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[Contn.] McIndia Localisation as a religion
A real estate developer from Delhi with a background in printing, or a vegetarian with a chemicals and textiles business in Mumbai, may seem unlikely choices to have as partners to run an international hamburger chain. But the Big Mac's brass at Oak Brook, Illinois, USA, didn't seem to think so when they chose Vikram Bakshi and Amit Jatia, respectively, for the northern and western regions of the country. Says Jatia: ''In McDonald's, they look more at the attitude of the person-the technicalities, they feel, can always be explained.'' According to Arvind K. Singhal, Managing Director of the retail consultancy KSA Technopak, a lot of the credit for McDonald's taking off in India goes to the choice of the partners. ''More than the concept of localisation, which is similar to what they do in other countries, I am impressed with the way they function in India. Credit goes to the parent company in the choosing of the partners.''
Local products for the local palate is not a new concept at McDonald's. The Teriyaki Burger in Japan, the Maharani Burger aimed at Malaysia's large Indian population, a green pepper burger in Singapore, a Thai burger with a Thai curry paste, spaghetti in the Philippines or even spicy chicken on the bone with rice in Indonesia... at McDonald's, it's de rigueur. In India, one of the earliest and most stark moves the company made was to have no beef or pork items, respecting the country's religious sentiments. Then, given the high population of vegetarians, the next move was to separate the non-vegetarian cooking from the vegetarian so that finicky vegetarians could rest assured that their meal was 100 per cent vegetarian. Factors such as eggless mayonnaise and spicy herbs were kept in mind while the 'menu vision' was drawn up. It isn't easy to bring in a new product. The parent company has parameters laid down. You will never see McDonald's doing a thali because it has too many elements and would take too long to put together in what is essentially a fast-food restaurant. Plus, there is a rigorous testing procedure that each innovation has to go through-planning for the recent Veg. Surprise began a year ago. Incidentally, the Veg Surprise is what McDonald's calls the 'fourth flavour' (McDonald's terminology for products that are temporarily added to the menu), a temporary launch that capitalises on seasonalities or festivals. Some locally developed products even have a chance of making it big. Like the Pizza McPuff-a pie with a pizza topping that McDonald's International is already screening and wants to take global. Although McDonald's India is working on another new product codenamed wrap (it will be bigger than a burger, but easier to manage), it doesn't want to change its menu frequently. Says Mediratta: ''We do not plan to play around with the menu now. The fourth flavour will be the way we will bring in variety.''
Pricing it right for India When you're fishing for customers, your bait must be right. Or, if you like it, Vikram Bakshi's way: ''Till you get them in, you can't graduate them.'' When McDonald's introduced soft serve ice cream in 1997, it priced each cone at Rs 7, which left the company with a zero per cent margin. Hang on. Didn't that mean the company wasn't making any profit? True, that's how it was in the beginning. Today, thanks to increased supply chain efficiencies and huge volumes, that same Rs 7 yields a 41 per cent margin. Explains Wilbert Husselman, director (operations), McDonald's India: ''In softies, we underwent a big reduction in margins. But from the very next day, there was such a huge increase in volumes, we could renegotiate with the suppliers. Every company uses beacon products to draw customers in. It is part of our pricing strategy to make McDonald's affordable to the largest section of the population.'' McDonald's value meals start at a low of Rs 29 and go on to Rs 89. Such a value-ladder strategy attracts a widest section of customers and enables them to come and try new items. And, as Bakshi says, graduate to the higher rungs.
McDonald's wouldn't have been able to enjoy the flexibility it does in pricing its products if it weren't for the well-established supply chain that it built beginning six years before the JVs were struck in 1995. In all its markets, the company traditionally uses an outsourcing model. However, in other countries, it has also been actively using imports. In India, a decision based on import duties and forex fluctuations was taken early on to indigenise to the maximum. Currently, McDonald's buys 95 per cent of all the raw materials it uses, working with 38 suppliers. Says Sundar Srinivasan, country purchasing manager: ''We constantly look for ways to innovate at the local level. We encourage our international suppliers to work with and grow our Indian suppliers.'' Now, having the India recipe right, McDonald's has to scale up. It will pump in another Rs 400 crore by 2004, by when it intends to have 80 outlets across the country. It also expects to break even around the same time. Next month, the first drive-thru McDonald's will be launched on the Mumbai-Pune expressway. The company is also entering Gujarat and finalising a franchise agreement in Bangalore. With growth in developed markets plateauing, India is naturally big in the Big M's scheme of things. Expect to see more golden arches. 1 | 2 |
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» Its
30 outlets serve some 3.5 million customers per month. Total
customers served since 1996: 30 million.
