McDonald’s Ongoing Marketing Challenge: Social Perception in India
This case was prepared by Dr. Smita Kulkarni (University of Miami) and Dr. Walfried Lassar (Florida International University) with assistance from Chandan Sridhar (Florida International University) and Akhila Venkitachalam (Aditya Birla Centre, London Business School) as a basis for classroom discussion rather than to illustrate either effective or ineffective handling of a management situation. Copyright © 2009. All rights reserved. No part of this case study may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise without written permission of the authors.
McDonald’s initiative to adopt the burger to meet the Indian taste was widely appreciated. bookstalls. This experience was way different from that of other fast food chains serving in Mumbai and other parts of India. Issue 2 (Jan. It was a mini marketplace. It promised and delivered the customers an entirely different experience. The impressive aspect was that the intangibles of the fast food service had made the maximum impact on the customers. It was the Golden Arch of McDonalds. Indian culture had always embraced newer cultures and absorbed them within itself. Smiling. In the Indian Railways Food Plaza at Mumbai Central. A family with two kids arrived in an air conditioned car two hours earlier then their scheduled departure. Service and Cleanliness was quick and lasting.. a country where the majority of the population was Hindu and vegetarian. The perceived value of the customers about McDonalds was high as the evidence of cleanliness. Porters in their red uniforms were seen carrying baggage to help the travellers. and the cow was sacred.. quality and sophistication of service made a lasting impression on their minds. marked with the usual rush of passengers. McDonald’s. 2009) OJICA-Online Journal of International Case Analysis
. Introduction McDonald’s restaurant in Delhi In 1996. They were sure that that the experience would be wonderful like the ones they had during their earlier visits to McDonald’s at other locations in India and abroad. It was a busy day at the Mumbai Central Station in India. the children looked around and suddenly shrieked with joy. creating a global system in which wealth was drained out of local economies into the hands of a very 2
Volume 1. 31. In this case. Availability of McDonald’s in their country reflected the beginning of globalization which had brought in western brand influences into the Indian markets. McDonald’s stood apart from its other competitors. Many saw it as just another example of the relentless spread of Western corporations into every nation. Now in McDonald’s. they indicated a sign to their parents. McDonald’s represented America world wide and was an American icon like basketball and Coca cola. McDonald's opened in India for the first time. the typical odour at the railway station and the crowd made them uncomfortable. The Indian market welcomed western brands. Food vendors.A Story Began……. Excited. A large group of passengers was ready and anxiously awaiting to board their respective trains. one could visualize the transformation of Big Mac to Maharaja Mac. newspaper sellers. the humid weather. The Indian customers had always seen the kitchen doors of the other restaurants with a sign ‘Restricted Area’ or ‘For Employees’ only. for a great time before they boarded the train. they were able to see the operations and hence the conviction in the QSC – Quality.. With a bored look. the family entered Ronald’s place. After they entered the train station. Irrespective of the diversities. They were Indian customers who considered McDonald’s as a symbol of the American culture.
It was a favourable situation for McDonald’s because at the time when they entered. Hardcastle Restaurants Pvt. Divided into 28 states and 7 union territories. McDonald initially concentrated in the West and North regions. religion. that the first restaurant became operational in 1996. while Connaught Plaza Restaurants Pvt. With the combination of spices in a unique way. It worked on developing local relationships with local partners to facilitate the raw material.S.S. the progressive West. 31. demonstrating what the McDonald’s experience was all about. Issue 2 (Jan.. The entry of McDonald’s in India was perfectly timed.) and two Indian businessmen. It introduced the Indian customers to service standards which were available in the western world for years. the vegetation. Mumbai. very rich elite. The customer markets were eager to acquire newer products and use newer forms of services. the Asian Tiger was awakening to the global call. Ltd. It operated over 31. language. owned and operated McDonald’s restaurants in Western India. the powerful North. headed by Vikram Bakshi. History McDonald's expansion worldwide was mind boggling.000 restaurants worldwide and employed more than 1. clothing. Indian companies for their operational convenience had divided the Indian subcontinent into four zones. South and East.few.. owned and operated the North Indian operationsi. McDonald’s opened its doors in India in October 1996. Later the company exhibited ambitious plans for expansion in Eastern and Southern regions. In a way McDonald’s revolutionized the food retailing business in India. The second restaurant was opened in the financial capital of India. India. Ltd. Latin Americans and Asians were the biggest supporters of globalisation and the value that it added to the various aspects of their livesii. before opening the first McDonald’s restaurant in India. Amit Jatia’s company. India as a market was a unique example of diversity. These service standards were visible and noteworthy and hence triggered quick acceptance within the customers. The Indian customer was enthusiastic about the market situation which provided them with numerous choices to choose and pick. With their presence in more than 3
Volume 1. McDonald’s in India was a 50-50 joint venture partnership between McDonald’s Corporation (U. climate. the traditional and culturally rich. 2009) OJICA-Online Journal of International Case Analysis
.A. According to a report of AC Neilson. food of these states reflected their traditions and culture. Hence the biggest challenge to any food business in India definitely was about balancing the diversity and the product offerings. McDonald’s positioning in India as a family restaurant further fuelled its success. McDonald’s got clearance from Foreign Investment Promotion Board (FIPB) of India in 1991. But it was only after five years of preparation. The market had begun to open up.5 million people. McDonald’s opened their first restaurant in the capital of India which is Delhi. among the world’s consumers. The economy of the country was growing stronger. Foreign brands were valued and perceived to be superior in quality. These companies signed their joint-venture agreements with McDonald's in April 1995 and along with their Indian management team trained in McDonald's restaurants in Indonesia and the U.A. and food varied from one state to another.
