FIRST THINGS FIRST: DECODING THE HISTORY
Initially, the Indian economy was a traditional economy which preferred home cooked food but there is a great change in preference of the customers in the recent years which has led to the emergence of the fast food industry of India. The revolution in the Indian Food Services Industry began in the mid-1990s with the emergence of organized quick service restaurants (QSRs) replacing the traditional age-old home-grown brands like Haldiram’s, Nirula’s, Sarvana Bhavan, etc. A quick service restaurant is a restaurant that efficiently serves standardized meals that can mostly be eaten either on the go or takeaway. QSRs highly focus on maintaining uniformity across their branches and serving customers to their utmost satisfaction. The QSR industry is also witnessing a phenomenal expansion due to the rise of the hospitality and tourism industry. The recent transition from home-grown restaurants to fast food QSR giants entering the Indian market marked the beginning of the evolution of the food services industry in India.
INDIAN FAST FOOD INDUSTRY- ON THE UP AND UP
The QSR market in India was valued at INR 171.90 Bn in FY 2022 and is expected to reach INR 431.27 Bn in FY 2027. The Indian food services industry has grown by 8% over the last six years and is now expected to grow at a rate of 9% over FY20-25P. India proved to be the ideal economy for this transition because of three major favorable reasons:
a) growing levels of urbanization and more demanding customers
b) having a large number of younger population
c) change in food consumption habits because of increased aspirational levels of millennials and hectic schedules.
All these macroeconomic factors induced fast food giants such as McDonald’s and Domino’s to establish their customer base in India as well.
Since 2017, the number of quick service restaurants has increased by leaps and bounds. Their target customers are the young adults (18-35) who spend a major share of their income on fast food. Statistics say that teenagers from the upper-income families are spending 24% of their cash on food.
Clout kitchen also saw an increase in demand due to the COVID 19 pandemic and it is anticipated that they would register the fastest growth in the upcoming period.
BOUTIQUE BRANDS: THREAT TO FAST FOOD QSRs?
However, the quick service restaurant (QSR) industry in India is now witnessing intense competition from various boutique brands that have adopted various strategies to associate their brand name with quality experience at affordable prices. Leo’s, Tossin Pizza, and MojoPizza are a few of the pizza boutique brands in India that have developed a prominent customer base over the years by adapting to newer customer preferences, following ongoing trends, and most importantly, altering their prices to fit the Indian customer base better than the existing QSR. These local players have strategically designed a market plan that aims to attract the younger generations and the working populations by offering lower-priced alternatives with better customer service and more variety. Alongside offering more affordable options, these emerging boutique brands have also undertaken the preparation of dishes with gourmet methods and offered a ‘fine-dining’ experience to their customers as a part of their market acquisition plan. To adapt to this new competitive environment, fast food giants such as McDonald’s, KFC and Domino’s have adopted various promotional strategies to secure their position in the market and come out as giants with better service and wider varieties.
ARE FOOD GIANTS ON THEIR LAST LEGS?
With the rise in quick service restaurants like Instapizza, The Burger Club, and La Pino’s to name a few, existing fast-food giants have been impacted negatively. With higher expenses and stiff competition from rising QSRs, these fast-food giants have observed a shift of customers from their products to those of the QSRs. This has led to a steady decline in their customers, resulting in a similar decline in earnings as well.
Customers are beginning to prefer quick and quality services over their old favourites, which is putting the latter in a tough spot, where they have to choose between increased expenses or retaining their much-valued customers. Market trends keep changing day by day as the competition keeps rising. The goodwill that these fast-food giants have worked years on to establish, is toppling over with every passing day, or rather with every new QSR that comes up offering great deals and lightning-fast services. With the introduction of these new and better services, fast food giants who have been serving customers forever are being forced to adapt. They’re dealing with ordeal after ordeal, since they’re faced with this new and pertinent issue, immediately after recovering from the pandemic. Instead of focusing on expanding their services, now all their energy is invested just in retaining their existing customers because if they end up losing their customers, recovery will be far from a child’s play in this red ocean market. This leaves the fast-food giants with no option but to bring about drastic changes in their marketing strategies and level up their game if they want to get ahead of their cutthroat competition and retain their market share.
GETTING BACK ON TRACK
Fast food giants like McDonald’s, Domino, and Pizza Hut have spent years being the global leaders in the market. They have the experience and the know about what to do in situations like these. For instance, McDonald’s is moving toward healthier options because of the increased awareness about health and fitness. They are constantly innovating new items along with refining existing offerings just to adapt to customers' tastes and preferences. This also creates a buzz around the brand and develops a feeling of excitement among the customers. Furthermore, they are always seen engaging in various co-branding efforts and partnerships to extend their reach and build the brand. Some famous examples of this would be the collaboration with Coca-Cola and the very new Kartik Aryan meal that includes McAloo Tikki burger, Beverage, Fries and Pizza McPuff at a pocket friendly price of Rs.197. This helps them to tap into the already existing fan bases of these partners and market their brand through these celebrity endorsements and partnerships.
Dominos is also trying to fight the competition in its executive ways. Dominos is adapting its price strategy to remain competitive in the market. This has led to significant drops in their price range. The company has slashed the price of the large vegetarian pizza from Rs.799 to Rs.599, and that of non veg pizzas from Rs.919 to Rs.549. Domino’s Pizza’s exceptional marketing strategy of a 30 minute delivery or free guarantee.
Saffire Food India, the parent company behind some famous names such as Pizza Hut and KFC, is quite optimistic about the entire situation. They refer to this as a short-term hurdle and predict a resurgence in demand in the next 12-18 months. Just like Domino, Pizza Hut is also trying to reduce its prices and introduce more budget-friendly product lines to remain relevant among the customers. Additionally, the company is expanding its reach by taping new cities for a wave of entirely fresh customers.
KFC’s marketing strategy is equally strong. They are actively using facebook and twitter to attract customers, share promotions and schemes, and solve customer grievances. So a strong digital marketing is helping them stay relevant even after such major competition from new emerging QSRs.
FINAL TAKE
Competition is the only thing constant when it comes to the market. Surviving this competition has always been one of the major focuses of companies. With the QSR industry evolving into a dynamic sector catering to the diverse tastes and preferences of millions, it becomes essential for the fast-food giants to react to this competition and regain their market share to survive. India's QSR chains are adapting to changing consumer preferences by localizing menus, focusing on lower price points, and investing in product innovation. While local competition presents challenges, it is also driving innovation within the industry. As the industry navigates headwinds and local competition, it remains focused on long-term growth and evolving to meet the ever-changing needs of Indian consumers. Because of the large number of options available for the consumer, they tend to switch from one product to another as soon as they find something new offered by some other company. This turns out to be an advantage for those who can adapt to this by providing something new and innovative, and a disadvantage to those who fail to survive this competition. Technology also plays a major role as with the advent of mobile apps, ordering has become much easier leading the industry towards digital transformation. Even after the massive challenges faced by the fast food giants, their adaptability and commitment to innovation will surely help them sustain its growth in the upcoming years.
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