to play the waiting game.

Lead Bank Budgam organizes district level implementation committee meeting on PMJDY

BUDGAM, NOVEMBER 20: District level implementation Committee meeting regarding monitoring and implementation of Pradhan Mantri Jan Dhan Yojana (PMJDY) was convened today in District office Conference hall Budgam organized by Lead Bank Office Budgam under the chairmanship of Additional District Development Commissioner Budgam Mr. Mohammad Hussain Mir.

In the meeting, the discussion on progress of banks in opening accounts and holding camps/mega camps under PMJDY was discussed. The Banks operating in the district have opened 12716 accounts with effect from August 15, 2014 to November 18, 2014 under PMJDY Scheme, besides Banks have also organized 164 camps during the period to make people aware about the benefits of PMJDY and bring them within the ambit of banking facilities.

The chairman advised the banks to involve Panchayat Officers, VLW’s, Panchs, Sarpanchs, Numberdars and well known persons of the respective areas where such camps are to be held.

The member secretary informed the meeting about the importance and main features of this scheme which has been taken as a national mission and also said all the bank coordinators to submit the required information on weekly basis.

The meeting was also attended by Chief Planning Officer, Project Officer DRDA, all Bank Coordinators, representatives from NABARD and concerned agencies.

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