{"id":2551,"date":"2011-04-28T05:34:00","date_gmt":"2011-04-28T05:34:00","guid":{"rendered":"https:\/\/www.thirdeyesight.in\/?p=2551"},"modified":"2022-09-09T05:37:47","modified_gmt":"2022-09-09T05:37:47","slug":"western-chains-flock-to-india-as-fast-food-craving-grows","status":"publish","type":"post","link":"https:\/\/myechoproject.com\/TES\/western-chains-flock-to-india-as-fast-food-craving-grows\/","title":{"rendered":"Western chains flock to India as fast-food craving grows"},"content":{"rendered":"\n

REUTERS
\n Mumbai April 28, 2011
\n Nandita Bose and Neha Singh<\/i><\/p>\n

McDonald’s made its name serving up hamburgers fast, but it took \n the world’s biggest hamburger chain four years to enter India \n — without its signature dish.<\/p>\n

A number of fast-food and cafe chains — Starbucks and Dunkin \n Donuts to name just two — that are flocking to India would do \n well to take away lessons learned by established rivals such as \n McDonald’s in navigating a market beset with obstacles.<\/p>\n

Industry experts say patience and flexibility in a country where \n dietary traditions rule may well define successful global restaurant \n brands in India.<\/p>\n

The stakes are high, with India’s quick-service restaurant market \n worth $13 billion and growing roughly 25-30 percent a year, according \n to Euromonitor and market research firm RNCOS. India’s entire \n food-service market is estimated at $64 billion.<\/p>\n

Adapting menus to cater to local dietary needs may be a winning \n strategy, analysts say. This is not as easy as it seems – Burger \n King had looked to enter India in 2007-2008, but hit roadblocks \n when trying to tweak its menu to suit local tastes, according \n to analysts and several local media reports.<\/p>\n

"If you’re a global food retailer, you need to have an offering \n for the Indian consumer … you cannot push global products," \n says Pinakiranjan Mishra, partner and national leader for consumer \n products and retail at Ernst & Young in Mumbai.<\/p>\n

"For a select group of consumers you can, but not if you \n are looking at building a mass presence."<\/p>\n

India is the first country where McDonald’s decided not to offer \n beef or pork items. Instead it sells chicken and vegetarian variants \n to cater to a significant portion of the population that is vegetarian.<\/p>\n

Some of its newer competitors such as Denny’s Corp, which plans \n to enter India by mid-2012, are following suit.<\/p>\n

"We have had to strip beef and pork out of our menu. We \n have had to customise it completely," said William Edwards, \n chief executive of EGS, which is handling the international expansion \n of Denny’s, well known for its all-day menu featuring eggs, sausages \n and pancakes.<\/p>\n

YOUNG AND TRENDY<\/b><\/p>\n

Analysts estimate that China’s fast-food market is nearly six \n times as big as India’s and foreign chains are targeting both \n markets to take advantage of rapidly growing economies.<\/p>\n

Driving the growth in India’s fast-food sector is a generation \n of young and increasingly wealthy consumers with an appetite for \n western tastes.<\/p>\n

More than 60 percent of India’s population, or 700 million people, \n are under the age of 30 — a prime target for fast-food.<\/p>\n

"It’s a lot easier to grab a burger at McDonald’s than order \n a vada sambar (savoury doughnut in lentil soup) at an Udipi which \n is time consuming," said Bidisha Mukerjea, a 24-year-old \n content writer from Mumbai, referring to Indian local fast-food \n restaurants. "Udipi food is cheaper but it’s about foreign \n brand attraction, it’s just fancy to eat at these new places."<\/p>\n

It’s no surprise that a host of foreign chains have their sights \n on India. Starbucks is expected to open its first India store \n in July or August. Others wanting a foothold include Applebee’s, \n Pollo Tropical, a unit of Carrols Restaurant Group (TAST.O<\/a>), \n and hamburger chain Johnny Rockets.<\/p>\n

Existing foreign brands know the competition is heating up and \n have expansion plans of their own.<\/p>\n

Yum! Brands, which owns the KFC, Taco Bell and Pizza Hut chains, \n plans to invest $100-$120 million in India this fiscal year. It \n runs about 108 KFC outlets in India, compared with 2,800 KFC outlets \n in China.<\/p>\n

"The market here is competitive. There is competition \n among the existing foreign chains and the ones who will clearly \n benefit are the ones who have scale," said Devangshu Dutta, \n chief executive at retail consultancy Third Eyesight.<\/b><\/p>\n

"This inflow of western chains does not pose a threat \n to local players such as Udipis because the market is big enough \n for both sides to grow."<\/b><\/p>\n

India caps foreign ownership in single brand retail at 51 percent, \n forcing all foreign chains to seek partnerships to do business \n in Asia’s third-largest economy.<\/p>\n

Denny’s plans to operate through regional licenses in India and \n Starbucks has signed a pact with Tata Coffee Ltd (TACO.NS<\/a>). \n Dunkin Donuts said in February it planned to launch its brand \n in India, partnering with fast-food operator Jubilant Foodworks \n Ltd that runs the Dominos Pizza chain in India.<\/p>\n

VALUE MEALS?<\/b><\/p>\n

Analysts say that keeping menus affordable is crucial in a country \n where incomes remain low by global standards, and lunch from a \n street stall can cost less than 50 U.S. cents.<\/p>\n

By comparison, a McVeggie meal at McDonald’s, which entered India \n in 1996, costs 94 rupees ($2.1) in Mumbai.<\/p>\n

Low unit consumption and high attrition makes targeted turnover \n that much more difficult to achieve.<\/p>\n

"When you train someone to make pizza or coffee, the \n skills needed are far more than what is needed to sell clothes \n at a retail shop," said Third Eyesight’s Dutta. "So \n it is much more difficult for these companies to find people who \n have the necessary skills."<\/b><\/p>\n

Foreign chains face other problems such as underdeveloped real \n estate for the retail market and food inflation, which has been \n in double digits for the much of the past year.<\/p>\n

"Milk leading to cheese is our key ingredient and milk prices \n are shooting up," said Ajay Kaul, chief executive of Jubilant \n Foodworks. "Maintaining margins in an inflationary environment \n is definitely a concern."<\/p>\n

Amit Jatia, vice-chairman for McDonald India’s west and south \n regions says that supply chains are an issue, although they are \n better then they were 15 years ago.<\/p>\n

"India still lacks an effective cold chain network and storage \n systems are not very efficient," he said.<\/p>\n

Roughly 30 percent of produce in India goes to waste due to transportation, \n warehousing and cold storage bottlenecks.<\/p>\n

Still, the vast potential from entering India’s fast-food sector \n outweigh the risks, analysts say.<\/p>\n

"As a consumer market, India has everything going for itself. \n From strong GDP growth to rising income, increasing urbanisation \n etc.," Ernst and Young’s’ Mishra said.<\/p>\n

"Problems such as inflation and supply chain bottlenecks \n will be a deterrent, but only in the short term."<\/p>\n

($1 = 44.275 Indian Rupees)<\/p>\n

(Editing by Tony Munroe and Dhara Ranasinghe)<\/p>\n

(This article originally appeared on Reuters \n on April 28, 2011<\/a>)<\/i>
\n <\/p>\n","protected":false},"excerpt":{"rendered":"

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