Boosting the economy of the nation and bank balances of entrepreneurs, the food and beverage industry has a lot to offer and is a burgeoning market. The QSR format has taken a leap ahead and offers lip smacking food in a jiffy without burning a hole in th
FROM the Dominos “Hungry Kya!!” to McDonald's “I am loving it”, be it KFCs “So Good...” or Pizza Hut “Stories Happen”, the taglines of these multinational brands in the food and beverage industry had sent waves across the nation and the brands gained popularity among masses immediately. These brands were among the pioneers following the QSR format in the country.
Moreover, the QSR format has always remained a key segment of the Indian food services market and has grown over the years with the focus on affordable and competitive pricing clubbed with the growing need of the consumer for convenience, increased appetite and craving for international food. The QSR or the chain market size is estimated at Rs 5,500 crore in 2013. It is projected to grow at a CAGR of 25 per cent to reach Rs 16,785 crore by 2018. The chain space is marked by the presence of 90-100 brands with approximately 2,900 to 3,000 outlets spread across various cities in India. This segment is expected to witness increased activity via market expansion and entry of various players.
Acting as a cherry on the cake is the mere fact that India is among the largest producers as well as the biggest consumers of food. The presence of approximately 1.2 billion people, with changing consumption patterns, ensures constant growth for the Indian food services market and this also drives the growth of India's economy as a whole. The size of the total market (organised and unorganised) is Rs 2,47,680 crore in 2013 and is projected to grow to Rs 4,08,040 by 2018 at a CAGR of 11 per cent. Within this, the unorganised market holds a 70 per cent share with an estimated market size of Rs 1,72,685 crore. The organised market (chain and licensed standalone outlets) is estimated at Rs 67,995 crore in 2013 and is projected to grow at a CAGR of 16 per cent to reach Rs 1,45,770 crore by 2018.
QSR segment: A bagful of opportunities
A major chunk of the food and beverage industry is dominated by the QSR and casual dining formats. Both the formats grab a major share of the industry accounting to 74 per cent of the industry. With the highest number of organised players currently, the QSR format dominates the chain market, followed by the casual dining and café formats. By 2018, the chain market is expected to reach approximately Rs 33,250 crore with QSRs still contributing the highest, followed by casual dining. Smita Jatia, Managing Director, McDonald's West and South India Operations, elaborates on it saying: “The concept of QSR has gained increased prominence in India, with the entry of Indian and international brands into the space encouraging affordable eating and enabling customers within smaller pockets to indulge in. The market is quite competitive in nature where players operate via core menu offerings and keep introducing variations in Indian and international foods.” She adds that the rapid growth of the QSR sector is underpinned by the consumers' increasing disposable incomes, greater density of younger people, the growth of consumers in socio-economic classifications, or SECs, A and B, and the widening exposure to new cultures and cuisines and the increased propensity of eating outside home, along with the growing popularity of takeaway delivery services.
On the ever-growing Indian QSR industry, Joseph Cherian, CEO, GFA Global, says: “The Indian QSR industry is growing very rapidly. India's QSR space has pushed the chain market and the estimated size is Rs 550 crore ($ 1,060 million) in 2013. It is projected to grow at a CAGR of 25 per cent to reach Rs 16,785 crore ($ 3,230 million) by 2018. Rising disposable incomes, change in lifestyle, more eating out, increase in online ordering and preparation of dishes with Indian spices to suit the local palettes are the major reasons for the growth.”
Asvin Simon, MD, Bangs India believes that there is a lot of craze in India for international brands. “I boldly accepted the challenge of stepping into the QSR industry to make the fast food lovers understand that an Indian brand, Bangs, can also give customers the same quality and quantity products with better pricing option for their pockets,” he says.
