The Food and Beverage market in India is not new for the American Brands. A lot of American food brands already have a popular presence in the country. And now many more are gearing to take on the booming F&B space in India especially in the $13 billion I
QSR or fast food concept was introduced in India about a decade and a half ago when American brands like McDonalds, KFC, Domino’s Pizza and Pizza Hut entered into the Indian market. These brands have undergone the initial challenge of charting the new territory and today have not only found acceptance but are part and parcel of Indian consumer’s dining habits. The brands which have recently entered in India are Quiznos and Dunkin’ Donut. Now, more of the American brands like Denny’s, Rita’s, Pollo Tropical, Applebee’s and Johnny Rockets are ready to take plunge in Indian QSR market. The American Food brands would like to leverage the Indian QSR market which is witnessing unprecedented compound annual growth rate (CAGR) of 10 per cent. Experts have predicted it will be worth US$ 6.5 billion in 2011.
Franchise in QSR
In the past, most of the multinational food brands have opted for franchise model to enter and or grow their footprint in India and the trend has only increased over the years because now more and more franchisees observe corporate-like culture and high professional standards leading to enhanced profitability. The American companies like Denny’s Corp are ready to make its debut in 2012 in India. Rita's Water Ice, Pollo Tropical of Carrols Restaurant, Applebee's and Johnny Rockets are also preparing to launch their food concepts in near future. With likes of Wendy's, Arby's International, CKE Restaurants (Carl's Jr), Focus Brands (Schlotzsky's Deli, Moe's Southwest Grill and Carvel Ice Cream), BannaStrow's Crepes and Coffee planning to launch their brands in India, the food industry in India is gearing for lot of action. Most of the brands are seeking franchise partners for their expansion into India. Previously, Quiznos has given master franchisee license to Hyderabad based Businessman Sanjay Vallury and Dunk in’ Donut has signed Jubilant Foodworks (JFW) as its master franchisee. The brand (JFW) has also brought Domino’s Pizza via franchise route in the country. The new US brands are also looking for franchise model to get into the Indian market.
Success of American Brands
The American food brands have achieved success in India owing to factors like their product development expertise, best sourcing practices, maintaining high standards of quality along with pricing and operational excellence. They have selected their store locations wisely with focus on shopping malls, multiplex complexes, metro stations, highways, offices spaces not only in Tier-1 but also extending their foot print in Tier-2 and Tier-3 cities in due course of their expansion. Also, they have been quick to realise the need to adapt to the Indian consumers taste and cultural sensibilities. They have not only Indianising their menus but also have kept beef and pork dishes off their menu list and also added a variety of dishes to cater to large number of vegetarian consumers.
As Sanjay Valluri, Owner, Surya Ray Elixir Pvt. Ltd says, “We have young upcoming population which has growing likeness for international brands and varied demography. We will target returned NRIs, IT offices in the Hyderabad to begin with and cater to campuses of IT firms. Indians have strong preference towards hot food. We will offer store menu of Quiznos' signature offerings and we will also adapt according to local tastes.”
The US brands, with right market and advertising strategy have been able to tap Indian consumers who are lapping up the cosmopolitan culture and developing liking for variety of international tastes and cuisines. Also, with rising level of incomes and busy life styles more and more Indians are preferring to eat out.
Elaborating on this trend, Ajay Kaul, CEO, Jubilant Foodworks Ltd says, “Indian food service market is huge. It can be anything from 50-60 thousand crore market. Out of this chained food revenue is only 10 per cent which is growing very fast. With constant internalisation of Indian consumer and rising income level, discretionary spend of this disposal income on items like food is going to increase in future. And with double income no kids and more women working-we realise, this is going to grow very fast.”
Competition and constraints
The US food brands and other multinationals in the QSR market have to compete with local players like Nirulas, Kaati Zone, Haldiram’s and Bikanervala which are also very popular and have fair market share in quick food segment. Also, all foreign chains have to resort to partnership ventures in India as there are constraints pertaining to Foreign Direct Investment (FDI) regulation by which there is a cap on foreign ownership in single brand retail at 51 percent. This has fueled the trend of more and more international players seeking franchise agreements to scale up their businesses. The other limitations include the rising rental costs, lack of sound infrastructure, human resources issues, tax implications which impact the revenues.
In spite of all the limitations the future is bright for QSR culture in India. Indian consumers have had options like roadside eateries, dhabas and stalls to eat out. This scenario is changing. The scaling economy and brand awareness among the Indian consumers has escalated the demand for fast food formats. The QSR concept is not only satisfying the taste buds but also offering healthy options to health conscious clients. More over the ease of getting it by a phone call or a drive-through has added to its popularity. And this segment of business is not only financially rewarding for the brand owners and franchisees but also contributing to national economy by generating opportunities for employment benefitting the young population in India.