McDonald's had been a successful global food corporation at refining. McDonald's had done for food and eating habits. In addition. 1955. McDonald’s since then has expanded phenomenally. and many other companies followed their suit. Cow being sacred and worshipped.backed by incessant media hype. McDonald’s in India was one of its kinds as it did not offer beef at all. and remained a focus of controversy.despite their highly developed and expensive marketing effort about being a benefit for the community. The challenge was to change the form of the worldwide popular Hamburger to make an entry into India. McDonald's real influence had been in establishing organizational systems of complete control at every stage from raw product to factory. They were resisted for what they represented. nutritionists and many others in almost every town and country where they planned a new store . expensive and systematic mass marketing strategy of recent times. Issue 2 (Jan. Challenges for McDonald’s in India: Vegetarianism: The major issue was beef. Aloo. What Ford Motor Company did for cars. In order to convince and change the perception of the customers about the burgers they offered. Muslims did not eat pork. It had set up these practices in every country it had moved into. 2009) OJICA-Online Journal of International Case Analysis
. from worker to consumer . McDonald’s made attempts to clarify their stand about beef in India. So the world famous hamburger was without meat. This was indeed a classic case of product adaptation. McDonald's expansion was criticized and resisted by trade unionists. It also made a chicken and fish option available for the non vegetarians. With 25-30% of the population being lacto vegetarian and a large majority eating meat. an alternative to beef and pork was necessary. McDonald’s accepted the challenge and created the Aloo – Tikki Burger known as McAloo TikkiTM especially for the Indian vegetarian customers. the crew cooking vegetarian food were asked to wear green apronsiv.
The population of a billion was undoubtedly a promising opportunity for an international company. standardizing and developing such processes into a total system. beef could not be served. The first store opened near Chicago on April 15. travel and the urban environment.Tikki was a potato patty with spices. local residents. to gain foothold in a new market. This perception was the result of the most extensive. 31. McDonald’s even separated the non vegetarian cooking process and the vegetarian cooking process to convince the customers of the “Shudh Shakahari Experience’ which means pure vegetarian experience. co-coordinating.119 countries in six continents a global traveler saw them everywhere . Competition from Local Food Retailers: 4
The metropolitan cities and some developed urban areas offered superior dining experience through the existence of some fine. The initial attempt of McDonald’s was to induce trials and get the customers into the restaurants. consumer needs. These were the ambitious middle. Organized food retailing was dominated by the north Indian style and the south Indian style restaurant chains. The food retailers had been doing business for years. But the price was expensive and only a select group of customers could afford to make visits there. Fun and entertainment 5
Volume 1. Word of mouth and advertising was expected to reveal the experience of eating at McDonald’s.The competition from the local food retailers was intense. upper middle and affluent classes who were keen to combine eating with fun. Happy MealsTM were all about the simple pleasures of childhood. Children were the major influencers. Local food in a large assortment was widely available within acceptable price ranges. 31. Each Happy Meal™ was themed and had on offer. a time of excitement. a set of collectible toys from that particular theme. The rising income levels in India increased the disposable income. Issue 2 (Jan. classic restaurants. the more effectively one could communicate and market to themv. In this deal the customer got a choice of a burger. On the other hand. Aroma. 2009) OJICA-Online Journal of International Case Analysis
. The more one knew and understood about consumers. Happy MealTM was used to reflect the fun element of the experience at McDonald’s. The mass markets in India had their own set of preferences. it was important for any company to understand the consumer market. One theme typically was used for duration of 4 – 6 weeksvii. dhabas (the eateries on the highways) and on the outskirts of the cities and a plethora of small eateries. buying motives and the buying processvi. McDonalds was affordable to select customers only. the size of the unorganized food retailing was larger and comprised of roadside food vendors. McDonalds Value Meal addressed the price sensitivity of the Indian consumer market. a drink and a toy. The local food business exactly understood the psychology of the customers and operated accordingly. Four aspects of consumer behaviour which needed to be examined to understand a consumer market were the ability of the people to buy. Happy MealsTM were a huge success. and being treated special. There were numerous eating joints which offered snacks and meals with affordable price tags. However. McDonald’s advertisement put forth an attractive proposition to the children segment that played a major role in the decision making as regards the choice of a restaurant. Target Marketing: Value propositions had to be directed to the right target market to establish a new product. taste. It was observed that food choices made by consumers were impulsive. joy. irrespective of this effort. habits and visibility worked on the subconscious level and played a major role in affective decision making. An interesting question was who would eat at McDonald’s? In order to develop the marketing strategy. Their familiarity with the market and the understanding of the local taste gave them a competitive edge.
