The Golden Arches have always been synonymous with food that is quick, clean and sinful. But, starting next week, your local McDonald’s outlet could give you a chance to munch on healthier food options. All at a premium, of course. McDonald’s is also tucking away some of its straight-laced furniture to include couches and soft furnishings as it revamps outlets across India. All this, to give consumers a “different experience”.
With increasing disposable incomes, experts say consumers will always look for quick status fixes derived from premium products and premium experiences. So, it comes as no surprise that companies across categories, such as McDonald’s India, are increasingly looking at introducing a more premium range retail experience or product offering to raise value for the brand and reach out to newer target groups.
“Salaries have doubled over the last four-five years (and) aspirations have more than doubled,” says Subhinder Singh Prem, managing director, Reebok India Co. A few years ago, volumes at Reebok India were driven by the Rs999 shoe. Today, those volumes come from shoes that start at price points of Rs3,000. “Consumers are moving up the value chain,” he says.
(From top) McDonald’s healthy option wraps; a Reebok from Fish Fry store; and Reebok shoes designed by Manish Arora;
Having launched performance stores (product selection is driven more by technology) as well as lifestyle stores (product selection is driven more by design) across the country, the firm is now looking to roll out eight exclusive Reebok from Fish Fry outlets in malls over the next six months. The stores will carry Reebok’s range of apparel and footwear by fashion designer Manish Arora, and will stock products with price points that range from Rs6,000 to Rs50,000.
McDonald’s India, in turn, is relaunching its wraps with healthier options such as multigrain breads and extra salad. Fruit juices are also likely to join its list of beverages which, so far, consisted of caffeinated or aerated drinks and milkshakes. They will be available at a slightly premium price.
Godrej Agrovet Ltd’s retail chain Nature’s Basket has revamped its products portfolio to include premium products such as wines, imported foods, along with fresh fruits and vegetables.
Wrangler, the denim brand from VF Corp., has launched a collection of organic apparel called Naturally!
“It is fundamentally a problem of greed,” says Anand Halve, co-founder, Chlorophyll Brand Communications Consultancy Pvt. Ltd, who maintains that just as a mass brand will always envy the margins of a premium brand, a premium brand will always envy the volumes of a mass brand. So, it makes sense for a mass brand to look at improving its margin profile through propositions that could include personalization, premium services and higher price points.
“Not only does it translate into higher margins, but also opens up new consumer groups. And, more importantly, it also serves well for the brand ego—everyone wants to work in the premium space,” says Halve.
Introducing a premium or niche product range or service helps create a differentiator for the brand, and also enhances brand value and image.
Barista Coffee Co. Ltd launched Crème, a premium range of coffee bars that offers consumers a slightly more sophisticated environment, table service and a live kitchen.
“We are an experiential brand, and Crème offers our consumers a premium brand experience,” says Rini Dutta, vice-president, marketing and product development, Barista.
Its chain of Espresso Bars also went through a makeover with more stylish interiors and a premium selection of coffee to match in anticipation of global coffee brand Starbucks’ entry. Crème, however, took it up another level with a live kitchen, soft furnishings, table service and price points that were 15% higher than the Espresso Bars.
Ditto for Wrangler’s Naturally! launch. “We (Wrangler) have always been known for bringing new trends to our Indian target group,” says Anshul Chaturvedi, marketing manager, Wrangler. This one actually allows consumers to buy a conscience, by supporting the environment.
Internationally, several brands are using this strategy to expand their reach in Europe. While McDonald’s is replacing its yellow and white plastic furniture with lime green designer chairs and dark leather upholstery, toy manufacturer Hasbro Inc. launched FurReal Friends Butterscotch Pony—a pony with built-in sensors that enable it to respond to children in a life-like way. The toymaker could be seeking to capture a bigger share of family budgets that regularly go to iPods and video game consoles.
While it would seem logical for mass brands to move up the chain, experts sound a word of caution. “If brands stretch to an extent that is against the core of the brand culture, it could prove disastrous,” says Halve, citing the example of Videocon Industries Ltd, which built itself as a mass brand.
“Even with endorsements by (actor) Shah Rukh Khan and (cricketer) M.S. Dhoni, Videocon will find it hard to sell high-end products. Because, in the public mind, Videocon is still a low-cost brand,” he says.