Business Today

An Indian McDonald's anyone?

A similar eating out format for Indian food is a big opportunity.

Raghav Gupta | Print Edition: May 16, 2010

India is changing rapidly, and so is the way it eats. This change is driven by various factors—more nuclear families, newer types of jobs, more working women, lack of time, increasing incomes, more "guilt" caused by the lack of time for the family, a more adventurous palate, greater consciousness of hygiene and so on. This has created a lot of exciting opportunities in food services retail. But the success enjoyed by chains like McDonald's, Domino's Pizza, Café Coffee Day, KFC and Haldiram's so far may not even be the tip of the proverbial iceberg!

Various reports project that 85-90 million jobs will be created in India over the next five years, with almost half in services sectors like hospitality, health care, modern retail, IT & BPO, telecom and education, and many women will be joining the workforce. So far, the large numbers of women in agriculture and labour have skewed the metric of "percentage of working women". As more women join "urban" jobs, this will change. And this will shrink the time available for grocery shopping and cooking.

Indians see eating out as a "celebration" — of a birthday or getting together with friends. But, now more of eating out will be necessity-based. Developed countries have followed this pattern before us; what is different is the detail. For example, in India, cafés get the bulk of their business in the second half of the day, when people like a leisurely coffee with friends or family. In the developed markets, on the other hand, café chains get the maximum business in the morning as people going off to work pick up breakfast and coffee.

India's food services retail market is estimated at Rs 32,000 crore, and expected to grow at 8-10 per cent a year over the next five years. Of this, the organised market currently accounts for around Rs 4,000 crore and is expected to grow at 25-30 per cent a year into a Rs 15,000-crore market by 2015.

However, the real growth fillip could be provided by "necessity based" eating out, and all growth projections could turn out to be pleasantly understated. An average adult Indian requires about 1,800 to 2,200 calories per day, or 700 calories each from lunch and dinner. Such a meal needs to be tasty, hygienic, healthy, priced right, and conveniently available. Also, while Indians are increasingly open to different international cuisines, over 80 per cent of food consumed (at home or outside) continues to be Indian.

What is available in Indian cuisine on an average is focussed on fine dining and sit-down. But menus are too long, with the objective of providing variety, but this reduces economies of scale and increases price points. Input raw material quality is poor and this is covered up by the use of large quantities of fat (gravy), resulting in a meal that is probably 1,300 calories and way higher than the desired 700 calories. No wonder, visitors from overseas often remark at the large difference in an Indian meal at home versus a restaurant, though they usually love both versions.

Further, from a business design perspective, various improvement opportunities exist. A large menu means a large kitchen, which is expensive retail real estate not being used for seating. So, while Indian food outlets continue to hold their own against multinational chains on the menu front, these players have not been able to ramp up the number of outlets like coffee chains or international quick serve restaurants have.

A format designed for "necessity based" eating out—with Indian cuisine, simplified and standardised menus, centralised kitchens, a sourcing and supply chain, hygienic ambience, flexible seating, and priced marginally higher than a meal cooked at home — would be a very strong opportunity for a business "built for India".

I believe 500-700 such outlets, across 40-50 cities, over 5-7 years, generating revenues of Rs 1,000-1,400 crore per annum would make this opportunity interesting for Indian business houses as well as some international chains. And, extensions into home delivery, institutional business, ready to eat meals, etc., could further enlarge the size and scale of such a business. Hence, a fully Indian McDonald's anyone?

The writer is the President, Technopak Advisors

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