Wednesday, May 3, 2017

McDonald's in India

McDonald's in India
Global food giants have the $19 billion eating out Indian market firmly set in their views. As many as a dozen food companies set foot on the Indian market in the past year- like Burger King, Wendy’s, Carl’s Jr to name a few.[1] But an early entrant to the Indian market was McDonald’s, which entered the Indian market in 1996 as a joint venture between Oak brook III and two local partners.[2] It wasn’t an easy ride for McDonald’s as its signature product- beef burger- was a taboo in the Hindu majority country.  Through numerous trail and error, McDonald’s was able to capitalize on the rapidly growing culture of meals on the go via vegetarian and localized recipes. Let us try to discuss some of the challenges McDonald’s faced in this journey and how it worked around them to transform itself into a household name.

1.     Localization to meet the cultural challenges:

McDonald’s was a global giant that thrived on its signature burgers- beef and pork. This posed a threat for its own survival in India. India consists about 65% Hindus who abstain from consuming beef while pork was taboo to the 13% Muslim population.[3] McDonald’s offered a complete different menu to accommodate the Indian culture and taste. For instance, all the ingredients in the vegetable burgers were vegetarian, even the mayonnaise in them was eggless. The company classified the tools as well as employees in the vegetarian and non-vegetarian categories to honor the cultural values. [4]McDonald’s offered products such as Allo Tikki- a burger containing a patty of mashed potato and peas flavoured with Indian spices- which became an instant hit. Furthermore, they experimented with McMaharaja burger, Paneer Tikki burger, McCurry Pan and other innovations which received great response from the Indian consumers.  [5]

2.     On the go to family dining:

McDonalds’s was famous for its on the go model. However, in India, “family dining in” was the norm. Unlike the its global stores, McDonald’s stores in India are as huge as the traditional dining-in restaurants and can seat people anywhere between 50-200 depending on the location.  McDonald’s used this opportunity to project itself as an advocator of family and cultural values. With localized products, McDonald’s also introduced the concept of breakfast and lunch combos as part of its happy price menu which appealed to the dining values. McDonalds’s came up the taglines ‘Toh Aaj McDonald’s Ho Jaye’ and ‘McDonald’s Mein Hai Kuch Baat’ which resonated with Indian family values. This became the McDonald’s unique selling proposition in India.[6]

3.     Competition in the price sensitive Indian food market:

Though McDonald’s was one of the first global giant to enter the Indian food business, it has very stiff competition now. For Instance, Domino’s has more than 1000 outlets, KFC 700+ restaurant and 150+ Dunkin Donut stores.[7] The competition provides Indians with a wide range of eat outs. McDonald’s realized that the Indian food market id highly price sensitive. They offered burgers starting at INR 25 (approx. $0.33). The low pricing ensured high sale volumes which was essential to its sustainability. This attracted the youth and college students who were awed by the price and taste. The low prices and quality food products have impacted in an overall increase in dining out numbers among Indians.[8]

4.     Adapting to the local needs:

Lettuce was an integral part of the McDonald burgers. However, there was no lettuce supply chain in India. McDonald’s had to start form the scratch to meet its product requirement. McDonald’s initially imported lettuce from the neighboring countries briefly. Later, they were able to convince the local farmers to from lettuce from whom they purchased. Similarly, all kitchen fabrication is done locally. Outlet requirement such as refrigerators, chillers, freezers and furniture are all locally made. However, the global suppliers fulfilled the local requirements of McDonald’s other countries.  In India, McDonald’s obtain 99% of its needs from within the country.[9]

5.     Marketing and soaking in the local culture to become a household name:

To improvise sales, McDonald’s conducted various surveys and internal audits. McDonald’s wasn’t happy with its sales despite introducing localized product. They turned to marketing to realize their full potential. McDonald’s started advertising in local languages to reach out to the people.

For the first-time McDonald’s aired commercial in local language for its soft serve coned ice cream- softie- which became a huge hit. The success for softie of not only attributed to local language advertisement but also its price (10 cents).[10]

Since its success, McDonald’s has been using the same advertising modeling. This has helped them to get feedback from the customers and improvise based on it. Going a step further, McDonald’s has hired staff who can converse well with local language as well as English. The menu too was available in local language as well English. These measures were amid at servicing customers with diverse background.

These were some on the solutions to the challenges that the R&D team at McDonald’s formulated. This can be blue print for other global giants who are eyeing the enter the Indian market.

[1] Gauba, Vaishali. "This Is Fast Food's next Mega-market." CNBC. CNBC, 02 Apr. 2015. Web. 03 May 2017.
[2] "Key Milestones." McDonald's Key Milestones - McDonald's Restaurant in India. N.p., n.d. Web. 03 May 2017.
[3] Orgi. "Religion." Census of India: Religion. N.p., n.d. Web. 03 May 2017.
[4] Ap. "McDonald's to Beef up in India with Meatless Menu." CBS News. CBS Interactive, 05 Sept. 2012. Web. 03 May 2017.
[5] Gasparro, Annie, and Julie Jargon. "In India, McDonald's Plans Vegetarian Outlets." The Wall Street Journal. Dow Jones & Company, 05 Sept. 2012. Web. 03 May 2017.
[6] Kannan, Shilpa. "How McDonald's Conquered India." BBC News. BBC, 19 Nov. 2014. Web. 03 May 2017.
[7] "Global Fast Food Giants like Fatburger,Jhonny Rockets, BurgerKing Are Flexing Muscles in Indian Market." Global Fast Food Giants Flexing Muscles in Indian Market. N.p., n.d. Web. 03 May 2017.
[8] "Competing to Go Native." KFC Takes on McDonald's with a Cheap Potato Burger. Living Media India Limited, n.d. Web. 03 May 2017.
[9] Kelly, Nataly. "McDonald's' Local Strategy, from El McPollo to Le McWrap Chèvre." Harvard Business Review. N.p., 07 Aug. 2014. Web. 03 May 2017.
[10] Rautray, Samanwaya. "McDonalds’ Soft Serve Should Be Classified as Ice-cream for Determining Excise Duty: Supreme Court." The Economic Times. Economic Times, 03 Dec. 2012. Web. 03 May 2017.

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