As American companies battle for supremacy in India's fast-food sector, Indian franchises prepare to take a bite out of the U.S. market
Author Boyd Farrow
MCDONALD’S MADE HEADLINES late last summer when it announced that 2013 would see its first-ever all-vegetarian restaurants debut in two northern Indian cities: Amritsar, home to a major Sikh temple, and Katra, a Hindu pilgrimage site. In deference to local religious strictures, the eateries will forgo serving beef in favor of things like the McAloo Tikki, a burger made with a spicy potato patty, and the Pizza McPuff, a vegetable and cheese pie.
Despite this concession, some have argued that the presence of the world’s most famous hamburger chain in these two revered places would "humiliate" India. McDonald’s has responded to such criticisms by pointing out that it has long worked to cater to local tastes: Germans can order McBeer, Hong Kong branches offer rice burgers, there are salmon McLaks in fish-loving Norway, and so forth.
For all of the grumbling over the McDonald’s outlets in Katra and Amritsar, India and its 1.2 billion people represent a mouthwatering opportunity for the company. While the U.S. fast-food sector is growing at a respectable 4 percent annually, India’s is growing at a whopping 30 to 35 percent a year, as the country’s ascendant middle class hits the food courts en masse. Researcher RNCOS reckons the market could be worth 146 billion rupees ($2.7 billion) within 18 months, up from 47 billion rupees in 2010.
That said, India is one of the few places where McDonald’s is relatively small-fry, outflanked and outnumbered by its more aggressive rivals. The Keema Do Pyaaza, a pizza topped with minced goat, has helped make Domino’s the leading fast-food brand in India, with more than 500 outlets dotting the country. Yum!, which owns Taco Bell, KFC and Pizza Hut, has about 480. By comparison, McDonald’s looks like a mom-and-pop operation (which, in many of its outlets, it actually is).
There are plans, though, for aggressive expansion. McDonald’s has stated its intent to have as many as 500 outlets operating here by 2015, and in the past few months it’s been laying the groundwork, identifying sites in new malls and expanding its production capacity. A state-of-the-art bun plant has just been built near Mumbai. A new patty plant has materialized in North India. New dishes have been added to regional menus, each with a vegetarian option.
Its rivals are not expected to surrender their dominance easily. Last fall, Yum! Announced it would spend $100 million to add 500 new Taco Bells, KFCS and Pizza Huts to its India portfolio. Dunkin’ Donuts and Subway are expanding their operations. Starbucks recently opened its first outlet in Mumbai. Denny’s, Applebee’s and Johnny Rockets are all on the on-ramp.
Local outfits, too, are preparing to do battle. Mumbai-based Jumbo King , purveyor of vada pav (spicy, deep-fried mashed potato on a bun), has said it will expand from 43 outlets to nearly 300 this year. Kaati Zone, a Bangalore-based chain specializing in fried flatbread filled with chicken or vegetables, is in the process of growing from 17 eateries to close to 100. And there’s a raft of smaller companies set to take their place alongside U.S. brands in Indian food courts.
There is an irony emerging here. Forced to beef up their operations in order to compete with the American fast-food brands flooding the market, Indian companies have gone on an investment binge. The influx of foreign and local capital, according to many industry analysts, could result in Indian fast-food companies looking abroad in the pursuit of further growth. Even now there are Indian chains operating in Austria, the Czech Republic, Poland and Sunnyvale, Calif., among other places.
The likes of Jumbo King and Kaati Zone gaining a foothold in America would not be a welcome development for U.S. fast-food companies already claiming smaller and smaller portions of the market. For the casual observer, though, there is an agreeable symmetry to the idea that we may one day find ourselves at a roadside fast-food joint in Duluth, Minn., being asked, "You want pani puri with that?"
Boyd Farrow, a London-based editor and writer, has a hankering for a Maharaja Mac.