An ideal strategy was to focus on customer’s ability to pay and tap the rich and upper middleclass population in India. McDonald introduced newer menus appealing to the India taste. because of unavailability of space and lack of proper infrastructure. In India. the demand for fast and readymade food was growing.The positive factors were the growth in consumer markets with rapid growth in disposable incomes. Pricing Food pricing was a sensitive issue in India. the company could not do so. In March 2007. However. Eating Habits Eating out was a special occasion to many Indian families. Issue 2 (Jan. McDonald’s needed to find ways and methods to motivate the customers opt for initial trials and acceptance.Vikram Bakshi said “Mc Delivery currently accounts for almost 5 per cent of the overall sales and with the introduction of the new system. the choices available were abundant. 31. Youngsters valued McDonald’s for the trendy environment and the joint acted as an interesting meeting place. its products were perceived to be expensive. the company's Managing Director Mr. The company outlets in Delhi and Mumbai initially were opened due to the increased affordability of people with western exposure and brand recognition factors in metros. The conventional eating pattern of Indians involved breakfast. development of modern urban xi lifestyles and the demand for value .5 per cent in the turnover by next year”x. Meals had been an essential medium for social sharing and relationshipxii. The needs of the growing working population stimulated the need for new products and services. In United States.Whenever families decided to eat out. Children in India preferred a burger over pizza and McDonald.75 million) over the next three years to strengthen its home delivery services.assumed importance in the financially stable families. It launched an all-India single home delivery number — 66-000-666 to facilitate this service. Lunch and dinner menus 6
Volume 1. home delivery was an area of consideration. toy gifts and of all the attraction of a burger. Additionally. people in the metros were open to experiment with variety of foods. Indian culture was relatively new to the use of technology and streamlined process in food service. McDonalds announced that it would invest about Rs 3 crore (US $0. 2009) OJICA-Online Journal of International Case Analysis
. The mass markets in India were price sensitive. two thirds of the business of McDonalds was done at the drive through windowsix. The trend in metropolitan cities was however changing. With more nuclear families and dual income households. Subsequently. McDonald’s was perceived to be a fun place with special areas marked for kids. the king of burgers was announced as the number one in a survey titled India’s most respected companies by Business Week in India for Food retailing in 2006viii. the company is looking at a substantial share of 7. Although McDonald’s strategy was to increase sales volumes by making products available at affordable price. Absorption of newer cultures was faster in the Metros than other areas. In March 2007. lunch and dinner.
2009) OJICA-Online Journal of International Case Analysis
. used for just a few minutes before being discarded.. damaging forests and other eco7
Volume 1. painful and short lives. But globally burgers and beverage brands were linked with poor xiii eating habits . A major consideration for the fast food industry was whether it was acceptable for the food industry to exploit animals at all. they were responsible for the slaughter of countless cows every year. As the world's largest user of beef . with transnational corporations in particular. Multinational companies operating on such a scale contributed to global warming. In Europe alone they used half a million chickens xvi every week. and no freedom of movement. This mass production process was primarily to benefit the food companies' drive for greater profits. McDonald’s corporation was the world's largest promoter of meatbased products. ozone destruction. the largest user of beef and the second largest user of chicken. There had been complaints as regards the nutrition.for obvious reasons. many being kept inside with no access to fresh air and sunshine. The market situation called for focus on the environment within the restaurant and western association. hygiene etc……. McDonald's argued that it stuck to the letter of the law and if there were any problems. Issues McDonald’s had been accused of destruction of vast areas of the rainforest for the production of cattle to produce beef. Breakfast was conventional as per the family culture and upbringing. all from windowless factory farms . promoting unhealthy food with a risk of cancer and heart disease. had callously taken advantage of the natural resources globally. The environmental effect of the production and disposal of all this needed to be taken into account. backed by their promotional campaigns. They annually produced over a million ton of packaging. 31.were complete meals providing the right balance in terms of nutrition. The modern industrial system.
Animals Vegetarians and animal welfare campaigners were not too wholehearted about McDonald's xv . it would be a matter concerned with the government. Burgers were likely to be slotted in the category of snacks. But the company spent a fortune promoting itself as environmentally friendly. and cruelty to animalsxiv. it was only in recent decades that factory farming and intensive methods had been applied on a vast scale. taking advantage of children with its advertising and marketing. depletion of mineral resources and the destruction of natural habitats. Although meat eating had a long history. Issue 2 (Jan. This meant that these animals suffered great cruelty during their unnatural. Environment Conservationists had often focused on McDonald's as an industry leader promoting business practices detrimental to the environment.
either in a family or home setting. Macro environmental factors affected McDonald’s. Mass-produced. and through the production and disposal of thousands of tons of packaging material.fats and their use in food also had been a major controversial issue. a large level of population savored them for the spicy taste ignoring the hygiene and the value in terms of nutrition.systems. It had been established scientifically that artificial trans. sugar and salt . 31. friends. Issue 2 (Jan. food industry was heavily criticized for creating products that are high xvii in fat. and they had to resort to lip service to try and deflect public criticism. discussed. McDonald's contribution to these were mainly through the effects of cattle ranching (as the world's foremost promoter of a beef-based diet). forced it to become defensive. Trans. Bhel Puri. and debated only after witnessing the frightening consequences. neighbors or in the community in general. But there were rapid changes as the pace and nature of society had shifted. or with others while at work or in school. These consequences sparked a debate about healthy food. 2009) OJICA-Online Journal of International Case Analysis
. But at the same time. In recent decades. In United States. whether among families. In the health debate. The concern was serious as it was children who were the most affected. processed food gradually and increasingly replaced fresh and healthy foods in people's diets over the course of the twentieth century. Samosas and Potato Wada which were some of the very popular Indian snacks were weak in terms of nutrition. through the growing and transportation of cash crops. it was worthwhile to note that the type of demand exhibited by the market initiated the processes within the companies. India also had its own set of so called nutritious and non-nutritious food. contending that fast food menus and portion sizes contribute to obesity. As long as the demand for fast food continued. undermining existing patterns of human interaction. and sea and air pollution while adversely affecting the global climate. People in India appeared to prefer food for its taste. now were considered.fats were bad for human health. An industrial or service infrastructure increasingly dominated the local neighborhoods and people's lives. McDonald’s capitalized on this situation by promoting quick meals to be eaten outside the home. Health consciousness was rising amongst people with the obesity crisis hitting the world. diabetes and heart disease and a variety of other diet related problemsxviii. reducing biodiversity. Many critics blamed McDonalds like businesses for public health concerns. However. This change in eating habits brought serious consequences to human relations and health. adding to land. For most people this generally meant eating the healthiest possible food (bearing in mind constraints of time and poverty). They also brought out a whole range of new campaigns and movements dedicated to encouraging healthy eating and healthy lifestyles. usually cooked on site and then eaten communally . nutritional issues would continue to be argued and deliberated upon. New York City was the first city to announce a ban on all restaurants from using 8
Volume 1. Nutrition and Health One of the most fundamental and enjoyable aspects of the day-to-day lives of people had been eating food of their choice and the circumstances in which it was eaten. Nutrition and exercise issues which were important and needed to be reviewed earlier.
