McDonald's has high hopes for India

05 October 2009

NEW DELHI: McDonald's, the US fast food giant, should reach profitability in India in the next two years, and also plans to open more than 100 new restaurants in the country, as it aims to heighten its presence in what is regarded as a key future growth market.

The company currently serves around 500,000 customers in the Asian nation every day, and has recently announced plans to open 120 stores there in the next three years, at a total cost of around 400 crore rupees ($84m; €57m; £53m).

It entered the Indian market in 1996, forming joint partnerships with two separate local operators, Connaught Plaza Restaurants and Hardcastle Restaurants, and has 170 outlets at present.

However, according to Amit Jatia, managing director of Hardcastle Restaurants, "the food industry in India is very small.”

“Informal eating out is a very small market, which shrank a bit in 2008 because of the recession, but there is enough room to grow,” he added.

More positively, Jaita reported that McDonald's like-for-like sales improved by 20% on an annual basis in September, compared with a single-digit increase over last year as a whole.

Furthermore, he predicted the American firm's Indian arm would become profitable in the near future, a result that would put the rapidly-growing economy in line with a number of other major markets.

"We have always said we never make money. McDonald's took 14 years to break even in Australia. In the UK, it took 12 years. We have been in India since 1996 and should break even in a couple of years," said Jatia.

The quick service specialist's other recent initiatives in the country have included launching a range of low cost Extra Value Meals, as it seeks to attract value-conscious consumers.

"At a time when food prices are going through the roof, the Extra Value Meals are priced much lower. We manage to do this by working directly with the farmers."

"We have anticipated increased volumes of produce because we are pushing yield," added Jatia.

Data sourced from Business Standard; additional content by WARC staff