Fast Food To Benefit From Improving Economy

There remains a great deal of scope for growth in India's fast food market for both Indian and Western firms. New quick service restaurants have been steadily entering the market, though the Indian consumer's substantially different food and cultural taste, as well as the country's poor infrastructure, continue to provide tough but not insurmountable challenges.

The quick service market is estimated to be worth more than USD10bn in annual sales per annum according to the Financial Times. Improvements in the Indian economy will add further momentum to the fast food market.

Western interest in the Indian fast food industry is as strong as ever, with Krispy Kreme, Burger King, McDonald's and Yum! Brands' Taco Bell having all announced expansion plans or new openings in the country over the past year. These Western chains account for less than 10% of the market so there is a great deal of room for multinational chains to establish themselves. Similarly, Indian chains such as Kaatizone also have a lot of room to grow.

Rebounding Economy To Boost Discretionary Spending
India Real Private Final Consumption Growth, % change y-o-y

Fast Food To Benefit From Improving Economy

There remains a great deal of scope for growth in India's fast food market for both Indian and Western firms. New quick service restaurants have been steadily entering the market, though the Indian consumer's substantially different food and cultural taste, as well as the country's poor infrastructure, continue to provide tough but not insurmountable challenges.

The quick service market is estimated to be worth more than USD10bn in annual sales per annum according to the Financial Times. Improvements in the Indian economy will add further momentum to the fast food market.

Western interest in the Indian fast food industry is as strong as ever, with Krispy Kreme, Burger King, McDonald's and Yum! Brands' Taco Bell having all announced expansion plans or new openings in the country over the past year. These Western chains account for less than 10% of the market so there is a great deal of room for multinational chains to establish themselves. Similarly, Indian chains such as Kaatizone also have a lot of room to grow.

The list of Western fast food companies in India, while not yet extensive, is growing. Much of this expansion can be attributed to the performance of Domino's Pizza, which operates in the country through its subsidiary Jubilant FoodWorks ( see 'Domino's Dominant In India', November 18 2013). Following its entry into the country in 2007, the pizza chain now has around 650 stores, boasting a 67% share of the pizza market. Domino's success has largely been due to both its flexible menu - spicier offerings catered to the Indian consumer - and its achievement in terms of delivery. Notorious for its poor infrastructure, Domino's has arguably mastered pizza delivery in the country owing to a hands-on approach and the effective use of scooters. Indeed, Domino's has been so successful on this front in India that the company offers its pizza free if it is not delivered within 30 minutes.

Rebounding Economy To Boost Discretionary Spending
India Real Private Final Consumption Growth, % change y-o-y

McDonald's has adopted such a strategy to good effect, with its menu consisting largely of chicken and vegetarian options. Through its franchise partner Westlife Development, more than 250 McDonald's restaurants are open within India, with plans to double this number in 2014. Like some of its competitors in India, the McDonald's store network comes in all shapes and sizes, from operations next to petrol pumps to more familiar restaurants.

A difficultly facing entrants into the Indian food and drink industry is the underdeveloped infrastructure. Sameer Sain, managing partner at Burger King's partner Everstone Group, has said that no cold chain network or national suppliers for the fast food industry currently exist in India. The lack of a supply chain network has meant that companies such as McDonald's and Domino's Pizza have had to vertically integrate.

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