31.artificial Trans fats with the deadline on July 1. Sources at McDonald’s reported that they were an equal opportunity employer. Food industry was required to innovate and work on introducing healthy eating options and making them available. McDonald's employed more than a million mostly young people around the world and provided them with work opportunities.
Volume 1. The fast food giant helped pioneer employment that was low-pay. The average McDonald’s restaurant employed as many as 50 people. Advertising was the backbone of McDonald’s marketing strategy in India. temporary or part-time with few guaranteed rights and conditions. the visit to McDonald was portrayed as a special occasion providing excitement and satisfaction to the customers who comprised of families with kids and the youngsters. Awareness about health needed to be built up and somewhere the responsibility definitely lay with companies which were into the food business. geared to maximum turnover of products and profits. over half of them under 21 years old. Health concern was a global call and responding to this was the need of the hour. This would create a situation where the final choice would then be made by the consumers. 2009) OJICA-Online Journal of International Case Analysis
. highly standardized and fast production-line system. McDonald's worldwide employed over one and a half million workers. When the legal system imposed bans and developed a regulatory framework. McDonald’s picked new Trans fat free oil for cooking its famous French fries xix after years of testing . Special efforts were made to not allow it to get converted into a typical teenage hangout. Issue 2 (Jan. 2007. providing not just employment but long-term careers as well. Through a variety of advertisements. The chain planned to invest in the improvement of supply chain management and new outlets in the country which in turn would generate employment. But product and the value offered needed to be attractive and powerful to maintain consistency in sales and build customer loyalty. Advertisements were created using storylines with focus on emotions. the food industry was compelled to respond. In view of the health risks and dangers. it was important that food service did not just confine to respond to the basic need of hunger.from crew to restaurant manager. non-union. The franchisee model of McDonald’s was a significant source of employment for many people in India. Advertising and Marketing Initiatives at McDonald’s Advertising was known to have an impact on the minds and the hearts of the consumers. Employment McDonald's Corporation created a global. The positioning had been directed towards establishing McDonald’s as a family restaurant. It had been calculated that a staggering 10% of all workers in the USA got their first job at McDonald's! Outlets like McDonald’s provided job opportunities to youngsters in India pursuing their education. A healthy lifestyle only would help overcome the health problems gripping the society. In January 2007.
The strength of McDonald's as a brand in India was that it was the most recognizable brand world over amongst all age groups. and McDonald’s realized that this group could no longer be ignored. The entire restaurant was attractive and child friendly. 10
Volume 1. McDonald's executed promotional campaigns involving children. India saw a major shift to nuclear families. which talked about an everyday experience. So McDonald’s narrated the fun filled environment at their fast food outlet using electronic media. After McDonald’s established itself and people knew what McDonald's was all about. over the years. 2009) OJICA-Online Journal of International Case Analysis
. Indians being emotional found it easier to correlate themselves with such types of emotional messages. People were encouraged to try the McDonald's experience. The brand’s success was attributed to its promise of a great fun filled experience delivered at its outlets. Issue 2 (Jan. Advertisements with audio –visual appeal created more impact on the viewers. Word of mouth and peer pressure worked effectively for this age group. 31. It was the ‘Indianization’ of the brand that helped McDonald’s establish in a new market successfully. Children were an integral part of the decision making process for buying things and played an influential role. McDonald’s used kids as an entry strategy to the family. During the last few decades. by providing play areas wherever possible so that the parents could relax and have a good time while visiting McDonald's. World over McDonalds was a family restaurant and children were an integral part of a family. but advertising alone was not able to sustain the brand. When joint-extended families existed. the head of the family made most decisions. whether it was buying a refrigerator or a TV or whether it was about eating out. When operations in India began. However. McDonald’s did have enough repeat customers. the baseline was changed to “Toh aaj McDonald's ho jaye" (“Let it be McDonald’s for today”). The customer base increased substantially since they started operations. there was a need to evolve the communication strategy and move on from trying to encourage and motivate people to visit for the first time to making McDonald's a regular experience. initially McDonald’s positioned itself as a place to visit with the baseline "McDonald's mein hain kuch baat" (“There’s definitely something about McDonald’s”) in their advertisements. tables were rounded so that children did not hurt themselves in the restaurant and the menus are pictorially depicted so that a child could order a meal without bothering parents. after McDonald's had been hugely accepted by Indian customers. Extra care was taken to make the restaurants child friendly. In smaller-nuclear families. Despite the fact that McDonald's was a fast food chain of restaurants. individual opinions had become more dominant. kids had become the target audience for most categories including consumer durables. Children influenced the decisions of parents. The advertising continued to use emotional appeal to display family ties and fun at McDonald’s. The brand’s media strategy focused more on the electronic media. The counters were low.Advertising helped in building brand recall. In the 1990's. in India it was positioned as the family restaurant and outlets were called “McDonalds Family Restaurant”. The objective was to continue positioning McDonald's as a comfort zone for familiesxx.
