Executive summary of the project
With the increase in spending capacity of Indian middle class society, the mind set of consumers have changed in relation to recreational activities.
More frequently people have started to move out to eat, this has created scope for many fast food chains. But along with that it has also created competition among different food chains.
Hence each and everyone plays a major role in attracting customers. The trend can be seen by the increasing number of food chains.
That is why this topic was chosen for further study as this particular industry is fast becoming very competitive.
This project comprises a brief analysis of the Indian fast food industry and the competition that marks the trend, different companies and various players are analyzed from their competing strategies. Some of these fast food chains are Nirula’s, Pizza Hut, McDonald’s, Haldiram’s.
Further the main scope of the study is to conduct a comparative analysis on two of the major players in the food services industry, which is McDonalds and KFC. The research tries to develop a case study which analyzes McDonalds and KFC’s strengths and their business process very closely with a greater emphasis on how they do a better job than most competitors at serving their customers. In addition to this a consumer research was undertaken with the objective of assessing the service quality of McDonalds v/s KFC on the basis of:
Tangibles
Reliability
Empathy
Responsiveness
Price Sensitivity
Literature Review
A synoptic review of the literature brings to the fore insights into any past comparison made between McDonald’s & KFC.
A related article published by Vishal Krishna, BusinessWorld, 10 October 2009 on the Third Eyesight website which is a consulting firm states:
Indian shopping hotspots are sporting more and more golden arches these days. If McDonald’s is expanding like never before, not far away is KFC (Kentucky Fried Chicken), though on a lesser scale. Their guests are young, their menus glocalized, their branding established, and their menus are no longer over-priced. After more than a decade in the highly fragmented quick service restaurant (QSR) segment – only 20 per cent of the Rs 10,000-crore segment is organized – McDonald’s and KFC are growing at a nippy 20-25 per cent, despite the slowdown.
Get Help With Your Essay
If you need assistance with writing your essay, our professional essay writing service is here to help!
“In a recession, we see ourselves as a good substitute for premium dining,” says Amit Jatia, managing director of Hardcastle Restaurants, a joint venture partner of McDonald’s. “We are rapidly expanding because we have tested the supply chain for over 15 years and it has given us the opportunity to scale up.” McDonald’s, which had 20 stores in India till 2002, today has 160. It plans to open 200 more over five years, with an investment of Rs 500 crore. KFC, the smaller player with 52 restaurants, plans to open over 100 more outlets in the next two years.
Though McDonald’s foray into chicken nuggets this year has taken it into KFC territory, the companies give the impression of ignoring each other. “The Indian market is very large for QSRs and our focus is on large portions of white meat, while the competition focuses on different products,” says Unnat Varma, marketing director of Yum Restaurants, which has been developing KFC and Pizza Hut in India. The pricing of its menus makes McDonald’s a quick eatery with the average per person spend at Rs 100. KFC’s spend is higher, at Rs 125-150.
In 2009, McDonald’s guest count has crossed 30 million; in 1996, when it started, the count was a little more than 200,000. KFC’s annual guest count is expected to rise from 3 million today to 5 million by the end of 2010.
Many Indian retailers have not turned cash positive because they burnt most of their money on building the front-end. But, “McDonald’s and KFC have got an amalgam of things right,” says Harish Bijoor, a Bangalore-based brand and marketing consultant. “While McDonald’s has converted millions of people with its Rs 20 happy price menu, KFC has done it with its large portions as a QSR-plus restaurant.”
Staying Ahead In The Numbers Game
It has taken McDonald’s, which has a global turnover of $22 billion (Rs 1.1 lakh crore), almost 12 years to operationally break even in India (KFC is yet to break even). That in itself is not unusual; Bijoor says cereal maker Kellogg’s took 23 years to break even in Mexico. “The costs incurred on store design and supply chains are huge,” says Jatia. “Now, I am expanding in Chennai and I have to prepare the back-end to service that region, which requires large investments.” Of McDonald’s’ Rs 1,200 crore investments in India so far, Rs 250 crore was for the supply chain alone.
McDonald’s supply chain in is decentralised – a store manager sends a requisition to its logistics partner Radhakrishna Foodland (RKF) though a data management system, who in turn informs Vista Foods, which McDonald’s’ global supplier, OSI Global, bought in partnership with Hardcastle Restaurants. “We source everything for McDonald’s locally and process.”
