It's well-known that the Indian economy was in the midst of a severe slowdown even before the COVID-19 pandemic broke out in the end of February this year. While companies were already struggling to grow, Westlife Development, the company which owns McDonald's India franchise for South and West, had claimed that it had mastered the recipe of countering slowdowns. The Rs 1,400 crore company had registered 18 consecutive quarters of consecutive same store sales growth and had set itself a target of clocking a revenue of Rs 2,500 crore. The company's strategy of growth was to look beyond burgers and create more occasions for customers to visit its stores. It had widened its menu by focusing on breakfast and all-day snacks.
The three-month long coronavirus lockdown has forced the company to reset its strategy and quickly put in place its restaurant operating platform 3.0. Though, Smita Jatia, MD, Westlife Development, refuses to put a number to the kind of de-growth her business has gone through in the past few months, she does admit that had it not been for the delivery business which was allowed to operate during the lockdown, her woes would have been deeper. "We have 100 delivery hubs which are open. Some states are not allowing delivery, but are allowing take-away," she says. A recent Crisil report says that the organised restaurant industry has seen a 90 per cent reduction in sales since the lockdown and online orders have decreased by 50-70 per cent. Organised restaurants, according to the Crisil report, account for 35 per cent of India's restaurant industry, estimated at Rs 4.2 lakh crore in fiscal 2019. Dine-ins are 75 per cent of the organised restaurants, with online delivery/takeaways making up for the rest.
McDonalds globally is known to have undergone a 22 per cent dip in same store sales post COVID, and Jatia says that her company is putting together a revival plan to bounce back. Going forward, in the new normal, Jatia expects the delivery and take-away businesses to grow much faster than it earlier did. "However, that doesn't mean that the in-store business will be a laggard for us. We are taking all necessary steps to bounce back. We are leveraging technology in a big way to stay safe. We are going to enable our consumers to order digitally through our apps even in our stores, so that they can avoid standing in queues at the order counter, and the food will be delivered to them on their table. We also have strict social distancing norms in our kitchens," she explains.
The company, she says, is also looking at costs under a stricter lens. "Once the new normal sets in, we have to look at costs which will help increase our productivity as well as those which we don't need and hence, we can get rid of. In fact, cost conservation was an important agenda for us even before the lockdown. We had also reduced our capex cost by 30 per cent. We had also introduced an energy management system as part of which all our stores are being monitored remotely."
Jatia is confident that the heightened consciousness for hygiene will lead to incremental consumers visiting her stores. "As offices open up, people who are used to eating at local roadside eateries will start moving to organised eateries such as ours which offer a hygienic experience." McDonalds, she says, recently conducted a survey which indicates that consumers want to return to restaurants post the lockdown. "Consumers are looking for a break from their daily chores and want to step out post the lockdown. However, with discretionary spending likely to come under pressure, they will prefer going to value restaurants such as McDonalds, which also have high levels of hygiene." She also expects sales from McDonalds drive-in restaurants to see a surge in the new normal.
Jatia is confident of bouncing back and even meeting its 2022 revenue target of Rs 2,500 crore. "Demand for McDonalds in countries like China and Thailand is already at 90-95 per cent of normal demand. We are committed to the long term and will take decisions that will help us grow both in short-term as well as the long-term."
The Crisil report, however, predicts the rebound to be gradual. "The slow recovery should begin from June. Given low demand and social distancing norms, restaurants will operate at 25-30 per cent of their monthly service levels in the first 45 days after lifting of the lockdown," the report says.
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