a popular environmental activist and her supporters launched an aggressive campaign against fast food chains which contributed in the destruction of the ecological balance and promoted unhealthy food. television and internet advertising to promoting more healthful products and healthy lifestyle. green apple and berry to entice the curious youngsters.McDonald’s “Happy Meals” were often accompanied with Lego toys to attract children and the restaurant maintained several ‘Play-Zones’ to provide children with a fun experience. Disney characters were used extensively by McDonald’s at one time but the entertainment company decided to allow its characters to push products that met certain nutritional guidelines’xxi. 11
Volume 1. But some argued that it still amounted to exploitation of children. Mary Dillon. Issue 2 (Jan. As part of `Each One Contribute One' programme. In view of this criticism. played latest pop-music hits and became a favorite place even for the new generation of jean-clad ‘Americanized’ teenagers of India. Mrs. McDonald with some other companies vowed to devote at least half of their radio. McDonalds sponsored “Olympic Day Run” in 2005 and offered baked potatoes and McCurry Pan instead of fries. McDonald’s participated in community-related projects targeting children. In November 2006. sponsoring so many school events and learning programs out of publicity. print. McDonald’s also partnered with local health organizations to make India Polio-free by helping to set up Pulse-Polio program to provide free vaccine to children. McDonald’s in India hosted interschool arts competition and raised funds for charity on World Children’s Day. McDonald's World Children's Week 2006 `Each One Contribute One'. To respond to such campaigns. not philanthropy. promotional schemes in schools and figures such as Ronald McDonald. television commercials. McDonald’s pursued its main target group – children. McDonald’s launched several pro-green advertisements such as “We love Green” and funded community related activities including “Keep our city clean”. The month-long campaign garnered proceeds for vision correction of the visually and economically challenged children. 31. Ethics and Social Responsibility In India. McDonalds even introduced unusual ice-cream flavors such as bubblegum. The restaurants hosted birthday parties. The restaurant celebrated Children’s week every year from November 14-20 and tactfully supported educational programs for girl-child to promote goodwill among community organizations who worked towards improving status of women in India. Re 1 was contributed on the sales of all meals sold from October 13 . 2009) OJICA-Online Journal of International Case Analysis
.November 20. towards the xxii corrective eye surgeries of the needy children . As a part of its Corporate-Citizenship strategy and to help its own brand and reputation in India. McDonald’s adhered to all the advertising codes in each country. Maneka Gandhi. Many parents objected strongly to the influence this had over their own children. McDonald’s Chief Marketing Officer said that McDonalds planned to put more emphasis on physical activity in ads and was reviewing how it could use licensed characters. Using collectable toys. McDonald's India announced the completion of its annual fundraiser.
transportation and retailing of food products under controlled temperatures. McDonald's xxvi India purchased more than 96% of its products and supplies from Indian suppliers . contractors. During popular religious festivals in India. Over 390 children were treated at the pediatric centre at Dr xxiii Shroff's Charity Eye Hospital with the support of NGO ORBIS . Issue 2 (Jan. Setting up the Cold Chain involved the transfer of food processing technology by McDonald's and its international suppliers to Indian entrepreneurs. $12. who had become an integral part of the Cold Chain. 50. Understanding the value to the downstream customer was a part of the supply chain management process.According to Mr Vikram Bakshi. Cold Chain The Cold Chain was necessary to maintain the integrity of food products and retain their freshness and nutritional value. McDonalds in India focused on making a successful supply chain strategy to implement its QSCV principle (Quality. The Cold Chain was an integral part of the Supply Chain.000 crore (about U. even constructing restaurants using local architects. In it’s commitment to providing quality products while supporting Indian businesses. mainly because of the lack of proper infrastructure for storage and transportation under controlled conditionsxxiv. McDonald’s restaurants stored products to be used on a daily basis. and hired local personnel for all positions within the restaurants and contributed a portion of its success to communities in the form of municipal taxes and reinvestment. French Fries in India were not beef flavoured as in the US. and maintained its adherence to Indian Government regulations on food. exposure to advanced agricultural practices and the ability to grow or to export. since hidden value often emerged once the entire chain was visualizedxxv. pricing flexibility and new product launches from time to time. Cleanliness and Value). warehousing. Service. McDonald’s stated that it was critical to go beyond one’s immediate suppliers and customers to encompass the entire chain. McDonald's India (North and East Region). The supply chain connected McDonald’s throughout India and made McDonald’s ‘Indian. McDonald's did not offer any beef or pork items in India. even before opening it’s first restaurant in India.5 billion) worth of food produce was “wasted” in India. suppliers would continue to get the opportunity to expand their businesses. access to the latest in food technology. and even created egg less products for their vegetarian customers. 2009) OJICA-Online Journal of International Case Analysis
. McDonald’s described the relationships between itself and its Indian suppliers as mutually beneficial. Supply Chain McDonald’s stated that Rs. 31.S. McDonald’s spent a few years setting up a unique supply chain. reasoning that as McDonald's expanded in India. The term Cold Chain described the network for the procurement. health and hygiene. McDonald’s introduced more vegetarian selections. local material (wherever possible). McDonalds had come a long way since 2002 and the results were encouraging.’. Joint Venture Partner and Managing Director. within a 12
Volume 1. Local Sourcing McDonald's sourced its requirements from local suppliers and farmers.
