Fast food chains have made life easy for Prajna Rao, a media professional in Mumbai.

Her hectic
schedules leave her hardly any time to cook and so, she relies on food chains like Subway,
McDonalds and Domino’s for her meals.

In what will come as good news to people like her, many more such restaurants are about to
mushroom across the country. Malls, high streets and commercial areas conquered, fast food chains
are now looking at highways, airports and even campuses of educational institutions and companies
to expand footprints.

Slowdown or not, it’s business as usual for them.

Jaideep Ghosh, who heads the travel and leisure segment of market research firm KPMG, said, “Most
of the established food and beverage retailers in the country fare well on consumer expectations.
They are affordable and are trying to include the best practices in their business. For them, scalability
is important as being near the right consumer is the key.”

Subway, the sandwich and salads chain, is eyeing 350 outlets by the end of this fiscal from 190
outlets now. Pizza major Domino’s has 251 outlets and is looking to add 60-65 new ones this fiscal to
take its total number of outlets to 500 by FY11.

Neeraj Katoch, general manager (sales), Domino’s, said, “The pizza market is a Rs 650-crore
business, growing at 15% year-on-year but we are growing over 20%.” He said the chain has tied ups
with Infosys, Wipro and Amity University for their campus outlets.

Similarly, Subway has on-campus tie-ups with Infosys, educational institutes and hospitals.
Institutional sales account for 15-20% of Subway’s business. “The IT sector and its long hours have
created a huge demand for such joints on campuses,” Ghosh said.

Burgers giant McDonald’s is looking to add 190 outlets by 2015 at an estimated investment of Rs 570
crore. Many of these outlets would be on highways, which the company has tapped successfully in
the past. Currently, McDonald’s has over 160 outlets.

Then there are airports, which, thanks to the increase in air travel, have become lucrative for food
chains. Travel Food Services, a company floated by Blue Foods owner Sunil Kapur, is helping the
likes of Cafe Coffee Day, McDonald’s, Domino’s, Baskin Robbins, Subway and others, set up shops
at airports across the country. The company will also have its own brands — Cafeccino, Chaatwala,
Spice Bazaar and Noodle Wok — at airports and is aiming at a turnover of Rs 100 crore in FY11.
Later, it may even tap highways and railway stations.

Sensing the opportunity, many new players are entering the fray with offerings for the health-
conscious consumer. Two months ago, Birla Kerala Vaidyashala, the Yash Birla promoted ayurveda
therapy chain, launched its herbal cafe H3 in Mumbai. The company will open 25 cafes in metros over
the next four years.

Gurgaon-based Horizon RHI Group’s Cocoberry, a chain that offers ‘guilt-free’ desserts, is now in
Mumbai, Delhi and Hyderabad. G S Bhalla, CEO, Cocoberry, said, “We plan to open 32 Cocoberry
stores by the second quarter of 2010 and reach a total of 500 stores in India, Southeast Asia and the
Middle East by 2015.”

Then there is Denmark-based cafe chain Joe & The Juice, which entered India through a JV with
Franchise India Holdings Ltd. Under the JV, Joe & The Juice will open 100 cafes within five years. It
has invested $250,000 to open cafes in Delhi, Mumbai and Bangalore in FY09.

Jumbo King Foods Ltd, the retailer of the ‘Indian burger’ vada pav, will add 200 stores in Mumbai over
the next two years, said its managing director Dheeraj Gupta. Currently, it has 52 stores in Mumbai
and Gujarat.

Little wonder then that the Rs 25,000 crore foods and beverage industry is growing at 24% year on
year.
Indians catch the fast food craze
By Raju Bist 

MUMBAI – Fast Food America is starting to turn into Fast Food India. Annual turnover in the
multinational segment of the Indian fast food industry is up to Rs 6 billion (US$132.7 million),
a figure expected to zoom to Rs 70 billion by 2005, although not without a remarkable
amount of resistance and bitter protest. 

As India's population becomes more affluent, global chains are flooding into the country. As
many as 75 McDonald's outlets are open, perhaps 40 Subways. Domino's Pizza is present
in about 100 locations. Pizza Hut is catching up, and according to Sandeep Kohli, the Indian
sub-continent managing director of Yum! Restaurants International, it will have 125
restaurants by the end of 2004. 

Those figures aren't particularly high in relation to the developed world – McDonald's, for
instance, has 28,000 restaurants scattered around 125 countries. But they are significant in
India, where the entry of new outlets and the expansion of existing ones still meets
considerable resistance from a segment of society that continues to believe the fast food
craze is detrimental to India's culture. These companies have been the targets of often
violent attacks. 

This is what McDonald's, one of India's first foreign fast food companies, discovered to its
dismay. In June 1998, when McDonald's was setting up its ninth India branch in the north
Mumbai suburb of Vile Parle, it set off a wave of protests that its presence would harm
"Indian culture". 

