India’s youth savour fast-food chains

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By Amy Kazmin in Mumbai
Published: March 16 2011 18:24 | Last updated: March 16 2011 18:24


Low prices and vegetarian options have won fans for McDonald’s in India

It is lunchtime and the McDonald’s at Mumbai’s Phoenix Mills – a textile factory turned upmarket shopping complex – is slowly filling up with college students, mothers and office workers.

Among them is Akshaya Batta, 30, who grabs lunch at McDonald’s or Subway, at least once a week, rather than carry a packed lunch from home, as many Indians still routinely do. “This is like a snack to fill your tummy, not to satisfy your tastes,” says the marketing executive, as he tucks into a Fillet-O-Fish, fries and a Coke. “I don’t have a desk job – I can’t move around with a tiffin [lunchbox], so whenever I’m hungry and I see a McDonald’s, I stop.”


When western fast-food chains such as McDonald’s, Domino’s Pizza and KFC initially opened their doors in India in the mid-1990s, they struggled to compete with spicy street food and the elaborate home-cooked meals Indian women regularly prepared for their families.

But more hectic schedules, rising incomes and demographic realities – about 60 per cent of Indians are under 30 years old – have created new appetites among Indian consumers.

Now, sales at western fast-food chains, and local rivals, are taking off, growing at an average of 28 per cent a year, as dining out moves from being a special occasion, to a routine part of Indians’ busier schedules.

Indians spent an estimated $1.3bn on dining out in “chain restaurants” in 2009, of which about 400m was accounted for by fast food, according to research group Euromonitor.

It is not just India’s biggest urban agglomerations, but smaller, second-tier cities where such restaurants are finding growing favour.

“Whatever a guy anywhere in the world wants, a guy in India wants that as well,” said Amit Jatia, vice-chairman of McDonald’s India – south and west. “The consumer is beginning to recognise that quick-service restaurants mean quality and value for money.”

Domino’s Pizza is growing at a blistering pace, with 364 outlets in 55 cities, all run by Domino’s Indian franchisee, Jubilant Foodworks, in New Delhi.

Jubilant, which raised $71m in an initial public offering last year, increased sales by 61 per cent from April to December, compared to the previous year, buoyed by 54 new stores opened in the period.

“The Indian market has been growing and evolving at a very fast pace,” says Hari Bhartia, Jubilant Foodworks co-chairman.

Last month, US-based Dunkin’ Donuts, owned by the private equity firms Carlyle Group, Thomas H. Lee and Bain, announced a partnership with Jubilant to bring its deep-fried products to India.

Subway is also gaining popularity in India, with 199 outlets, and Starbucks is gearing up for an Indian market launch this year.

Hardcastle Restaurants, one of two Indian partners to McDonald’s, is buying out the US hamburger chain’s stake in the 50-50 joint venture that operates the chain in southern and western India, paving the way for accelerated expansion. Hardcastle aims to open 30 McDonald’s outlets this year. “It’s getting competitive,” said Mr Jatia.

Western fast-food brands have gone through a tough learning process to cater to Indian tastes.

Traditional menus were spiced up, vegetarian options enhanced, and low price, entry-level items developed to make the restaurants more accessible in a highly price-sensitive market.

Such efforts have won the loyalties of consumers such as Sahal Amlani, 30, a store manager, who spends at least Rs50 ($1.10) on an afternoon snack at McDonald’s twice a week, and treats his wife, and one-year-old son to a McDonald’s meal, spending up to Rs300, every weekend.

“My child likes French fries so much, and even my wife has a desire to go out and have some junk food,” he says.

While fast-food chains have finally adapted their recipes to local tastes, they face other trials.

Finding suitable real estate in crowded Indian cities is difficult. “Real estate is the single biggest challenge,” said Mr Jatia.

Indian rivals also pose stiff competition. Café Coffee Day, a coffee chain based in Bangalore, has around 1,000 outlets, and a range of food offerings.

Near McDonald’s at Phoenix Mills, cheery food stalls like Dosa Hut, On a Roll, Thai Chi, do brisk business serving up Indian and Asian dishes – which for many Indians are still more appealing than spiced up versions of Western fare.

“Indian food is far safer and healthier if you eat on the street,” says Charu Gargi, 48, a film-maker, as she tucked into a south Indian lunch with friends.

“They make it fresh, and I don’t want to have so many preservatives.”

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