besides being supplied to McDonald's. produced a range of frozen chicken and vegetable foods. The infrastructure at its plant at Taloja. flight kitchens and offshore catering companies all over India. About 52% of its food products needed to be stored under these conditions before they were usedxxvii. procedures and support services. exposed the farms to advanced drip-irrigation technology. Ltd. In addition to export. and McDonald's India Pvt. Suppliers Trikaya Agriculture – Supplier of Iceberg Lettuce Implementation of certain agricultural practices enabled Trikaya to successfully grow specialty crops such as iceberg lettuce.temperature range of –18ºC to 4ºC. This included hi-tech refrigeration plants for production of frozen food at temperatures as low as . USA. These products. but with McDonald's assistance in the area of agriculture. 31. specific herbs and many Asian vegetables.35° C. and had done shipments to the Gulf successfully It also shipped a large amount of snow peas to Austrian markets. had: • • • Separate processing lines for chicken and vegetable foods.
Technical and financial support extended by OSI Industries and McDonald’s India enabled Vista to set up a better infrastructure and support services. especially to McDonald's Middle East and Asia Pacific operations. Ltd. Ltd.. – Supplier of Chicken and Vegetable Products As a joint venture with OSI Industries Inc. McDonald's Quality Inspection Program (QIP) carried out quality checks at over 36 different points in xxviii the Cold Chain system till it reached the customer . Capability to produce frozen foods at temperature as low as -35 degree Celsius to retain freshness. Trikaya Farms in Talegaon. With this cold chain infrastructure in place. Maharashtra. Trikaya Agriculture planned to export this high value product to other international markets. As the ingredients moved from farms to processing plants to the restaurant. were able to grow the crop all the year round. International standards. Initially lettuce was grown only during the winter months. Issue 2 (Jan. Vista Processed Foods Pvt. Maharashtra. high-quality lettuce to McDonald's urban restaurant locations thousands of kilometers away. Vista Process Foods Pvt.. McDonald's provided assistance in the selection of high quality seeds. clubs. and helped develop a refrigerated transportation system allowing a small agri-business in Maharashtra to provide fresh. McDonald's assistance enabled Trikaya Agriculture to supply this crop to a number of hotels. This was vital to ensure that the frozen food retained it freshness for a long time and the 'cold chain' was maintained. 2009) OJICA-Online Journal of International Case Analysis
. were also 13
Volume 1. Setting up of the Cold Chain enabled McDonald’s to cut down on operational wastage.
offered to institutions such as hospitals. Dynamix Dairy – Supplier of Cheese Dynamix set up a network of milk collection centers equipped with bulk coolers in Baramati. Stringent quality control measures and continuous research & development. for total hygiene. deliveries. an ISO 9000 company. lactose. recording and reporting. inventory management. corporate canteens. 14
Volume 1. providing the entire range of services including procurement. McDonald’s introduced Dynamix to two of its global suppliers – Schreiber Foods. Amrit Food – Supplier of long life UHT Milk and Milk Products for Frozen Desserts to McDonalds Amrit Food. Issue 2 (Jan. It also helped Dynamix in acquiring technology to xxx market a large number of high quality. butter/ghee. casein & whey protein and humanized baby food. Its plant had: • • • State-of-the-art fully automatic machinery which did not require human contact with product. manufactured widely popular brands .
To encourage the improvements in quality standards and manufacturing capabilities at Dynamix. Maharashtra. Capability to convert milk into cheese. data collection. 2009) OJICA-Online Journal of International Case Analysis
. The factory had: • • • Fully automatic international standard processing facility. Foodland specialized in handling large volumes. quality inspection. schools and colleges.
Radhakrishna Foodland – Distribution Center McDonald's local supply networked through Radhakrishna Foodland. Easy accessibility enabled farmers to augment their income by finding a new market for surplus milk. 31. USA and Erie Foods. Uttar Pradesh. which operated distribution centers for McDonald's restaurants in Mumbai and Delhi. Effective process control for minimum distribution cost. Dry and cold storage facility to store and transport perishable products at temperatures up to . USA. skimmed milk powder. food service establishments and coffee shopsxxix. An integral part of the Radhakrishna Group. storage. Installed capacity of 6000 liters/hour for producing homogenized UHT (Ultra High Temperature) processed milk and milk products.Gagan Milk and Nandan Ghee at its factory at Ghaziabad. restaurants. The most important strengths were: • • • A one-stop shop for all distribution management services. Strict quality control supported by a fully equipped quality control laboratory. This resulted in a joint venture with one company and an export order from the other company. value-added milk products . caterers. project sites.22 degrees Celsius.