Here is the list of sub-categories of brands:
Pizza Mania: From typical homemade pizzas to Dominos, this crust and cheese burst pizza, the pizza segment of the QSR format, definitely titillates the taste buds of all age-groups. With leading brands like Dominos, Pizza Hut, Pizza Corner, Pizzavito, Sam's Pizza, NYPFC, Slice of Italy, Papa John's, Smokin Joe's, the list is unending. Thus, if you invest in a pizza brand, it's surely going to generate big returns. Most of these brands provide organised training and support. In this regard Cherian says that their franchise support system, training, etc., provide a great handholding for anyone who is new to the business. The investment requirements are also attractive to the franchisee. GFA has a well-organised franchise support system in place. It includes various supports like market study, feasibility study, store development, management support, information technology, training, operating standards,marketing support, vendor development, research and development and finance training. While the spokesperson of Yum Brands, Pizza Hut asserted that the Indian market has been a challenging one. Elaborating on it the spokesperson said the cost factor and affordability dominated by rentals of retail spaces are the major challenges. These two factors drive the company to lay more emphasis on strong and efficient operations. The brand works very closely with their partners to ensure bulk of the costs aren't passed on to the end consumers. Yum! is the largest and fastest restaurant company in the country. Presently at 494 stores, they are planning to have 1000 stores by 2015 and increase it to 2000 stores by 2020 (KFC 228; Pizza Hut 148; Pizza Hut Delivery 115 and Taco Bell 3.
Burger Bug: While you still get the deep fried burger priced at a nominal Rs 6 to Rs 10 at any roadside stall, you get a mini burger of Mc Donald’s at Rs 25. Thus, the QSR concept has gained popularity with the franchisees of leading burger brands in India like Mc Donalds and Burger Girl which are minting money. Owing to the huge potential of the QSR industry, Jatia of McDonald’s, says: “We have opened 32 new restaurants taking the total restaurant footprint to 161 as on March 31, 2013. The financial year 2014 will be a critical year from an overall corporate perspective with the expected completion of our scheme of amalgamation.” Jatia adds that this fiscal the company will continue to advance its efforts on becoming customers' favourite place and way to eat and drink by leveraging the strength of its menu variety, unsurpassed value and convenience, and by emphasising outstanding customer service. While McDonald’s plans to deploy brand extensions such as McDelivery, Drive Throughs, Breakfast, Kiosks and 24x7 Operations, it is also focusing on re-imaging McDonald's restaurants with fresh and contemporary designs to enhance customer experience and brand relevance.
Vinay Sedey, MD of Burger Girl says: “Customising the product is what makes a brand stand out among other brands in its category. Likewise, we have come up with six unique flavours for vegetarian burgers and six for non-vegetarian burgers. The basic recipe which Burger Girl prepares is unique from others in the industry and we plan to keep it that way. We offer a great quality product in all our locations all the time. We are also in the process of developing a new recipe that is unheard of in the QSR industry, so stay tuned in the coming weeks!”
McDonald's is the world's leading food service retailer with more than 34,000 restaurants in 118 countries serving more than 68 million customers each day. A critical factor in McDonald's system growth is the strong relationship between McDonald's corporation and its franchisees and partners. In India, McDonald's has two Indian entities: Hardcastle Restaurants Pvt. Ltd (HRPL), which holds the development licensee (master franchise rights) status with McDonald's Corporation, U.S.A. HRPL spearheads McDonald's operations in West and South India, while McDonald's restaurants in North and East India are managed by Connaught Plaza Restaurants Private Limited, which has a joint venture agreement with McDonald's Corporation.
For HRPL, the transition to a development licensee implies a higher level of commitment by McDonald's Corporation as it enhances its trust in the local partner. Under the master franchise or development license arrangement with McDonald's Corporation, HRPL is responsible for providing capital for the entire business, including the real estate interest with technical, operational and business support from McDonald's Corporation. HRPL does not operate the franchise business model in its markets. McDonald's specifies that the restaurant industry presently is largely unorganised, and will grow at an average rate of 17 per cent overall in the next decade. But it will rapidly move towards becoming organised with the entry of international players and national/international food service brands.
Thus the internal growth rate of the industry (from unorganised to organised will be much faster). The few major trends that show up are the advent, adaptability and fast growth seen in the restaurant franchising. Food service franchises remain one of the most appealing business concepts for the aspiring entrepreneurs in India. The franchising sector in India is growing at a swift pace of 35-40 per cent per annum.