Other than a tie-up with Venky’s for chicken, KFC outsources buns, vegetables and transportation from different vendors. While this explains its slow expansion and gives McDonald’s a clear advantage, KFC’s limited, chicken-based menu does not need the kind of supply chain McDonald’s has struggled to establish. It is also the reason why McDonald’s can envisage expanding faster into the metros as well as the tier-I and tier-II cities, but KFC cannot for now.
Introduction to Project
Industry
Overview
(Fast Food Industries)
Introduction
The food industry is on a high as Indians continue to have a feast. Fuelled by what can be termed as a perfect ingredient for any industry – large disposable incomes – the food sector has been witnessing a marked change in consumption patterns, especially in terms of food. An increasing number of international fast food chains rushing to India is because all of them see tremendous potential in for this type of business. The large upwardly mobile population in the urban areas tend to eat out more often or business or for leisure.
The various players operating in India are the well established Indian chains like Nirula’s, Haldiram’s and multinational companies like McDonalds, KFC, Pizza hut, Domino’s pizza, etc.
In addition to these, apparently some of the best known international food chains are looking at India. Among them are Great American Disaster, The Burger King, Mexican food chain Tacogrill, Move-n-pick, etc. are some of them to name.
At present all these players are fighting for a small pie, as fast food is really not a big habit with Indians, but they see a big potential.
The players are fighting on products, pricing and positioning and trying to convert the first trials into regular purchase by providing delightful service quality. The focus is on product quality and standardization of taste. Consistency is the key, as its standardization in fast food as the consumer is short on time and wants to satisfy his taste buds with a consistent taste experience.
Beyond this each player has its own strategy to expand consumer base.
– Some feel that pricing is not the deciding factor since fast food industry is not price sensitive market because it is not a regular diet of Indians.
– Some others are competing on positioning which is surprisingly varied, giving the small size of the market.
– For most, targeting children seems the right strategy.
– Advertising is popular.
However, with competition rising most chains are increasing reach as well as working on establishing a national or local presence.
As the fast food companies have expanded around the world, they have had to adapt to local sensitivities. For instance, there were disturbances in India when it was learned that McDonalds’s food items were pre-cooked in beef fat in the USA, because Hindus revere cows and cannot eat beef.
Trends in the fast food industry
The fast food industry is estimated to grow at 9-12 per cent, on the basis of an estimated GDP growth rate of 6-8 per cent, during the Eleventh Five year plan period. Value addition of food is expected to increase from the current 8 per cent to 35 per cent by the end of 2025.
The popularity of food and agro products is not surprising when the sector is now offering a growth of more than 100 percent in sales. With such promise in the sector, a number of foreign companies have joined the fray. While US brands such as McDonald’s, Pizza hut and Kentucky Fried Chicken have become household names, more are on their way.
The market scenario
India is among top 10 market for weekly fast food consumption, an online survey has found. Most of the countries are from the Asia-pacific region, with the US being the exception.
According to an A C Neilson study of 28 markets across the US, Europe and the Asia-Pacific, carried out through the internet in interviews with more than 14000 consumers, Asians are the world’s greatest fast food fans.
Percentage of adult population eating at takeaway restaurants at least once every week:
Hong Kong 61 %
Malaysia 59 %
Philippines 54 %
Singapore 50 %
Thailand 44 %
China 41 %
India 37 %
Europe 11 %
Type of cuisine, price and convenient location were found to be the most important criteria across all three regions
The competitive factors to be considered to succeed in the fast food industry: –
• To succeed a fast food chain should always be working in improving their quality of food they offer to their consumers.
• The development of new product from time to time is critical to stay on top of the market; consumers always look forward to new products that businesses have to offer.
• The frequent analysis of demographics helps the business to keep active awareness of a risk in the change of their target market in a particular area. The analysis helps businesses keep track of any change needed to cater to changing demographics.
