Hunger Games

Written by Anushree Bhattacharyya | Updated: Dec 10 2013, 08:23am hrs
Its a cold and foggy morning in Delhi, but at the McDonalds outlet in DLF Cyber Hub in Gurgaon on the outskirts of the national capital, theres a steady stream of customers popping in for a hot cup of coffee

and a hearty breakfast consisting of Hash Browns and McMuffins. Most of them are young executives

living in digs nearby and working at the gleaming information technology office complexes around. For many of them, lunch too will be a quick affair as they go online to the Dominos Pizza website and order pizzas.

For the young urban Indian, food items once considered foreign such as burgers, pizzas, bagels, wraps, etc., are de rigeur today. Whether it is Pizza Hut or Dominos Pizza, McDonalds or KFC, Taco Bell or Dunkin Donuts or Subway, each of them offers a variety of affordable fast food items perfect for almost every occasion. Only last month, Burger King Worldwide, the second largest fast food hamburger chain in the world, formed a joint venture with private equity (PE) major Everstone Capital to enter India.

The deal includes a long-term master franchise and development agreement, which includes sub-franchise rights for all of India. Over the next few months, Everstone will work with Burger Kings Asia arm BK AsiaPac Pte Ltd to set up the supply chain in India and execute a rollout plan to establish Burger King restaurants across the country. India is a market with huge potential for Burger King restaurants and we have the chance to offer the unique brand proposition to its consumers with our own local twist to the menu, said Elias Diaz Sese, president, BK AsiaPac Pte. Ltd.

According to a recent report by Technopak Advisors, a strategic advisory firm, the Indian quick-service restaurant (QSR) market, as this fast food category is known, is valued at $1.1 billion (R6,890 crore) and is expected to grow by 21% annually to touch $4.2 billion (R25,843 crore) in 2020. There are many factors that have aided the growth of the category. Around 65% of urban Indians are below 35 years, and these are the people who are likely to eat out most of the time. Also, earnings have increased apart from the rise in spending power as more women join the workforce. Thirdly, the Indian consumers palate has evolved over the years mainly from exposure through international travel and media, said Tarun Jain, vice president, food services at Technopak Advisors.

To be sure it wasnt this easy always. The initial days were mired with controversies. KFC, whose tryst with India began in 1995 when it opened its first outlet in Bangalore, was forced to leave the country after exceeding monosodium glutamate (MSG) limits in its dishes and the detection of a fly in its kitchen in Delhi.

Next, McDonalds was nearly forced to leave the country after it was reported that beef flavouring was in the fat it used to make French fries. Activists from the Shiv Sena and other organisations protested outside McDonalds outlets, in some cases ransacking

them. In a letter to then Prime Minister Atal Bihari Vajpayee, activists demanded that the chain be banned from India. Nearly two decades back, when international QSR brands entered the country, consumers were not ready for them. Nevertheless, it was actually the right time for these brands to come to India to lay the foundation for the growth they are enjoying now. While it has not been a smooth ride, it has been an eye-opener for QSR brands, said Harish Bijoor, CEO, Harish Bijoor Consults.

Desi approach

When in Rome, do as the Romans do this became the mantra for all the QSR players as they tried to woo customers, and it continues to be the guiding principle as they continue their march. Realising that bland, continental cuisine would not find much favour with Indians known for their love for spicy food, QSR brands tweaked their global menus to match local palates. For instance, Dominos India upped the spice quotient in its pizzas in India. It is about providing a desi touch to make a new product familiar to consumers. Almost 80% of our menu resembles the international menu with same toppings, variants, etc. The only difference is that the pizza in India is spicier than its international counterparts, said Harneet Singh Rajpal, vice-president, marketing, Dominos Pizza India.