McDonald's looked for a particular variety of potato to make its French fries. worked closely with farmers in Gujarat and Maharashtra to develop process-grade potato varieties. McDonald’s India planned to invest Rs. concentrating on cities where their cold chain facilities had reached.400 crores (US$ 75 Million .300 crores. These items were stored in rooms with different temperature zones and were finally dispatched to the McDonald's restaurants on the basis of their requirements. McCain Foods Pvt.The distribution centers focused all their resources to meet McDonald's expectation of cold. Issue 2 (Jan. Sauce came from Bector Foods in Phillaur. Bector and Sons in Khopoli. McDonald's broke even on operations around December 2003 and expanded to 80 outlets that same year. Buns were sourced from from Cremica in Phillaur. invested heavily in setting up production lines to process these potatoes and make the fries. and on-time delivery and played a vital role in maintaining the integrity of the products throughout the entire 'cold chain'. One of McDonald’s suppliers. Ltd. which resulted in an affiliation between the two companies to develop the distribution set-up in India. McDonald’s introduced Foodland to F. Punjab and Mrs. 15
Volume 1. as the right quality of potatoes could not be sourced. the distribution center received items from different parts of the country. Lamb Weston. McDonald’s celebrated its tenth anniversary in India. Maharashtra. high solids content and low moisture content while the ones that were available were of the tablegrade variety. Gujarat potato crop was utilized to make McDonald’s ‘Chatpatey’ Potato Wedgesxxxii. The variety of potato required by McDonald’s had to have a certain length. This created new business opportunities for marketers who were keen on tapping travelers on the highways. Walkers of Australia. Ranging from liquid products coming from Punjab to lettuce from Pune. Cremica Industries worked with one of McDonald's suppliers from Europe to develop technology and expertise. J. Growth Plans In 2006. They had ambitious plans for growth in various cities and also on national highways. (the world’s largest French fries company). Maharashtraxxxi. the production was discontinued. Nonetheless. clean. However.US$ 100 Million) in the next three years to add 100-125 restaurants in the country as against the then existing number of 94xxxiii. With the Golden Quadrilateral Highway Project connecting four corners of India nearing completion. 31. which allowed Cremica to expand its businesses from baking to also providing breading and batters to McDonald's India and other companies. as per its initial commitment to local sourcing. McDonald's and its supplier partner. highway traffic was expected to increase multifold. Potato Farming in Gujarat In 1991. Punjab and Hindustan Lever Limited-Best Foods Division in Thane. 2009) OJICA-Online Journal of International Case Analysis
middle class in India exhibited strong aspirations to grow financially stronger. resulting in a cleaner neighbourhood. In order to target the shopping mall and cinema lovers. Out of the total investment.After establishing itself in the Northern and the Western India. In order to tap the potential among the middle-class Indians. Petroleum bigwigs proposed to upgrade the service experience to the customers at the gas stations.800 a yearxxxvii. a report by McKinsey Global Institute revealed that India would join the premier league of the world’s consumer markets by 2025. In South India. In 2006. This key factor made India an active potential market for companies into areas such as food retailing. The plan was to set up drive through eateries at the fuel stations. McDonald’s also introduced the concept of ‘Litter Patrols’ where the employees of McDonald’s would go around the market every day picking up garbage left behind not only by customers from McDonald’s restaurants but also by other visitors in the area. Petroretailing was evolving in India. 31. the company partnered with railway stations and bus stations. Partnership with McDonald’s was a strategic decision to highlight the value added services. Companies with long term plans for the Indian markets needed to understand the hidden potential and prepare themselves to accept the challenge. Rs. the opportunities were very attractivexxxvi. In its pursuit for better living and improving the quality of life. Issue 2 (Jan. Future In 2007. The middle class formed the backbone of the Indian market and it was the rising income of young middle class that fueled its growth. the company was 16
Volume 1. McDonald’s was very positive on the Indian market scenario. the market potential was hugexxxv. With 63% of its population in the age group of 15-64 years and 31. With the middleclass growing by 12 times from 50 million to 583 million.100 crore (US $ 25 Million) was to be spent to concentrate on the new Eastern region. the company planned to open more stores in one city than one store in many citiesxxxiv. McDonald’s opened their first restaurant in Eastern India at Kolkata. With the parent company making huge investments in supply chain and media communication.5% GDP growth. consumer durables. The company adopted a cluster approach to identify key locations in a 500-700 km radius of the city for further expansion. automobiles etc. McDonalds partnered with BPCL (Bharat Petroleum Corporation Limited) and HPCL (Hindustan Petroleum Corporation Limited) to set up restaurants targeting the automobile driving consumers. India achieved an 8. The focus was on expansion of the brands presence and introduction of new formats. the company setup outlets in new shopping malls and new multiplexes in the country’s metros. 2009) OJICA-Online Journal of International Case Analysis
. 56 million households in India earned US$4400 – US $21. McDonald set up a regional distribution centre in Kolkata.8% in the age group of 0-14 years.
the company intended to hire another 10. Further a bigger challenge was about translating the McDonald’s experience to the Indian masses and maintaining consistency in the delivery of services. In some states like Gujarat. With 5000 employees working. the penetration it has achieved in the country matches most of the xxxviii countries. depending upon the seating xxxix capacity . the country’s regional cultures were so varied that the company needed to bring new products regularly. Issue 2 (Jan. “even when India is the youngest market for the Big Mac in the Asia Pacific region. there were no restrictions on the Indian operations. Despite the fact that globally McDonald’s slowed down its expansion. India was identified as one of the top 10 markets for McDonald’s. KFC and local food chains was intense on the basis of pricing and the menu. McDonald’s was strongly viewed as a symbol of American Cultural Imperialism. McDonald’s India operated around 100 restaurants across the country which includeed 11 “drive thru” restaurants. Competition from other fast food giants like Pizza Hut. McDonald’s strategy revolved around customizing the taste of their menu to suit the Indian palate.Vikram Bakshi. 31. Will the middle class and the affluent continue to favor McDonald’s? Would Maharaja Mac expand deeper into the markets of India? Will the global image of a fatty food company affect McDonald’s future in India? Will McDonald’s continue to succeed in India in the years to come? A story continued….. Although the company had done well catering to India’s taste preferences. expansion outside the metros was unthinkable due to affordability issues.