Hen's Paradise: Here's the mouth watering category in the QSR format of the food and beverage industry. For those who have a taste for meat loafs and chicken wings, there are many Indian and international brands on offer for investment. The Zinger burger, a unique chicken recipe of Kentucky Fried Chicken (KFC), is much in demand. Among other brands are Marry Brown, Grill Inn, The Barns Fried Chicken, California Fried Chicken, Chickos Fried Chicken, Mexican Fried Chicken, Bangs Fried Chicken and Hot Chix. The spokesperson of KFC, a brand of Yum Brands, says the brand has seen a significant growth over the last couple of years. This growth has accelerated over time owing to deeper penetration in the metros, entering new cities like Baroda, Patna, Asansol, and a host of others and menu expansion aimed at offering variety to consumers. “We've also significantly invested in product innovation, which is in the DNA of the brand it helps us to continuously offer exciting products to our loyalists and get new consumers by broadening relevance,” says the KFC spokesperson. About the expansion plans, Asvin Simon, MD of Bangs India, says: “In our franchise outlets, we are taking care of supply chain, product quality and training of the staff. As a Bangs franchisee, the outlet owner will receive all the technical and marketing support regularly. We also conduct regular visits and mystery audit checks. On the other hand, KV Panduranga Rao, CEO, Panros Crisp Chicken, says: “Sky is the limit for aspirants or franchisees with dedication and commitment. We offer training as well as necessary support.”
Marrybrown has always been ahead in its franchising operation and has relied on its franchisees to play a major role in its success. Marrybrown and its franchising team have identified qualified franchisees in major cities to become a part of Marrybrown. Marrybrown franchisees are given support to retain the brand image and upkeep the brand value. Sharing the challenges faced, MGM Anand, Managing Director, Marrybrown, says: “The major challenge faced is to compete with all the other major brands and to maintain the QSC (Quality, Service, Cleanliness) standards in all the franchise outlets.”
Sweet Nothings
Do you have a sweet tooth? Over the years, donut brands are coming up besides the cakes and chocolates brands, making waves in the F&B industry. In the baked products industry, the organised sector has a market share of 35 per cent and the remaining 65 per cent is with the unorganised sector. The urban market occupies a larger part of the pie capturing 77.5 per cent of the total bakery market. There has been a strong shift towards the organised sector.
Leading brands in the bakery, chocolate and donut industry are Dunkin Donuts and Mad Over Donuts, which have company-owned stores, Krispy Kreme Donuts, B'akesmith and Dangee Dums Chocolates. Yasir Ahmed Hamraz, Founder and Director, BakeSmith, says: “In India, per capita consumption (approximately) of bakery products is 2-3 kg per annum compared to 10-20 kg range across various developed countries. These facts present an enormous opportunity to be exploited.”
The chocolate brand, Dangee Dums, offers 360 degree support, from site selection to successful operations, providing exhaustive training for its franchisees. Tremendous marketing efforts are done by the brand for their franchisees. The brand plans to expand in Gujarat and pan-India also.
Foodies Zone
Sandwiches, a typical Indian spicy cuisine, and footlongs are also a segment in the QSR format and have many takers. For the diet conscious Subway is the perfect choice, thanks to its salad-rich cuisine. Likewise, chat-papris and footlongs have their own set of consumers. However, for Mohit Mathur, CEO, Quiznos India, one of the challenges was to organise supply chain to keep their food cost low and cater to the market demand. The brand has already done a complete menu refresh and now has wider menu choices. At the same time Quiznos was able to bring down food cost by 4 per cent for their franchisees. The results have been very encouraging with 60 per cent of their franchisees going for multiple outlets. In training rendered to the franchisees the brand offers four weeks in-house manager training and certification at their training outlet. The brand also considers one-week store owner training. In addition, it has marketing and branding company that provides local and regional support. The brand also does weekly store visits to check and understand what kind of support the franchisees need from them. They have also structured monthly and quarterly training programmes. Likewise, Yes India Hospitality Services Pvt. Ltd, which was launched in 2008, with its two sub-brands Go! Chaatzz.. and Go! Foodiezz.., has presence from Kashmir to Kerala and from Assam to Rajasthan, in India.
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