Apart from tweaking their international menus, QSR brands from time to time have managed to sweep the Indian consumer off her feet by launching an Indianised food item. For example, Fiery Grilled Chicken, Potato Krisper, Veg Zinger and Rice Bowl are some of the Indianised items that were introduced by KFC. Pizza Hut introduced items such as Crown Pizza, a special heart shaped pizza for Valentines Day; while it brought Magic Pan Pizza to woo the Indian consumer. Similarly, McDonalds India has introduced food items such as McAlooTikki burger, McSpicyPaneer burger, etc. But there isnt a one-size-fits-all solution for a country as large and diverse as India. Therefore, focusing on product innovation around local flavours is ingrained in the DNA of our brands. Our menu across brands comprise some of the international favourites along with Indianised products, said Yum! Restaurants India spokesperson in an email response.

This relationship with the Indian consumer however did not blossom overnight; rather it took years of understanding. For instance, on its entry in India in 1996 McDonalds offered a Big Mac burger made with lamb called the Maharaja Mac.

The chain tried re-creating its American classics with lamb, but it was a flop and it was forced to withdraw it from the market within six months. Bijoor goes on to say that the initial years which were full of trials and tribulations for the category was also a learning experience which made QSR brands realise that they cannot take the Indian consumer for granted and will have to include food items that go with their lifestyle. And today QSR brands have taken customisation of food to a different level. For example, for KFC which had recently introduced rice bowl, the next step perhaps would be the introduction of a KFC Thali, explained Bijoor.

In fact, such is the fondness for Indianised food items that these have been driving sales. The Indianised food items account for 70% of sales for Taco Bell in India, said Unnat Verma, general manager, Taco Bell, Yum! Restaurants India. Rameet Arora, senior director, marketing, communications and menu management, Hardcastle Restaurants Pvt. Ltd, (McDonalds - West & South India) goes on to say that the innovations are based on customers feedback and are an extension of its Im Lovin it experience.

Today, our McAlooTikki burger is one of our most popular and largest selling products. Its huge popularity can be gauged from the fact that today McDonalds exports the McAlooTikki to the Middle East and to Singapore to enable the large Indian population present in the region to feel connected to their roots.

In the fine dining category, if plating of the food plays a crucial role in deciding the fate of a particular dish, in case of QSR it is packaging which draws a consumer to the dish. We think on very holistic terms when we think of product design. The journey of a product starts from our innovation lab and ends when a consumer buys it. We believe that how a product is packaged is a very important part of this decision making process. For example, in case of KFC Rice Bowlsince we know that rice is an integral part of how Indians eat meals, especially lunch; we thought of contemporising it. So we decided to go with a cool bowl, convenient take-away packaging and contemporary spoon-cum-fork. This product is for people who want to have lunch on-the-go, added the Yum! Restaurants India spokesperson.

Larger appeal

Unlike her American or European counterpart, the Indian consumer is known for her value for money mindset. QSR brands have realised that while there is a select set of consumers who have a fondness for premium food items, the majority prefers purchasing the more affordable ones. Both KFC and McDonalds have launched affordable burgers at R25, while pizza rivals Pizza Hut and Dominos Pizza are battling it out for the R45 small-sized pizza market.

The affordable range of food items, in this case pizza, plays a big role in driving trial. For those consumers who are looking to eat a pizza for the first time, the price point easily allows them to do that. The other role that the affordable range does is that it also drives the frequency of consumption, a must for any business, added Rajpal of Dominos Pizza.

In addition to introducing affordable food items, QSR players have launched affordable meals. For instance, the Indian consumer can now buy an affordable meal where is she able to get a burger, fries and cold-drink/ hot-drink for R100. McDonalds introduced the Happy Price Menu starting at R20 in 2004 and it still continues to be a success. Additionally, at a time when food prices were going through the roof, McDonalds had dropped prices on its meals by 25%. It offered customers even greater value for money and introduced a new category of mealsExtra Value Meal starting at R85 only. These initiatives have been instrumental in enabling our continual growth, explained Arora.