Volume 1.000 people in the next few years. which was an expensive strategy despite its successful supply chain initiatives.helping the back-end supplier through direct investments in the joint ventures with them. McDonald’s India worked with great effort to establish in India. This fact revealed the company’s perspectives and plans for India. On an average it employed 50 people per outlet. 2009) OJICA-Online Journal of International Case Analysis
. where the chain is 20-30 years old” .000 to 15. McDonald’s was associated with its high prices in India and therefore. According to Mr. a new concept to the Indian market. The company faced charges in the US for allegedly using beef extract on its French Fries at Indiaxl. Only time would tell if McDonald’s localization strategies and positioning as a family restaurant would continue to appeal Indian population. However the company management explained that it was incorrect to perceive McDonald’s as expensive.
Volume 1. http://www. 110:3. Biztantra and Houghton Miffin.mcdonaldsindia. Global Marketing Strategies.http://www. p23-24. Journal of marketing.com/locsour.06/05/2006 ix McDonald’s 24/7. The McGraw Hill companies. http://www. issue 9.com/funzone/happymeal.com/aboutus/supplychain/coldchain.wsjclassroomedition. “McDonald’s”.pdf
McDonald contributes for a cause http://www. Vol.htm and Pooja Kothari.org/issues/rants/animals.com/2007/03/16/stories/2007031603340500. The Economic Times.uk/dna/h2g2/A593525 xvi McDonald’s and Animals. Business and Society review. Fast Food.mcdonaldsindia.References
McDonald’s creating an ecosystem. 31.blonnet. pp 69 x http://www.mcdonaldsindia. 2004. 0 15-15 xiv The Verdict.cbsnews. 2009) OJICA-Online Journal of International Case Analysis
.66. 297-320 xix McDonald finally picks trans.kpmg.com v Plummer Joseph T.com/2006/11/22/stories/2006112202721200.htm xi Consumer Markets in India.com/stories/2007/01/30/business/main2411777. 2p
Adams.33 vi Jeanett Jean-Pierre and Hennessey David.14p xiii Gupta Divesh. p. “Brand-EquityShaking it Up at McDonald’s”. http://www.just-food. http://www. Blackwell Publishing.acneilson. www. January 1974.fi/Binary
Visset. 19.com/June0506/index. page 164 vii http://www.mcdonaldsindia.com/news/200060821.asiapacific. http://www. Ronald. Media Asia.mcspotlight.htm
Supply Chain Overview. 2/10/2006. Issue 2 (Jan. www. February 2007.bbc.mcdonald. Vol.shtml xx Advertising does help in building brand recall.com/advertise/mlbpa/health_foodmarketing. Margaret. Food and Culture: Interconnections. Social research.html The Wisdom of Local Sourcing. Business Week.html
Benady David.mcspotlight. pp 117-130 .com/supchain.html
www. but advertising alone does not sustain a brand". October 13. Issue 1.com/aboutus/supplychain/index.html viii http://www.thehindubusinessline.com www. 2005. 2/23/2007.mcdonaldsindia. Brand Speak (2004)
Wall Street Journal www..asp .ca/en/aboutus www.co. Spring 99.co.uk (2001).businessworldindia. http://www. Precision Marketing. The concept and application of life style segmentation.org/case/trial/verdict/verdict4_sum.htm xxiii ibid xxiv A taste of freshness from all over India’ http://www. Obesity and Tort reform: An examination of industry responsibility for public health.html xv BBC.mcdonaldsindia .fat free oil www. xxvii Cold Chain.
pdf Potato Farming in Gujarat http://www.rediff.cia.htm xxxiv www.hindubusinessonline. http://www.com/aboutus/presskit/04%20Cold%20Chain. March 9.mcdonaldsindia. 2009) OJICA-Online Journal of International Case Analysis
.mcdonaldsindia.com/aboutus/presskit/07%20RKHS.gov/cia/publications/factbook xxxvii Consumer Markets.org xxxviii McDonald’s gears up for home run http://economictimes.xxviii
Food Safety & Hygiene http://www. www.
Volume 1.com/2007/03/09/stories/2007030905190500.htm xxxv India on course to become fifth largest market by 2025 www.com/aboutus/presskit/09%20Dynamix%20Dairies.mcdonaldsindia.htm xxxvi CIA Factbook.com/News/CompaniesAZ/M_Companies_/McDonalds/McDonalds_gears_up_for_home xxxix McDonald’s get set to park at petrol pumps http://economictimes.com/money/2007/may/04india.pdf Radhakrishna Foodland (P) Ltd.com/News/CompaniesAZ/M_Companies_/McDonalds/McDonalds_gets_set_to_park_at_ xl Animal Flavouring-McDonald’s Indian Arm Says It’s Clear”. 31.indiatimes.pdf xxxiii McDonald’s India plans to expand in South http://www.indiatimes.mcdonaldsindia.ibef. Business Line.com/ourfood/quality_hygiene.com/aboutus/presskit/06%20Potato%20Farming.blonnet. April 2007 www. Issue 2 (Jan.com/2006/09/15/stories/2006091504191900.mcdonaldsindia. http://www.pdf xxx Dynamix Dairy http://www. 2002.html
McDonalds India’s Cold Chain (2004).