McDonald’s eyes slice of Indian coffee chain pie

Aug 11 2013, 09:28 IST
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SummaryMcDonald’s is thinking of moving beyond burgers and fries in India.

McDonald’s is thinking of moving beyond burgers and fries in India. With profit on its mind, the US-based burger chain, which made its debut in India 17 years ago, is putting together plans to bring its global coffee-house-styled food and drink chain ‘McCafé’ to get into the fast growing quick service restaurant (QSR) segment in India, say sources related to the development.

“This will help McDonald’s deliver better margins. However, it will take at least six months for the project to roll out. The company is already scouting for appropriate locations,” the sources said.

McDonald’s subsidiaries in India — WestLife Development (WDL), a part of the Mumbai-based BL Jatia family, which spearheads the burger chain’s operations in west and south India, along with Vikram Bakshi’s Connaught Plaza Restaurants, which is responsible for expansion in the north and east India in a joint venture with McDonald’s Corporation — will soon offer a selection of coffees, desserts and smoothies, among others, to target the youth.

While both the Indian subsidiaries declined to give details regarding the McCafé format, sources say pilot projects will be launched in the top eight to 10 markets. Initially, these will be launched as a “shop-in-shop” model in some of the 250 existing restaurants.

Through the new venture, McDonald’s is looking to counter the likes of KFC, Domino’s Pizza, Starbucks and Café Coffee Day, to whom it has been losing out as much as R20,000 crore in the organised QSR space.

“We continue to study the potential of launching McCafé in India. There are, however, no immediate plans to roll out the project,” a Connaught Plaza Restaurants spokesperson told FE in an email reply.

The food service industry is one of the largest in India, estimated to be worth R43,000 crore, of which the organised sector comprises 16-20%. The organised QSR business in India is estimated to be over R20,000 crore, growing at a compounded annual growth rate of around 40%. The share of this segment is expected to double from 16-20% of the Indian food services industry to 45% by 2015, says a report by retail consultant Technopak.

“Among the existing food formats, premiumisation is emerging as a strong trend owing to changing consumer habits. While McDonald’s is the core flagship business, diversifying into other formats will help it to improve margins,” said Saloni Nangia, president, Technopak.

Through the new venture, McDonald’s will be able

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