Promotions and offers too play a vital role in drawing consumers to their favourite QSR brand. For instance, Dominos Pizza had introduced an offer as per which a consumer on purchase of a medium size pizza, would get a second medium pizza free, every Wednesday. From time to time, QSR players replace the old promotion with a new one to further create excitement amongst consumers. Promotion and offers and launch of new products are an important part of the business as they account for 15-20% of overall sales. Currently the QSR category is going through a hit-and-trail phase, wherein a player introduces a scheme. If the scheme becomes a hit among consumers, then the player repeats it from time to time. In case it fails, then it is withdrawn from the market. So QSR brands continue to launch new schemes every 15 days or month, said Rajat Wahi, partner, head - retail, KPMG in India.

Interestingly, television no longer remains the only platform for the QSR brands to advertise about their products and services. The use of medium now depends on what the brand wants to communicate and to whom. For instance, Dominos Pizza took to digital to introduce its free pizza offer. Similarly, Pizza Hut ran a Twitter contest, The Bigger Pan Pizza, with five influential bloggers where their followers were asked questions and winners received Pizza Hut gift cards. Apart from the usual channels of communication such as above-the-line and below-the-line, we are now increasingly exploring the third medium, which is TTLthrough the line. Progressively, brands are turning to digital to support the core communication or sometimes even lead a particular campaign. For example, we had launched a web and mobile application WOW@25. The KFC WOW app received over 35,000 mobile downloads and over 150,000 on the app website in just 20 days, said the Yum! Restaurants India spokesperson.

Ballooning effect

Analysts believe that after a choppy start, the game for QSR brands has just begun in India and it is evident from the fact that apart from regular restaurants, QSR brands have started introducing different formats of restaurants. The various formats allow consumers to enjoy a new ambience which also encourages them to try out new dishes. McDonalds, for instance, for the first time in its history, introduced vegetarian-only restaurants at the foothills of the Vaishno Devi shrine at Katra in Jammu and Kashmir and near the Golden Temple in Amritsar. The fast-food brand has also introduced McCafe,

its cafe brand which is a spin-off of the original. Interestingly, McCafes worldwide are housed within McDonalds outlets but have a separate look and feel, and the same format will be followed here in India. Next, Dominos Pizza recently introduced a new store based on the new globally launched Pizza Theatre concept featuring an open kitchen. We continue to focus on our core format which is all about giving the customer an enhanced experience whether it is in terms of ambience or product offerings. For Pizza Hut we recently launched the Hut Caf concept in Kolkata. It has contemporary interiors with different zones, extended menu selection offering a dedicated counter for fine coffee, tea, smoothies, shakes, etc., with desserts and snacks around the clock, said theYum! Restaurants India spokesperson. Rajpal of Dominos Pizza goes on to say that today dining is an important part of their business. For Dominos Pizza, which is essentially a delivery brand and has grown at the back of delivery as its proposition, 50% of our revenue today comes from dining, he explained.

Even as QSR players continue to introduce new formats, they are also spreading their wings by entering tier II and tier III cities. According to a recent Crisil report, the Indian QSR market will see its next big growth come from consumers in these cities. Annual spends on eating out at QSR chains in non-metros are expected to surge 150% to R3,750 per household over the next three years.

The expansion plan has played a dual role in building the QSR category. While organised players are consolidating their reach by opening more stores, regional players such as Mast Kalandar too have become organised with fresh investments and are branching out. Getting organised has helped everyone, especially regional players who can now compete with international brands, added Jain of Technopak.

Smaller towns and cities, therefore, now hold a special place in the hearts of QSR brands. For example, Yum! Restaurants which operates brands such as KFC and Pizza Hut has penetrated deeper into markets such as Baroda, Patna, Raipur, Asansol, Jammu this year. Yum! Restaurants as of now runs 296 KFC outlets and 121 Pizza Hut restaurants across the country. Dominos Pizza, which currently has 650 restaurants across 137 cities, plans to open 135 stores this financial year. McDonalds, on the other hand, operates 330 restaurants in 64 cities across 16 states.

The idea is to make the brand more accessible to consumers both by opening more stores in the existing cities as well as by entering into deeper pockets, added Rajpal. Bijoor goes onto say that in another three to four years these brands will truly become ubiquitous.