Fast food industry in India on the rise
EATING AT home remains very much inbuilt in Indian culture and changes in eating habits are very slow moving with barriers to eating out entrenched in certain sectors of Indian society. The growth in nuclear families, particularly in urban India, exposure to global media and Western cuisine and an increasing number of women joining the workforce have had an impact on eating out trends. Which has lead us to a new era of eating- ‘fast food’. The name it self says the meaning of the food that can be prepared and served very quickly. While any meal with low preparation time can be considered to be fast food, typically the term refers to food sold in a restaurant or store with low quality preparation and served to the customer in a packaged form for take-out/take-away.
Market size and major players
Dominated by McDonalds having as many as 123 outlets.
Domino’s pizza is present in around 274 locations.
Pizza hut is also catching up and it has planned to establish 147 outlets at the end of 2009.
Subways have established around 145 outlets.
Nirula’s is established in Delhi and Northern India. However, it claims to cater 50,000 guests every day. It has future expansion plans for more than 50 outlets every year, for next three years.
The main reason behind the success of the multinational chains is their expertise in product development, sourcing practices, quality standards, service levels and standardised operating procedures in their restaurants, a strength that they have developed over years of experience around the world. The homegrown chains have in the past few years of competition with the MNCs, learnt a few things and has made us proud, for example, today, you might not find McDonald’s burger every where but one can have a sip of Café Coffee Day coffee.
Reason for emergence
Gender roles: Gender roles are now changing. Females have started working outside. So, they have no time for their home and cooking food. Fast food is an easy way out because these can be prepared easily. Workingwomen have no time for cooking.
Customer sophistication and confidence: Consumers are becoming more sophisticated now. They don’t want to prepare food and spend their time and energy in household works. They are building their confidence more on ‘ready to eat and easy to serve’ kind of foods.
Paucity of time: People have no time for cooking. Because of emergence of working women and also number of other entertainment items. Most of the time either people work or want to enjoy with their family.
Large population: India being a second largest country in terms of population possesses large potential market for all the products/services. This results into entry of large number of fast food players in the country. Relaxation in rules and regulations: with the economic liberalization of 1991, most of the tariff and non-tariff barriers from the Indian boundaries are either removed or minimized. This helped significantly the MNCs to enter in the country.
Menu diversification: Increase in consumption of pizzas, burgers and other type offast foods.
Challenges for the industry
Social and cultural implications of Indians switching to western breakfast food:
Eating meat is not explicitly prohibited, but many Hindus are vegetarian because they adhere to the concept of ahimsa. Those seeking spiritual unity may avoid garlic and onions. The concept of purity influences Hindu food practices. Products from cows (eg, milk, yogurt, ghee-clarified butter) are considered pure. Pure foods can improve the purity of impure foods when they are prepared together. But now, Indians are switching to fast food that contain all those things that are considered impure or against their beliefs. Some traditional and fundamentalist are against this transformation of food habit and number of times they provoke their counterparts to revolt against such foods. And that is what happened when McDonald’s decided to enter the complexity of Indian business landscape, counting only on its ‘fast food global formula’, without any apparent previous cultural training.
Emphasis on the usage of bio-degradable products: Glasses, silverware, plates and cloth napkins are never provided with fast food. Instead, paper plates and napkins, polyurethane containers, plastic cups and tableware, drinking cartons or PET (polyethylene terephthalate) bottles are used and these are all disposable. Many of these items are tossed in the garbage instead of being recycled, or even worse, merely thrown on the ground. This burdens nature unnecessarily and squanders raw materials. In order to reduce soil and water pollution, government now emphasises more on the usage of bio-degradable products.
Retrenchment of employees: Most of new industries will be capital intensive and may drive local competitors, which have more workers, out of business.
Profit repatriation: Repatriation of profits is another area of concern for Indian economy. As when multinational enters the any countries, people and government hope that it will increase the employment rate and result in economic growth. However, with the multinational operation, host country experiences these benefits for a short time period. In long run neither employment increases (because of capital intensive nature of MNC’s) nor it increases the gross domestic product or gross national product because whatever MNC’s earn they repatriate that profit back to their home country.
Problems of industry
Environmental friendly products cost high: Government is legislating laws in order to keep check on the fast food industry and it is emphasizing more on the usage of bio-degradable and environment friendly products. But associated with this issue is the problem that fast food player faces – the cost associated with the environment friendly products. They cost much higher than the normal products that companies use for packaging or wrapping their products.
