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India's QSR sector looks to promos

News, 15 July 2016

NEW DELHI: In a slowing fast-food market, restaurant chains in India are turning to promotions and product innovation to tempt consumers back while one state's imposition of a "fat tax" may hinder expansion plans.

Executives from leading chains told the Economic Times that consumer spending remained tight and that "everybody is fighting for the same customer".

The tactics adopted range from straightforward discounting to "happy hours" on certain days to bundling items together in meal deals.

Arvind Singhal, founder of retail consultancy Technopak, described the current spate of offers as being "like end-of-season sales by fashion retailers".

In addition to the uncertain economic outlook which has reined in discretionary spending, "the monsoon is a lean time for QSRs because schools and colleges have reopened," he explained.

Singhal pinpointed another development that is affecting sales. "[Restaurants] have to resort to discounting for their walk-in customers because online delivery of food has emerged as a large competitor for bricks-and-mortar fast-food chains," he said.

International chains have already adapted their menus to take account of local tastes and are now exploring ways to tap into changing consumer habits, as exemplified by Domino's launch of a cross between a burger and pizza, which it is calling … wait for it … a BurgerPizza.

According to Dev Amritesh, president and chief business officer of Domino's Pizza India, burgers in India are all-day escape and fun food while pizzas are seen more as a meal replacement; the BurgerPizza is an attempt to target the "all day, individual consumption occasion".

It is unlikely to be rushing to do that any time soon in Kerala, however, where the state government has just imposed a 14.5% tax on burgers, pizzas, doughnuts and tacos served in branded restaurants.

Finance Minister Thomas Isaac said the so-called "fat tax" was a preventive measure "as Kerala's food habits are changing dramatically – people are eating a lot of junk food and rejecting traditional food".

And he indicated the tax would in future be extended to cover other products, including those made from refined flour, and sugary drinks.

Data sourced from Economic Times, BBC; additional content by Warc staff