‘If people spend more time with us, share of wallet follows’

McDonald’s entered in 1996 – how has the brand and the market evolved since then?

 

While McDonald’s is a brand that covers the entire scope of India, we (Hardcastle Restaurants) are present in West and South. We have gone from zero to 216 outlets (as of September 2015) and growing. Western fast food isn’t something that has a broad-based mass appeal yet. It is still building.

 

In the last 20 years, we’ve added 216 outlets in West and South, and around 400 across the country. We’ve been able to do this, while keeping the brand relevant. It’s not just being a Western fast food player, doing cut-copy-paste into the Indian market. We’ve been able to customise and bring in a lot of local flavours into the Western format. So we have the global format with the local taste. That’s what has helped us grow this category. What we’ve also done in the last 20 years, is looked to stay relevant beyond burgers. The menu has expanded on sides, desserts, beverages and in the last three years, we have a special focus on coffee with McCafe. We’ve also leveraged the power of delivery and digital. Our digital contribution to driving guests through McDelivery has been significant. So, we’ve been constantly innovating on menus and formats. We have drive-throughs which not many people can boast of in this country. So, we’ve wired up and are geared up for the future.

 

What’s the split in distribution of these outlets? Are the smaller towns showing growth promise too?

 

Of the 216 outlets (in West and South), between Mumbai and Bengaluru we cover around 50 per cent. Then, there are towns like Palakkad, Mangalore, Hubli, Mehsana, which are helping us spread the brand far and wide. We’re trying to make the brand more accessible in these areas too. Sales is a direct function of the number of outlets in a city, so it’s skewed more towards the urban centres.

 

Chennai currently has around 12 outlets, there are 15 in Hyderabad, 45 in Bengaluru and Mumbai will have 70-odd.

 

Does the Happy Price Menu continue to drive the maximum sales?

 

Yes. It’s the one that recruits for us. It’s (McDonald’s) not like a FMCG that drives you to a particular product for a particular life stage. This is a brand that recruits you early and takes you ahead for your various journeys in life. From a college student to a first jobber, to a young parent and older parent – the brand recruits and manages to have an offering across the spectrum of age, taste and formats. We have different day parts too. We have breakfast, lunch, then snacking and dinner.  It could work as a late night snack too.

 

Is there an ideal (or core) TG then?

 

We are a brand that caters to everybody. We don’t have a bulls-eye TG, because different day parts see different constituencies of people who walk in. During the breakfast hours we have the first jobbers who are on the go, along with college students who start their day early. College students dominate most of the day then onwards. At dinner we find more of families, while lunch has more of the office goers. So, we are a single brand that caters to a wider audience. The challenge is to stay relevant to these people all the time.

 

How would you think brand Mcdonald’s equity has helped in the Indian market? Has there been any rub off of the negativity around the brand in recent years, around health concerns in other markets, in India? Has this hampered people taking to stuff like the breakfast menu?

 

I don’t think any food is unhealthy as such. It’s the lifestyle we lead which is unhealthy. To share a personal experience, I come from Indore – my father would keep saying, that he could eat 50 or 60 gulab jamuns. I can’t even think of the idea of eating one. But they led a lot more active life than we did. So, that needs to be factored in. Then, people start blaming other things (like food) as the evil, but it’s the lifestyle which is the evil. If you can balance the two, it’s fine.

 

Breakfast is one of our most healthy options. We have whole grain products and steamed. We have cut down on calories etc. in our mayos.

 

But these changes haven’t been communicated towards the consumer? Would that be an idea?

 

No. You wouldn’t want to say that in the McAloo Tikki, the calories are this and so on. If you look at what we look at as the barometer for understanding whether the industry is growing or not is a metric called ‘Informal Eating Out’. We check how is that progressing with time. If you compare us (India) to a market in South East Asia, the Informal Eating Out is way lower. For us eating out is still an occasion. And when you talk about an occasion, if you concentrate on health, the whole thing of going out and eating is lost. People want to indulge when they go out. If one is eating out every day, then there are concerns about health.

 

In 2003, a city like Mumbai was only eating out thrice a month. There are 90 to 100 meal (considering one eats thrice a day) options. Even today, it’s around eight or nine. Other Asian countries have around 30. In a country like Hong Kong, which is not bigger than Andheri, we have 438 outlets. Philippines has around 400 outlets. So, for the geographical spread of our country and the population we have, there is still a humongous opportunity for growth. In the entire eating out opportunity, Western fast food is only at 2 per cent. So we are not even scratching the surface. So the headroom for growth is huge and there’s even space for new players to enter. So existing players will expand and new categories will come in. These are exciting times to be in this category. The incidents of eating out has to increase in the next 10 to 15 years.