Balance between societal expectation and companies economic objectives: To balance a society’s expectation regarding environment with the economic burden of protecting the environment. Thus, one can see that one side pushes for higher standards and other side tries to beat the standard back, thereby making it an arm wrestling and mind boggling exercise.
Trends in Indian market
Marketing to children: Fast food outlets in India target children as their major customers. They introduce varieties of things that will attract the children’s attention and by targeting children they automatically target their parents.
Low level customer commitment: Because of the large number of food retail outlets and also because of the tendency of customer to switch from one product to other, this industry faces low level customer commitment.
Value added technology services: There is continuous improvement in the technology as far as fast food market in India is considered. The reason behind that is food is a perishable item and in order to ensure that it remains fresh for a longer period of time. Earlier, Indian people prefer eating at home but now with the change in trend there is also need for improvement and up gradation of technology in food sector.
Attracting different segments of the market: Fast food outlets are introducing varieties of products in order to cater the demands of each and every segment of market. They are introducing all categories of product so that people of all age, sex, class, income group etc can come and become a customer of their food line.
Major players
In India the major players which constitute the Indian fast food industry includes Indian as well as Multinational companies.
These are:
1. Nirula’s
Established in 1934, Nirula’s today is a diversified group having a chain Waiter service restaurants, Family style restaurants, Ice Cream parlors, pastry shops and food processing plants in India.
The chain with over 60 outlets operating in 5 states successfully caters to the Indian palate of over 50000 guests every day for over 70 years.
The restaurants serve a wide variety of multi-cuisine foods, both western and Indian including pizzas, burgers, chana kulcha, saag-roti and much more!
Ice cream parlors offers an extensive range of exciting and innovative ice cream flavors with one new flavor added every month
Nirula’s pastry shops are a one-stop shop for bakery and confectionary items.
2. Pizza hut
In 1996 Pizza hut came to India with a dine in restaurant in Bangalore that has special vegetarian pizzas. In addition to traditional Italian topping, it incorporates Indian favorites such as chicken tikkas, lamb korma, etc. In its list of innovative toppings, along with pizzas the menu features appetizers like garlic bread and soups, fresh salads, oven baked pastas and choice fof ice-cream sundaes.
In 1997 pizza hut opened a restaurant in the capital’s bustling M-Block market in Greater Kailash-I, unlike the existing pizza hut at shanti niketan which is delivery counter for just pizzas, this is dine-in where the entire menu is available.
3. Domino’s pizza
It was incorporated in 1995 as the master franchise o Domino’s pizza international inc., of USA.. the first Domino’s pizza store in India opened in January 1996 at new Delhi. Today it has grown into a countrywide network of over 104 outlets in 30 cities.
Ever since it was established, Domino’s Pizza India has maintained its position of market leadership with its constant product innovation and maintenance of stringent service standards. It has established a reputation for being a home delivery specialist capable of delivering pizzas within 30 minutes. It was the first one to start this facility to customers..
Domino’s constantly strives to develop products that suits the tastes of its customers. Thus time and again Domino’s has been innovating toppings suitable to taste buds of the local populace and these have been very well accepted by the Indian market.
4. Haldiram’s
Haldiram began in 1937as a small sweet shop in Bikaner, in Rajasthan state of India.
In 2001 the turnover of haldiram’s was Rs. 4 billion. The group has presence not only in India but in several countries all over world.
Till early 1990s, Haldiram comprised of three units- Kolkata, Nagpur and New Delhi.
Haldiram has many ‘firsts’ to its credit- It was first company to brand namkeens. And first company to offer traditional Indian items like ‘panipuri’, ‘chatpapri’ and so on.
The company faced tough competition not only from sweets and snack food vendors in unorganized, domestic and international competitors but also from its own units because of conflict between them.
At Haldiram’s quality is the obsession and this spirit has given its competitors a cutting edge. Haldiram offers a very wide range of delicacies like- Namkeens, Sweets, Syrups, Papads, North Indian dishes, South Indian dishes, Pastries.
Sweets itself has a very wide variety Bengali sweets include Sandesh and Rasgullas.
Other popular Indian sweets are:- Kheer, Halwa, Gulabjamun, Rasmalai and Kulfi.
Variety of refreshments include- Chat- a spicy mix of different ingredients, topped with tangy chutneys ‘sauce’ example, Bhelpuri.
