Shrugging off its early failure, kfc from the stable of yum! brands is now eyeing to replicate its chinese success story and trump mcdonald’s in the indian market. but the question remains – can it beat mcdonald’s first mover advantage in this market, and of course its robust supply chain?
ONKAR PANDEY | Issue Dated: March 4, 2012, New Delhi
zinger | KFC products | MC Donalds | |
It’s 9 am on a wintry Sunday and despite the chill and a holiday, a few young couples could be seen taking a relaxed breakfast at a KFC outlet in New Delhi’s Connaught Place. Whether they are pressed for time or it’s their love for KFC morning offerings, is not known. But certainly the ubiquitous Louisville, Kentucky-based chicken specialty restaurant from the Yum! Brands stable, has caught the fancy of urban youth. So much so that the well-entrenched McDonald’s known for its family and kids TG, has revamped its offering to orient itself to the young adults.
Starting in 1996, after a slow and circumspect start, today KFC is Yum! Brands’ best performing subsidiary in India, well ahead of Pizza Hut – once the flagship for the US-parent company in India. It is worth noting that with KFC Yum! Brands is hoping to create a China like success story in India. Today KFC is 80% of the Yum! Brands’ over 4,200 outlets in China – a market which contributes 33% of its global revenue. That is because while India being a chicken loving country, the chances of KFC’s continuing success becomes stronger, more so as offerings like Zinger Burger, and the trademark KFC hot and crispy chicken offerings, are gobbled by urban India. Officially the QSR chain is growing at a blistering 70%. And the company has already started eyeing for bigger targets. When asked about the company’s target to hit Rs 10 billion turnover in India, Dhruv Kaul, Marketing Director, KFC India says, “With the kind of growth and expansion we are having, that looks a very humble figure, we are aiming much higher in the coming years.”
However, to achieve these bigger targets, KFC has to take the game away from McDonald’s, which has a very strong presence across the country. Certainly, the QSR that believes in finger licking taste has outlined few key growth areas to take the matter forward. While keeping its great taste USP alive by further expanding and localising its menu is its primary strategy, increasing its footprints to roughly 50 cities, increasing the serving hours and thus drawing a broader customer base – especially among the Indian youth – are the key focus areas for the company now. Working on the lines, the company recently introduced Streetwise range starting at Rs 25 to cater to the college going youths, and lure the mass that have been loving McDonald’s happy price menu (starts at Rs 20) so far. KFC now aims to expand to 100 items serving all kind of customer needs from health to indulgence.
McDonald’s on its part knows that KFC is the one to watch out for. As such the Big Mac maker is on a good move growing at 35% over a revenue base that’s much bigger than KFC in India, and doubling its revenue every three years. But then the fact that the past couple of years have seen KFC’s aggression bringing it good dividends is something hard for McDonald’s to ignore. A serious competition is already in place. The flow at which both players have started offering new products to hit the other’s menu, explains how spicy the chicken and the burgers have become in the board rooms.
Outside their menus, both players are busy in outpacing each other in terms of reaching out to the mass. While McDonald’s led by its first mover advantage in India is leading the pack with around 250 restaurants across 50 cities, KFC’s ambitious expansion plan is targeting to increase the tally to 500 outlets by 2015 from 150 in 35 cities at present. Interestingly, 50% of the 1,000 stores Yum! Brands wants to open in India in the next four years will be KFC. The overall strategy is in line with Yum! Brands’ ambition to hit $1 billion turnover in India by 2015, and KFC will lead the charge. The parent company is set to pump in an investment of $150 million for the cause. But then McDonald’s has no intention to lose its numero uno spot as the QSR has already put forward its own expansion plans to scale up its number of restaurants to 1,000 by 2020 with an investment of Rs 10 billion. However, spokespersons from both the company’s mute the competition by saying, the market is too big and un-tapped for several players to co-exist. The big fight between the two best burger makers is gaining momentum, at least in India.
Experts opine that when it comes to preference, KFC is the winner with its unique chicken-based offerings. McDonald’s having more variety doesn’t have novelty factor for Indian consumers taste. Agrees Akshay Bhalla, MD, Protiviti Consulting, “KFC clearly has the consumer preference. But it has to work hard on its real estate locations and supply chain. If it gets these two things right, it’s a serious threat for McDonald’s with its great product line.” As of now, McDonald’s supply chain is more robust and its store locations are much better than KFC. And the Golden Arches is leaving no stones unturned to turn more enviable by innovating across various formats like drive-throughs, highways, and important locations. Something which KFC haven’t been able to do, as its focus on ambiance and a certain type of store look and feel curtails its expansion anywhere and everywhere. Probably that’s where the key lies too as Ray Croc, the McDonald’s founder once said, “We are primarily in the real estate business.”
There is no doubt that India’s rapid economic growth and integration with global economy has ensured that out of home consumption of food market grows as well. According to a RNCOS research report, the Indian Fast Food Industry is anticipated to grow at a CAGR of around 34% during 2011-2014. And organised retail accounts for only 2% of the roughly $90 billion Indian food industry pie providing both these players ample opportunities to thrive. But they have to deal with a stiff competition to be the market leader. In this while McDonald’s has the first mover’s advantage, KFC has the love of its trusted TG. But it is to be seen as to who will emerge as the eventual winner of the Indian QSR story.
So even as KFC will take heart from the fact that it has trumped McDonald’s in the China market, and might repeat the same in India as well, McDonald’s must be banking on its two franchisers (North & East) (South & West) to keep their smile intact from their knowledge of the Indian market.