 

To back your thoughts about the market growing, a FICCI-Grand Thorton report 2015 pegs the Quick Service Restaurants market to be growing at 16 pc. But it mentions that QSRs of Indian origin are growing at a faster pace. Is that of any concern to McDonald’s?

 

There is place for every cuisine. Forget any report or research. Just put yourself in a customer's shoes. I may have a craving for a McDonald’s one day, and then might have a craving for something else on another day. So, there is room for everyone. We are variety-seeking by nature, and so nobody is going to eat into each other. It’s too early to predict whether we’ll be fighting share-gain battles. Right now everybody has to grow the market. And that’ll happen only if you’re accessible, and offering the right food, at the right price, through convenience. The eating out community is still developing. The guy who will benefit the most is the one who develops the market the fastest. That’s what the endevaour should be.

 

You spoke about the online platform for delivery. This continues to lure consumers with free burgers or other offers that aren't in the store. How long do you foresee that brands will need to do this to lure consumers on the medium? How much does online contribute for McDonald’s?

 

Our delivery is available through mobile, the m-site, the website and the call centre. When we started this year, we were at 20 per cent, of total delivery business coming through digital. We have put our might into this and this number is almost at 50 per cent.

Drive-throughs is a thing for the future and we’re building capabilities for it. Because when you go into the development exercise, it’s better to keep it ready right now than build something then. The more mobile the country starts becoming, and the more time-starved it becomes; the more crowded spaces will start getting.

 

In our new stores in tier two, we are including drive-throughs. These are initiatives for the future, for market development.

 

What is the role of advertising in the category today, when neither category awareness nor brand awareness is an issue?

 

The role of advertising is to be able to communicate to the people, what we are innovating for and what we are creating stuff for. That to me is most important rather than making price announcements. At the start of the year, when we started looking at data, one thing that emerged was that in the urban pockets, most of the QSRs in the Western fast food formats had begun to lose their differentiation. Everybody was screaming price-offs and discounts. The economy going through its own little shades of blue. Discretionary spends were under pressure. Therefore the most obvious and laziest approach was to reduce the price and hope that people would walk in. In my experience, that has never happened. If people don’t have the discretionary spends, they don’t do it. The human mind is perfectly irrational. If you’re able to evoke brand love, people will leave everything for it and put the money on the table. So, while others were competing for share of wallet, what was important for us, as the brand that created the category and is a market leader, was to show people the new way. It wasn’t about the share of wallet, it was share of time. If we can get people to spend more time with us, share of wallet follows. So, in a very large quantitative survey that was conducted by Leo Burnett’s Chicago office, in mapping the Indian eating out scenario and how brands are interacting, what emerged was exactly true that all brands are clubbed together in one quadrant, almost at the same place. People were not able to differentiate brands from another and their choice was based on convenience and price. We wanted a way to pull away from this place. So, instead of becoming just the place of convenience, we wanted to be the place of choice. That was the place that was available and vacant. We then saw our own data, and saw that people come in an average group size of 2.3 to 2.4, so nobody was coming alone. Then, we looked at another data point, and what we were missing out was that our food wasn’t as shareable, or atleast that was a perception. Then the fourth data point we saw was that in today’s day and age, one thing that is coming in is the thing of constantly getting our head into our phone. That made us feel that people need to spend time with each other and we asked them to go a little offline. We constructed our food in a way which became more shareable. We did that, and that was the start of the journey for us. It’s just the starting point, and not a one-off campaign. We want to carry it forward as a philosophy.

 

How has the entry of other Western fast food burger brands like KFC and Burger King impacted sales? The buzz created during their launch, does it see a dip in your sales?

 

What happens is and you’ll find this globally, that most QSRs work in a way that one brand steps in and sets up, which leads to the others coming. They rely on the homework done by the first brand. The real test of time for these brands comes in after a while, if people keep coming back and make it their preferred destination. McDonald’s has held its own here, and across the world.

 

Has overall marketing spend gone up or down? By how much? How are ad spends moving towards digital?

 

They’ve gone up. Inflation is all over. Even if you don’t want to spend more, the ecosystem is such that you’ll have to spend more. Digital has moved from single digits to double. We are seeing the results now. Digital is not just making a campaign more famous, it’s about driving orders on McDelivery. So, all the spends have gone towards this. Digital is performance and engagement for us.

 

Are there any challenges in the market you're wary of?

 

We have to grow and there are no two ways about it. It’s about who does this the fastest. We have to give more people access to the brand. That could come through physically being present on ground or being present for deliveries. We have to keep creating new occasions. We are optimistic about what lies ahead and we have our plans in place.

 

(This article first appeared in the 27 November 2015 issue of Campaign India)