Snacks include- Samosas, Pakoras, Aloo tikki, Kachori, Pao bhaji, Golgappa, Dhokla and many more….
Company profile
McDonalds India
Introduction
McDonald’s in India is a 50-50 joint venture partnership between McDonald’s Corporation [USA] and two Indian businessmen. Amit Jatia’s company Hardcastle Restaurants Pvt. Ltd. owns and operates McDonald’s restaurants in Western India. While Connaught Plaza Restaurants Pvt. Ltd headed by Vikram Bakshi owns and operates the Northern operations.
Amit Jatia and Vikram Bakshi are like-minded visionaries who share McDonald’s complete commitment to Quality, Service, Cleanliness and Value (QSC&V). Having signed their joint-venture agreements with McDonald’s in April 1995, they trained extensively, along with their Indian management team, in McDonald’s restaurants in Indonesia and the U.S.A. before opening the first McDonald’s restaurant in India.
As a leader in QSR (Quick Service Restaurant) segment McDonalds has pioneered various industry benchmark practices over the past decade of serving Indian customers, including new concepts such as
# Oil alliances in India by linking with petroleum giants BPCL and HPCL. Three such alliances with BPCL outlets are in mathura (2000) (up), doraha (2002) (Punjab) and chanakyapuri (new delhi-2005)
# Novel menu formats such as an Express model with a limited menu and kiosks with a variety of dessert offerings
# Home delivery (mcdeliveryâ„¢ -2004); providing even more convenience to our customers. In 2006, mcdelivery on bicycle at chandni chowk and 2007 all India single delivery number were introduced.
# First drive thru restaurant in India at noida (up) in1997.
Restaurant count
McDonald’s has 155 restaurants in India of which 95 are in north & east India and 60 in west & south India .
Our Philosophy
“We take the burger business more seriously than anyone else.” When McDonald’s founder, Ray Kroc made that memorable statement, he was letting the world in on the philosophy and secret behind McDonald’s phenomenal success.
Our vision to be India’s “best” quick service restaurant experience is supported by a set of principles and core values [McDonald’s Way]
The principles that guide us …
Quality, Service, Cleanliness & Value – It is an unflinching McDonald’s ideology that our customers must always get quality products, served quickly and with a smile, in a clean and pleasant environment; and all at a fair price
We are committed to exceeding our customers’ expectations in every restaurant every time.
We have a passion and a responsibility for enhancing and protecting the McDonald’s brand.
We believe in a collaborative management approach, employing a mutually respectful business philosophy,
We will seize every opportunity to innovate and lead the industry on behalf of our customers.
The McDonald’s Promise
QSC&V……The Foundation that built McDonald’s success
When asked to explain McDonald’s success, founder Ray Kroc used to say, “We take the hamburger business more seriously than anyone else.”
Kroc was a perfectionist. From the day he opened his first restaurant, he vowed to give his customers high quality products, served quickly –and with a smile, in a clean and pleasant environment, and all at a fair price. Quality, Service, Cleanliness and Value (QSC&V) became the philosophy that drove McDonald’s business.
McDonald’s Quality Management instills the culture of quality through such principles as being customer driven, managing with facts, valuing people, and continually improving every aspect of our business
Service that is fast and friendly and has always been a foundation for success at McDonald’s
Cleanliness for us means having the cleanest and freshest facilities from the kitchen to the rest rooms and parking lots
Value at McDonald’s means the total experience…… great food, friendly folks, a clean environment, quick and accurate service and fun!
Company profile
KENTUCKY FRIED CHICKEN
Introduction
KFC Corporation, or KFC, founded and also known as Kentucky Fried Chicken, is
a chain of fast food restaurants based in Louisville, Kentucky. KFC has been a brand
and operating segment, called a “concept”, of Yum! Brands since 1997 when that
company was spun off from PepsiCo as Tricon Global Restaurants Inc. There are more than 14,000 KFC outlets in more than 80 countries and territories around the world, serving some 12 million customers each day.