"The money they [McDonald's] earn here goes to funding cow-slaughtering farmhouses in
the US. Nothing that affects our culture will remain here," declared Ajit Mata, all-India joint
secretary of the Vishwa Hindu Parishad (World Hindu Body), an ally of the Bharatiya Janata
Party (BJP), the right-wing Hindu party that leads India's 23-party coalition government. 

The Vile Parle McDonald's faced opposition from the day it announced its intention to start
operations. First, the citizens of the locality - primarily Hindu and Jain Gujaratis - opposed
the restaurant on the ground that its products contained beef and pork, despite categorical
statements to the contrary. So the protesters changed tack. They then opposed the new
branch on the grounds it would promote non-vegetarianism (most Gujaratis, especially the
Jains, are strict vegetarians) among the youth. 

Next came the issue of "Indian" versus "foreign". But McDonald's was quick in coming out
with a rejoinder. "All our food comes from India, all our employees are Indians, all our
customers are Indian, our menu caters to Indian tastes, and all the money we make is being
re-invested into the business," pointed out Amit Jatia, managing director of McDonald's
(western region). "We are a locally-owned and locally-run business." 

Three years later, the reactions were violent. A suit filed by an Indian-American lawyer
against McDonald's in the US had its echoes in distant Mumbai, with the food giant's
properties being ransacked and the company dragged into a political controversy. It all
started when Harish Bharti's lawsuit against McDonald's came up for hearing in a
Washington state court on May 2, 2001. Filed on behalf of three vegetarians, the suit alleged
that McDonald's had hurt their sentiments by cooking its popular french fries in beef tallow. 

Two days later, 500 people ransacked the McDonald's outlet at Gokhale Road in Thane, an
industrial suburb on the outskirts of Mumbai. Property worth Rs 2 million was damaged. "The
Thane branch was destroyed, with chairs and glass decorations smashed and the cash
register broken," a McDonald's spokesman told the press. On the same day, a smaller group
defaced the McDonald's outlet opposite the Chhatrapati Shivaji terminus, the last local
railway stop in south Mumbai. Police registered cases against 15 BJP members. 

More recently, two shopping malls being built in Mulund, a prosperous suburb in north
Mumbai, were immediately surrounded by agitating members of the Shiv Sena, another
political ally of the BJP. The Shiv Sena, founded by cartoonist-turned-political leader Bal
Thackeray, a self-confessed admirer of the dictator Adolph Hitler, is supported by locals hell-
bent on keeping Mumbai free of "outsiders". This time, the protestors ransacked two eating
joints in the malls: perennial whipping boy McDonald's and Pizza Hut, demanding that 80
percent of the jobs in these two establishments be given to local youths. 

Bharti, a Seattle-based lawyer, was inspired by author Eric Schlosser's book, Fast Food
Nation, a scorching attack on American fast food chains, especially McDonald's and the
meat industry. Schlosser's book was on the American best-seller list for more than three
months. In Fast Food Nation, he drew a succinct and devastating portrait of the American
fast food business, its growing clout worldwide, and the cruel ways animals, birds and
human beings are handled hour by hour throughout the country - in the name of fast profits.
"Americans now spend more money on fast food than on higher education, personal
computers, computer software or new cars," Schlosser wrote. 

He addressed the growing influence of American fast food chains early in his book. A
decade ago McDonald's had about 3,000 restaurants outside America compared to its
28,000 today. The chain earns most of its profits outside the US. While at least American
consumers are demanding some accountability from fast food chains, Schlosser charged, in
many other countries McDonald's and other fast food businesses do what they like. If
consumers abroad are not vigilant, he warned, they will become victims of the all-enticing
power of multinational food chains. 

There are no Schlossers here to expose the fast food companies' shortcomings, nor
consumers like Bharti to file million-rupee claims. So, despite incidents like the Thane, Vile
Parle and Mulund ones periodically cropping up, the fast food juggernaut into India has not
been halted. The protests might have slowed the forays into India, but the fast food joints
have slowly mushroomed all over the country. 

There are a number of reasons. More and more of India's 300-million-strong middle class
are eating out, in part because of the rising numbers of urban working women. Also, the
amount of money that Indians spend on eating out is growing by about 20 percent every
year. In addition, the hygienic surroundings of the new eateries are a major draw for yuppie
crowds that normally frequent them. Global exposure, particularly fueled by satellite TV, is
creating a demand. Other factors include a dramatic shift in lifestyle trends, the burgeoning
middle class, mushrooming of consolidated entertainment complexes and exposure to newer
cuisines. 

The pragmatic stance of the fast food companies has helped. McDonald's, for example, has
gone out of its way to please Indians and the Indian palate. In deference to local religious
sentiments, India is the only country where McDonald's does not sell its most popular
product - the hamburger. Beef is eschewed by Hindus and practicing Muslims do not eat
pork. (India has the largest population of Muslims in the world). Only mutton and chicken
satisfy religious restrictions in India. 

