McDonalds in India

McDonald’s Corporation, established in 1955, owns one of the world’s most well-known and valuable brands and holds a leading share in the global branded quick service restaurant segment. The Corporation has more than 30,000 restaurants in 119 countries serving 47 million customers each day.

McDonald’s entered India in 1996 through joint ventures with two Indian entities, Hardcastle Restaurants Pvt. Ltd. and Connaught Plaza Restaurants Ltd .Hardcastle Restaurants Pvt. Ltd. owns and operates McDonald’s restaurants in western India through a 50-50 joint venture with the parent company. Through a similar partnership, Connaught Plaza Restaurants Pvt. Ltd owns and operates McDonald’s operations in northern India. There are 60 McDonald’s restaurants in India employing over 2,000 people who serve more than 1.5 lakh customers across the country every day.

India challenges

• Indians do not consume beef and there is a significant population which is strictly vegetarian.

• Prior to McDonald’s entering India there was no concept of such a food category. This meant low product awareness and absence of the infrastructure (cold chain) and supply chain needed for such a business to be successful. Indian agriculture was tuned to producing for households and not for the processed food industry.

• While all this necessitated high investments in infrastructure creation, the consumer could not afford to pay high prices.

• Availability of real estate is crucial for success in the retail business. Getting quality real estate was an issue. McDonald’s either does outright purchase or enters into long lease of 25 years. Rent control laws, housing societies unwilling to enter into long term leases and required clearances from multiple authorities made acquisition of real estate a difficult proposition.

Factors for Success

McDonald’s India overcame all these challenges by focusing on its core values of delivering quality products, served in a friendly environment, in a clean place, at affordable prices, to set up its growing network of outlets. Several factors contributed to

this:

 Global support with local management

McDonald’s India is a joint-venture company managed by Indians with complete flexibility to run the business.The India team brought local knowledge into the JV.The Indian team also brought in entrepreneurial driveto makes the business a success, given the unique challenges the country presented.

McDonald’s Corporation provided strong support to the local management in several ways. It trained the Indian management extensively before commencing operations, in order to ensure adherence to its commitments on quality, service, cleanliness and value and enable standardization of the service in sync with the global experience. International experts in different areas were also sent to establish the business in India.

 Investment in the food supply chain

McDonald’s made large investments in infrastructure and supplier development. It set up a cold chain, to cut down operational wastage and maintain the freshness and nutritional value of raw and processed food products. The cold chain involves procurement, warehousing, transportation and retailing of perishable food products - all under controlled temperatures. Setting up this extensive cold chain distribution system took six years and has involved the transfer of state of-the-art food processing technology by McDonald’s and its international suppliers to Indian enterprises. McDonald’s identified and developed local entrepreneurs as suppliers for its India business. Global suppliers of McDonald have collaborated with them to facilitate transfer of technology and expertise.

 Localization

McDonald’s carried out significant localization of equipment that resulted in bringing down fixed costs. McDonald’s suppliers were also brought in to set up equipment manufacturing plants in India. In addition, products were developed to suit Indian cost

expectations and suitability to the palate. Some products in the global menu of McDonald’s were adapted for India.

 Suitable pricing

McDonald’s incurred high fixed costs in infrastructure and supplier creation in India. However, keeping in mind the price sensitivity of the customer, McDonald’s adopted a large volume, low realization model of business. The company has taken a long-term view and priced its products appropriately.