Fast food retailing in India

Want a quick no hassle meal by just looking around, you are more than likely to find the Golden Arches – perhaps one of the most visible symbols all around the world. Inter brand valuation of brands released in the year 2006, ranks the brand as ninth and values the brand at $ 27,501 m. McDonald’s Corporation is today, a leading player in the global branded quick service restaurant segment in virtually every country in which it does business. In an age of mass consumption it caters to popular tastes.

In this case study, we examine the strategy used to launch the brand in India developing a global yet locally acceptable offering while maintaining international standards and at the same time, promoting entrepreneurship.

Company background

The roots of McDonald’s go back to the early 1940s when the McDonald brother Dick and Mac opened their first restaurant in San Bernardino, California. Ray Kroc, a salesman with a flair for marketing, was so impressed by the speed at which they served people. That he became their national franchise agent.

Mc Donald Corporation was created in the year 1955, when Ray Kroc opened his first restaurant in Des Plaines, Illinois. He soon realized this success could be duplicated across the United States and beyond, if consistency and quality could be maintained. In 1957 the company adopted quality, Service, Cleanliness and Value as its motto. Over the decades McDonald’s corporation has emerged to be a leading global food service retailer with more than 31,000 local restaurants serving 52 million people in more than 120 countries each day.

In January 2003, McDonald’s announced its first ever quarterly loss of $ 343.8 million since it became a public company in 1955. This led McDonald’s to embark upon a new strategic course, reflecting upon a fundamental change in its approach to growing business. While it initially aimed at adding new restaurants it now shifted its emphasis to building sales at existing restaurants.

In February 2004, McDonald’s Corporation announced the System wide sales for McDonald’s restaurants increased 22.6% or 14.8% as compared to the previous year. Comparable sales for McDonald’s restaurants worldwide had increased by 13.9%. In the year 2007, the company recorded a 6.8% increase in global comparable sales and $23 billion in total revenues a record 25% three year compounded annual return to shareholder.

The Indian Fast food market

A nation as diverse as India is a competitive market in terms of habits. This is primarily due to the fact that each region has its own traditional food and dietary habits, and its own food specialties. Changing lifestyles have however, fuelled the trend towards eating out and emergence of new segments like coffee retailing. This segment is witness to many international players most of them have learnt to adapt to Indian tastes and sensibilities.

The Indian catering services sector of which fast food is a part is estimated to be worth Rs 57,000 crore, of which only Rs 3,940 crore or 6.9% is accounted for by the organized retail market. India is likely to se the addition of at least 400 restaurants fast food outlets and coffee joints in 2008. Food chains such as Yum Brands, McDonald’s and Domino’s have earmarked an estimated investment of over Rs 300 – 400 crore this year, for expanding their retail presence across the country.

Key players in the Indian fast food market include Domino’s Pizza, Pizza Hut, Subway, Nirula’s and large number of local and regional players.