Realizing that meat-based products were not popular, McDonald's considerably enhanced
its vegetarian menu. Hence the Vegetarian Pizza McPuff, made of five vegetables with
cheese and tomato sauce. The restaurant also introduced the McAloo Tikki burger, based on
a potato patty with green peas, carrots, coriander and cumin. "The McDonald's menu in India
is about 75 percent different from the standard fare in its other restaurants all over the
world," Jatia says. 

Other chains too have been quick in adapting to local tastes and needs. Thus, Pizza Hut
launched a range of masala stuffed crusts pizzas, dubbed as a "rich combination of world-
class pizzas and a familiar flavor" by the company, but in reality nothing more than pizzas
encrusted with spices that find a place on the kitchen shelf of every Indian housewife. Its
masala pizza, claims the company, has been a substantial contributor to Pizza Hut's
turnover in India - so much so that it has been introduced in other Asian and UK markets
after its success in India. 

Domino's, which sells 20,000 pizzas every day in India, is reaching out to the price-
conscious Indian by introducing a "regular" pizza eight inches in diameter. "Internationally,
the most popular size is 12 inches. No other country has a size as small as eight inches,"
Arvind Nair, the chief executive officer of Domino's India, said. In addition, Domino's offers
local flavors like Peppy Paneer and Chicken Chettinad. 

These adaptations have helped. A growing entrants, both foreign and local, hope to replicate
the success of these fast food movers. Among the recent entrants is Pizza Corner, a joint
venture between the Geneva-based Global Retail Investment, FM Investment and Indian
financial superpower ICICI. Pizza Corner has opened branches in 35 locations in six Indian
cities and apart from pushing pizzas, has tied up with fast-moving consumer goods majors
Hindustan Lever Ltd (HLL) and Nestle to market and distribute their products like ice-creams
and coffee. The new company is all set to break even this year. 

Also eyeing the Indian market are Singaporean fast food companies with names like Carona
Chicken and Pasta Mania. These outfits are looking at exploring business opportunities
across segments like dine-ins, specialty food courts and specialty cuisine. 

Providing the biggest challenge to the foreign pizza kings is Mumbai-based Smokin' Joe's. It
already operates 30 outlets in nine cities and is targeting a Rs 450 million turnover by 2005
through 75 outlets. Smokin' Joe's, too, offers local flavors like Tandoori Paneer and Butter
Chicken. But its drawing card is a price tag that is 30 percent cheaper than well-known
global brands. 
The high-end global fast food majors are fighting back by using the twin combination of their
money and marketing muscle. One way out is exploring new markets away from traditional
metro areas. Domino's Pizza found ready acceptance in the small north Indian city of
Kanpur. Similarly Pizza Hut and McDonald's were big hits in the towns of Ludhiana,
Jalandhar and Amritsar in the state of Punjab, often referred to as the granary of India. 

"The response in Ludhiana has convinced us that there is a huge potential in the smaller
cities. There are many towns where people have a global exposure, says Vikram Bakshi,
managing director of McDonald's India (North). Adds Nair of Domino's, "In smaller towns the
aspirational levels are very high. People adopt new international brands very fast. Frequent
visits to bigger cities have made the customer aware of the big brands, thus creating a latent
demand waiting to be fulfilled." 

The latest MNC entrant into the Indian market, Subway, a $7 billion American fast food giant,
is already giving finishing touches to an aggressive strategy for the Indian market. The
company has set up a wholly-owned subsidiary, Subway Systems India, and is planning to
invest Rs 2 billion in the Indian market. It envisions establishing 250 stores within seven
years. Taking into account cultural/religious preferences, Subway has separate preparation
counters for vegetarian food. The company is optimistic about its India operations. 

"India has the potential of becoming the largest market for Subway outside of North
America," said Mahmoud Chahrour, Subway's Middle East and India manager, while on a
recent visit to Mumbai. 

Pizza Hut, which claims to have been growing at 55 percent annually for the last three years,
has meanwhile decided to woo customers by bringing some excitement into the basic
product. Hence the stuffed crust Pizza. Here, the mundane crust is filled with a ring of
mozzarella cheese and is eaten from the edge to the center. The launch has been backed
by a new and catchy television campaign. Non-aerated drinks, too, are being added to the
beverages list. Customers can now also wash down the pizzas with iced tea. 

Owners of fast food chains are also getting involved in some serious marketing to attract
customers. According to a recent report on Indian fast food chains, "Today's consumer is
attracted to a less cafeteria-style restaurant atmosphere." So McDonald's is experimenting
with new color schemes and designs. Domino's India has redesigned its logo to look more
contemporary, the lighting at its outlets has been made to appeal to youth, and staff uniforms
have been made more vibrant. 

That the global fast food majors are very serous about India is clear from one decision. Even
though most are cutting spending and are opening fewer stores worldwide, expansion plans
in India are not being put on slow mode. To date, they have together put up around 500
outlets. 

This figure may appear large for any segment of the Indian food business. But for the
multinationals, who are used to dealing in thousands of stores in the more advanced
countries, their India numbers are miniscule. Hence the continued lure of the untapped
potential that is the Indian market.