McDonald's to sell potato burger, fries in India
McDonald's Corp. is staking its future in India on burgers made from mashed potatoes, peas and spices. Sumil Mittal says it's a good bet.
Mittal, 19, sits beneath the golden arches at a McDonald's in Ambala, a small town 125 miles north of New Delhi. He is eating the vegetarian McAloo Tikki sandwich, with french fries and a Coke, before seeing the new Bollywood movie, "Wake Up Sid."
"It's a change from the food that we eat everyday at home and inexpensive," said Mittal, a student at Mukand Lal National College in neighboring Yamunanagar. "It tastes good."
McDonald's, the world's biggest restaurant company, is expanding in India as a middle class predicted to grow 10- fold by 2025 develops a taste for Western-style fast food. Sales are up 30 percent during the first nine months of the year, led by growth in smaller cities, said Vikram Bakshi, managing director of McDonald's India.
There are 170 outlets in India, and the Oak Brook, Illinois-based company and its local partners will invest 5 billion rupees ($108 million) to add 120 during the next three years, Bakshi said. By comparison, McDonald's has 1,080 restaurants in China and plans to open 140 this year, down from the 175 it forecast before the global recession.
McVeggie, Pizza McPuff
The chain famous for hamburgers tailors its menus to local tastes, which means no beef in India since the majority of its 1.22 billion people are Hindus and revere cows. It also doesn't serve pork items in deference to Muslims.
Instead, it offers vegetarian and chicken dishes with items starting at about 40 U.S. cents. All restaurants have separate kitchens for vegetarians, including those who don't eat root vegetables like garlic and onions.
"It really doesn't make sense to sell beef in a country where 85 percent of the population doesn't eat it or will even shun a restaurant where beef is served," Bakshi said. "About 70 percent of the menu in Indian outlets doesn't exist anywhere else in the world."
Some items, including the McAloo Tikki and Pizza McPuff, were exported to restaurants in the Middle East. While locals expect the different menu, foreigners used to a Big Mac can be taken aback by a Chicken Maharaja Mac.
30 Percent Increase
"I did know that Indians don't eat beef but the menu was still not what I expected," said Andy Crab, 37, a construction company executive from Cologne, Germany, doing business in New Delhi. "Even the chicken was different from what we have in Germany."
The mashed-potato sandwich is the highest-grossing item on the menu. It costs 50 cents in a nation where the World Bank says 456 million people live on $1.25 a day or less. That's enough people to form the world's third-largest nation.
McDonald's declined to discuss sales figures for India or China, though the company said Sept. 10 that global sales rose 2.2 percent in August. Sales in Asia, the Middle East and Africa fell 0.5 percent, the first decline since May 2005.
By comparison, sales in Indian restaurants open more than a year rose 16 percent in the first nine months, compared with 11 percent a year earlier, Bakshi said. Overall sales climbed 30 percent in the same period.
Pizza Hut, Domino's
Western fast-food chains, including Yum! Brands Inc.'s Pizza Hut and Domino's Pizza Inc., are targeting Asia's third- largest economy, where 54 percent of the population is 24 or younger. India's middle class is expected to expand to more than 583 million people, or about 41 percent of the total population, by 2025, New York-based consulting firm McKinsey & Co. said.
McDonald's opened its first India outlet in New Delhi in October 1996.
The number of fast-food outlets in second-tier cities increased 65 percent last year after increasing 70 percent a year earlier, according to a report by the food wing of the Federation of Indian Chambers of Commerce & Industry this year. That is because of cheaper rents than big cities and spreading affluence, said Subhrangshu Pani, Mumbai-based managing director of retail at real-estate broker Jones Lang LaSalle Inc.
Indian restaurant industry sales are estimated to grow to about $10 billion by 2018 from $6 billion last year, New Delhi- based consultant Technopak Advisors Pvt. said.
Strict Vegetarians
"The next huge phase of growth for the quick-serve restaurant sector is going to be in India, and McDonald's is going to be right there in it," said R.J. Hottovy, an analyst with Morningstar Inc. in Chicago.
Urban Indians now eat out about six times a month, compared with 2.7 times a month in 2003, according to FICCI's Food Franchising Report 2009. Mittal, wearing Levi's, Reeboks and a black shirt, ate in Ambala's Galaxy World Mall, which opened a year ago and is a magnet for high-school and college students.
A sign says the restaurant doesn't sell beef in deference to Hindus and local followers of the Jain religion, which practices a strict form of vegetarianism.
"This town has a lot of the Jain families who won't eat food that has even come in touch with meat or even onions," said Hemant Gupta, the restaurant's manager. "We usually do a store tour, including the kitchen, to make them feel comfortable."
Karamvir Singh, 63, who grows wheat and rice on his nearby farm, isn't a vegetarian and usually orders the Filet-O-Fish sandwich. This time, the turbaned Sikh chose the McAloo Tikki for a change of taste.
"Unlike the regular eating joints, you can be sure that a level of hygiene is maintained," said Singh, who comes regularly with his family. "The cleanliness and quality is what I like about this place."