Blog: 25 years on, is McDonald's a success in India?
The author lists the areas McDonald's needs to focus on to grow in India
Sep 07, 2021 06:56:00 AM | Article | Sandeep Goyal Share -
This week, McDonald’s completed 25 years in India. How time flies! I can still remember when the first McDonald’s restaurant opened in Delhi in 1996. There was a Nirula’s restaurant at the corner of Basant Lok which made way for the new American eatery. Our Rediffusion office was in the same commercial complex, adjacent to Priya cinema (now PVR) those days. Some enterprising guys in the office decided that the whole office would have a lunch of the newly launched burgers on the opening day of the new McDonald’s. The hitch, however, was that no one was allowed to buy more than four burgers at a time: rationing imposed in anticipation of the crowds expected on the first day. So, more than 15 Rediffusionists were at the head of the queue that lined up from 9 am that morning and brought back to the office the first of McDonald’s burgers and fries which were devoured (and celebrated) with much relish and pleasure by all with many hurrahs for the tasty eats.
Madhukar Kamath, and the entire Mudra team - McDonald’s ad agency were in attendance at the launch, handing out menus, pamphlets and freebies to the ever-extending queue outside the outlet. To say the least, there was much expectation, excitement and happiness all around in welcome of the fast-food giant. The only sadness and poignancy was perhaps the shutting down of the iconic Nirula’s QSR – the beginning of the end of the then renowned Indian chain.
25 years down, Mc Donald’s, that arrived in India without its signature Big Mac (substituted in India by the Maharaja Mac, sans beef) has about 480 stores, of which 305 are managed by Amit Jatia’s Hardcastle which operates in the West and South of India and the rest by Sanjeev Aggarwal’s MMG (earlier by Vikram Bakshi’s Connaught Plaza Restaurants) that runs the North and East franchise. The numbers could have been much higher but for a long-running feud between McDonald’s and Vikram Bakshi that slowed down the brand’s growth for nearly a decade.
India must be one of the few countries in the world where burgers trail pizza. Of the estimated 6,500 QSR restaurants of international standing, Domino’s enjoys a whopping 19% market share in store count, pulling in 21% of all revenues through sales of pizzas. Even Subway with 500+ outlets numerically has better consumer outreach than McDonald’s. Thankfully, McDonald’s despite fewer store-fronts still pulls in 11% of all QSR revenues – though only a whisker ahead of KFC at 10% of revenues. Global competitor Burger King (if that is any consolation) has half the number of restaurants compared to McDonald’s and pockets about 5% of all QSR revenues.
So can we describe the McDonald’s journey of the past 25 years in India a success? A resounding success? No, for sure. A success. Surely. But a lukewarm one. What in school teachers used to grade as ‘can do better’.
With 1.2 billion Indians as potential consumers, 480 restaurants is a pittance for McDonald’s. The brand’s growth has been far slower than it should have been. And that has impacted both size and stature. The conquest of the India market has not been easy.
- Till the early 2000s, India was not really a serious ‘eat-out’ market. Only 3 out 100 meals were out-of-home at a restaurant or eatery. In the past 20 years that number has crept up to 8 or 9 per 100 – including takeaways and home deliveries. So the addressable market remains small.
- Globally, McDonald’s has had families with young kids as their core target audience. In India, the core franchise is more teenagers and college kids. Young adults. The core proposition therefore of a family outing at McDonald’s has got diluted in India. Even kids’ play areas that are a standard feature at most McDonald’s restaurants globally are not a must-have norm in India. On the other hand, the teenager crowd equally frequents a CCD, a Costa Coffee, a Starbucks, a Taco Bell, a Domino’s, a KFC … not seen to be traditional competition to McDonald’s in other geographies.
- A burger as a full meal has been a difficult idea to sell in India. A burger was at best a snack. Enlarging the thought and selling it as a meal time consumption item is still work-in-progress for McDonald’s.
- Localised menu, delivered with precision quality at a price that works has been the McD global formula. The Aloo Tikki Burger, a burger with a cutlet made of mashed potatoes, peas and flavoured with Indian spices priced at Rs. 20 was a great innovation but it frankly brought down the imagery of the brand many notches. Similar stuff was available at the chat-wallah at the street kerb. Why go to a McDonald’s to partake of one?
- Nearly half of Indians are vegetarian. Across the world the Big Mac beef burger is the company's signature product. So the Chicken Maharaja Mac was created just for India. But it never really became a flagship product and a magnet quite like the Big Mac.
- Localising has not been easy. Indians always used cabbage in their burgers. Finding lettuce to put in McDonald’s burgers took the company a lot of time and energy. There have been many more similar challenges.
- In 2009, McDonald’s added a new line of premium coffee to their menu which led to creation of McCafe globally. In 2010 McCafe added to their menu Real Fruit Smoothies to broaden their reach. Both product lines have very sparse presence or popularity in India so far.
McDonald’s is said to be aiming for a 1,000 outlets count in the next five years. That is at best making haste, slowly. That number should already have been achieved in these 25 years gone by.
To be fair to McDonald’s despite the slow growth, today no food court in a mall is complete without a McDonald’s being present. That is the intrinsic pull of the brand. And in the last 25 years, even the most orthodox of Indian families has tasted McDonald’s at some or the other time.
In the next decade, McDonald’s needs to rev up manifolds in India. Try more bold food innovations (even Starbucks today serves Chole Paneer Kulcha and Bhuna Murgh Pie designed differently by Chef Sanjeev Kapoor) that suit the Indian palette. Most importantly, it has to re-build the kids and family franchise where many other competitors cannot make a dent. There is loads of work to do. It can’t really wait another 25 years!
The author is managing director, Rediffusion.