Fast food: India isn’t a quick- fix growth market, but one to stay invested in

Published: January 10, 2017 6:07 AM

When American fast food standard bearers McDonald’s and Domino’s Pizza stepped into India in the mid-1990s, the market was just ripe enough for take-off.

Their growth has set the stage for other international players and also set business aspirational standards for Indian food entrepreneurs and conglomerates alike.Their growth has set the stage for other international players and also set business aspirational standards for Indian food entrepreneurs and conglomerates alike.

When American fast food standard bearers McDonald’s and Domino’s Pizza stepped into India in the mid-1990s, the market was just ripe enough for take-off. McDonald’s and later Domino’s Pizza can be credited with not just growing the consumer appetite for fast food but also being responsible for the growth of an entire food service ecosystem, including fresh produce, baked goods, sauces and condiments, and cold chain technology.

India has been typically difficult for business models driven by scale, replicability and predictability. The customer is price sensitive, operating costs are high and non-compliance of business standards is a frequent occurrence. In this environment, these brands have reinvented the meaning of meals, snacks and treats. Their growth has set the stage for other international players and also set business aspirational standards for Indian food entrepreneurs and conglomerates alike.

Product experimentation is also imperative. It keeps excitement in the brand alive and help improve footfall. However, how far a product sustains and whether it becomes a menu staple can’t be predicted accurately. This is one reason successful QSR formats don’t overhaul their menus incrementally. New products also need significant investment in both supply chain and front-of-house changes in standardisation-oriented QSRs, so the new product launch cannot be undertaken lightly.

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For these market leaders, future scale and deeper penetration is only feasible with higher visit frequency. For growth in middle-income India, there needs to be a significantly cost-competitive option to be more than a ‘treat’ or celebration destination. On the other hand, while both McDonald’s and Domino’s Pizza have invested significantly in Indian flavours and menu offerings, perhaps it’s also best for them to reconcile with the fact that there will be a significant part of the consumer’s heart, stomach and wallet that will remain dedicated to indigenous offerings.

In a global environment that’s turning hostile to fast food, India isn’t a quick-fix growth market, but it’s certainly one to stay invested in, for the longer term. And I have no doubt that as much as these companies aim to change India, over time India will also change them.

The author, Devangshu Dutta is chief executive, Third Eyesight

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