The company was founded as Kentucky Fried Chicken by Colonel Harland Sanders in 1952, though the idea of KFC’s fried chicken actually goes back to 1930. The company adopted the abbreviated form of its name in 1991. Starting in April 2007, the company began using its original name, Kentucky Fried Chicken, for its signage, packaging and advertisements in the United States as part of a new corporate re-branding program; newer and remodeled restaurants will have the new logo and name while older stores will continue to use the 1980s signage. Additionally, Yum! continues to use the abbreviated name freely in its advertising.
KFC HISTORY-AT-A-GLANCE
9/9/1890
Harland Sanders is born just outside Henryville, Indiana.
1900-1924
Harland Sanders holds a variety of jobs including: farm hand, streetcar conductor, army private in Cuba, blacksmith’s helper, railyard fireman, insurance salesman, tire salesman and service station operator for Standard Oil.
1930
In the midst of the depression, Harland Sanders opens his first restaurant in the small front room of a gas station in Corbin, Kentucky.
Sanders serves as station operator, chief cook and cashier and names the dining area “Sanders Court & Café.”
1937
The Sanders Court & Café adds a motel and expands the restaurant to 142 seats.
1939
The Sanders Court & Café is first listed in Duncan Hines’ “Adventures in Good Eating.”
Fire destroys The Sanders Court & Café, but it is rebuilt and reopened.
1940
Birthdate of the Original Recipe
1952
The Colonel begins actively franchising his chicken business by traveling from town to town and cooking batches of chicken for restaurant owners and employees.
The Colonel awards Pete Harman of Salt Lake City with the first KFC franchise. A handshake agreement stipulates a payment of a nickel to Sanders for each chicken sold.
1955
An interstate highway is built to bypass Corbin, Kentucky. Sanders sells the service station on the same day that he receives his first social security check for $105. After paying debts owed, he is virtually broke. He decides to go on the road to sell his Secret Recipe to restaurants.
1957
Kentucky Fried Chicken first sold in buckets
1960
The Colonel’s hard work on the road begins to pay off and there are 190 KFC franchisees and 400 franchise units in the U.S. and Canada.
1964
Kentucky Fried Chicken has more than 600 franchised outlets in the United States, Canada and the first overseas outlet, in England. Sanders sells his interest in the U.S. company for $2 million to a group of investors headed by John Y. Brown Jr., future governor of Kentucky. The Colonel remains a public spokesman for the company.
1965
Colonel Sanders receives the Horatio Alger Award from the American Schools and Colleges Association.
1966
The Kentucky Fried Chicken Corporation goes public.
1969
The Kentucky Fried Chicken Corporation is listed on the New York Stock Exchange.
1971
More than 3,500 franchised and company-owned restaurants are in worldwide operation when Heublein Inc. acquires KFC Corporation.
1976
An independent survey ranks the Colonel as the world’s second most recognizable celebrity.
1979
KFC cooks up 2.7 billion pieces of chicken. There are approximately 6,000 KFC restaurants worldwide with sales of more than $2 billion.
12/16/1980
Colonel Harland Sanders, who came to symbolize quality in the food industry, dies.
1982
Kentucky Fried Chicken becomes a subsidiary of R.J. Reynolds Industries, Inc. (now RJR Nabisco, Inc.) when Heublein, Inc. is acquired by Reynolds.
1986
PepsiCo, Inc. acquires KFC from RJR Nabisco, Inc.
1997
PepsiCo, Inc. announces the spin-off of its quick service restaurants – KFC, Taco Bell and Pizza Hut – into Tricon Global Restaurants, Inc.
2002
Tricon Global Restaurants, Inc., the world’s largest restaurant company, changes its corporate name to YUM! Brands, Inc. In addition to KFC, the company owns A&W® All-American Food® Restaurants, Long John Silvers®, Pizza Hut® and Taco Bell® restaurants.
2006
More than a billion of the Colonel’s “finger lickin’ good” chicken dinners are served annually in more than 80 countries and territories around the world.
KFC India
KFC is the world’s No.1 Chicken QSR and has industry leading stature across many countries like UK, Australia, South Africa, China, USA, Malaysia and many more. KFC is the largest brand of Yum Restaurants, a company that owns other leading brands like Pizza Hut, Taco Bell, A&W and Long John Silver. Renowned worldwide for it’s finger licking good food, KFC offers its signature products in India too! KFC has introduced many o
Cite This Work
To export a reference to this article please select a referencing style below:
