BackFast food emerges as the great leveller
Rapid urbanization and the influx of migrants to the metros are changing consumer habits
Premium(Hemant Mishra/Mint)
New Delhi: Tasleem Begum, who works as a household help in the Delhi suburb of Patparganj, treats her nine-year-old son Asif twice a month to a meal at McDonald’s or Domino’s. Asif is fond of the burger and pizza fare at the fast food restaurants. The outings cost her around ₹ 500, about 6% of her monthly earnings of ₹ 9,000.
“I somehow ration for this expense," the 29-year-old mother said. “Television commercials exposed him to Domino’s and McDonald’s, and I finally gave in to his demands two years ago."
For Tarini Kayastha, 13, and her sister Nandini, 8, eating out with their parents at McDonald’s, KFC, Domino’s or Pizza Hut isn’t rare. Their father, Sameer Kayastha, a senior engineer at Oil and Natural Gas Corp. Ltd, was transferred to Delhi from Ankleshwar in Gujarat some months ago and there is no shortage of eating-out options.
“These outlets were not available in Ankleshwar, so our parents used to take us to Baroda almost every fortnight," says Tarini. That’s an 80km drive the family used to make to satisfy their craving for fast food.
The social and economic backgrounds of Tasleem Begum, the sole breadwinner of her low-income family, and the Kayasthas, who belong to the middle-to-high-income group with sufficient disposable income to spend on eating out, may be different, but neither skimps when it comes to indulging their children.
And across India, fast food outlets are emerging as the great leveller as rapid urbanization and the influx of migrants from small towns to the metros make for a more-diverse customer base and consumer habits change. Every fast food chain has affordable offerings on its menu to cater to the changing demography.
“Today, consumption is more democratic. Our focus is on a larger set of audience," explained Harneet Singh Rajpal, vice-president (marketing), Domino’s Pizza India. “We are a mass brand and we understand that we will have to expand to a larger set of people across consumer demographics."
For instance, Domino’s introduced the Pizza Mania concept in 2008, with pizzas priced at ₹ 35 that became an instant hit. Now available for ₹ 44, Pizza Mania marked the brand’s first attempt at catering to wallet-watchers.
“When we entered 17 years ago, the concept of fast food restaurants and pizzas was very premature," said Rajpal. “Only people who were familiar with the concept, that is the educated socioeconomic class, were potential consumers. It has taken a lot of experience plus change in pricing, resizing of stores and the variety offered to consumers to change consumer habits."
Jubilant FoodWorks Ltd is the master franchisee for Domino’s in India and operates 500-plus pizza outlets in the country. The promoters of HT Media Ltd, which publishes the Hindustan Times and Mint, and Jubilant are closely related. There are no promoter crossholdings.
Café Coffee Day, or CCD, too offers competitively priced combo meals.
“At CCD, combos named after their indicative price, namely Forty-Niner, Fifty-Niner and Sixty-Niner, are a hit," said K. Ramakrishnan, president of marketing at the coffee chain run by Amalgamated Bean Coffee Trading Co. Ltd.
Changing customer profile
KFC’s Streetwise range starts at ₹ 25, and at Pizza Hut, iPan Pizzas are priced at ₹ 29, making them affordable and accessible to a larger clientele. Then there are competitively priced combo meals. Pizza Hut offers the Weekday special three-course meals that start from ₹ 99.
“We have seen tremendous growth for our brands with innovative products and attractive price points," says Sandeep Kataria, chief marketing officer, Yum! Restaurants India, which owns KFC and Pizza Hut in India.
Earlier this year, Subway, the American sandwich chain, also entered the ₹ 30 segment by introducing toasties (a cheese sandwich) to compete with rivals.
“When other chains brought down prices and lifted entry barriers, we too felt the need to do the same", explains Manpreet Gulri, country head, Subway India. “What it does for the consumers is that it induces trial and creates a sense of loyalty in the target consumer."
The fast food brand, which once fed consumers belonging almost exclusively to the high-income groups, has seen the profile of its consumers change. The average age of the walk-in consumer has also changed.
“What used to average at 25-plus has expanded to include people from 15-40 years of age," he said.
As the customer base grows in diversity and size, fast food chains have expanded rapidly.
From 11 outlets in 2005, when KFC started in India, it is now looking at opening its 200th restaurant. KFC and Pizza Hut have 13 franchise partners, including Dodsal and Devyani Group, across India.
“Over the years, as the Indian consumer has evolved, we’ve seen a shift in consumers as we have penetrated deeper. Confidence in a better future and increased earning potential have increased the general openness to experiment across all life stages, in particular the youth," said Yum’s Kataria.
Domino’s has expanded from 300 stores in 2010 to more than 500 today across 110 cities. McDonald’s has built a chain of 285 restaurants across India over the past 15 years. CCD has 1,350 outlets in 185 cities across the country.
To be sure, a part of the expansion is being driven by demographic trends such as rapid urbanization and an expanding middle class.
A June 2012 report by McKinsey Global Institute called Urban world: Cities and the rise of the consuming class says that about one billion new consumers will be added in emerging market cities by 2025. The 600 emerging market cities identified by the institute include 25 Indian urban centres.
Demographics at play
The rapid urbanization is being fuelled by an influx of people moving from rural and semi-urban areas to metros and large cities. According to a 2010 report by McKinsey titled India’s urban awakening: Building inclusive cities, sustaining economic growth, 590 million Indians will be living in cities by 2030, nearly twice the population of the US today. According to the report, 91 million households will be middle class by 2030, up from 22 million when it conducted the research.
“At a broader level, India has witnessed rapid expansion of the middle class, who probably did not go to picnics like maybe you and I did as children," said Maitrayee Chaudhuri, a professor of sociology at the Jawaharlal Nehru University (JNU) in New Delhi. “They are literally first-generation middle class, whose cultural capital may not be books, libraries and museums, but these eating joints."
Traditionally, Indians ate home-cooked meals, and eating out was more of a celebration, said Amit Jatia, vice-chairman, Westlife Development Ltd, which operates 148 McDonald’s restaurants in West and South India through a “development licensee" agreement.
However, changing cultural dynamics have resulted in a shift in food consumption patterns among urban Indian families, he said.
Jatia, who started the first McDonald’s outlet in 1996, has seen his consumers grow and change—from upper-class families to a wider base.
“What was the domain of the upper class, singles or forced bachelors has percolated to all echelons of society," Jatia said. “Dining out has seen explosive growth in recent years as urban consumers seem to have found more opportunities to dine outside the home."
While the initial target customer base for most fast food chains was the rich and upper class, the eventual trickle-down to the mass market has come as a natural progression.
And affordable prices have helped broaden the market, said Jacob Kurian, a partner at private equity firm New Silk Route, which has invested in CCD.
“This had earlier been restricted to the niche target audience that identifies itself as being ‘cool’ and ‘hip’," he said. “Now that target group is very prone to being fickle since it is primarily driven by trends which are prone to constant change. Thus, to avoid this fickle audience, they need to reach out to mid-mass India and broaden their appeal a little more."
The change is visible in the mix of people who patronize fast food outlets.
Upendra Kumar, 35, who works as a driver for a family living in New Delhi’s Vasant Kunj neighbourhood, takes his two children Jiten and Usha to McDonald’s for an occasional meal.
“Some of the packages are really affordable. My children got exposed to it through my employers and also television advertisements. It makes them happy and does not burn a hole in my pocket," said Kumar.
Prem Bedi, who runs a McDonald’s outlet along the Gajraula highway in northern India, attests to the diversity of his customers.
“Everyone from families on scooters to people in big cars stop by at this McDonald’s," said Bedi. “Obviously, their spending patterns vary a bit."
That perhaps proves the point made by Rajpal of Domino’s that consumption has become more democratic. And fast food outlets may have played their part in levelling the field, but there’s more to it.
“Overall, consumption has increased across classes, which is not specific to fast food joints," said JNU’s Chaudhuri. “So you will see construction workers eating Maggi as would the urban middle class. Similarly, with the expanding rural market, people from small cities or villages would consume the same products that a metro dweller does. Here, availability is also a factor."
“Also, because of the expanding middle class, the boundaries between different classes are sort of blurring," she said.
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