Globalization and Marketing strategies of multinational fast food companies

In the Indian foodservice market

Introduction

This paper investigates and analyses the impact of globalization on marketing in the Indian fast-

food industry as multinational corporations began entering the market mid-1990s onwards, to

grab the opportunity of the country’s embrace of economic liberalization as it opened up to

Foreign Direct Investment (FDI) and reduced import tariffs. The Indian market is an interesting

subject as although American fast-food giants sought an opportunity, due to the country’s

religious, cultural and culinary diversity they were met by an unprecedented challenge that

demanded a radical transformation of their marketing strategies.

This paper will be mostly investigating McDonalds as an archetype for the broad SWOT analysis

most American fast-food giants engaged in as they tried to win over Indian consumers, while

also highlighting specific debackles or successes others have had. The benefit of focusing on

McDonalds’ marketing strategy is that it was the first brand to not only enter but also break the

Indian foodservice market. It is important to note that prior to the influx of multinationals, Indian

consumers didn’t have an established ‘fast-food’ consumer culture, at least not in the way

Americans have long had. Therefore, the incredible challenge Mcdonalds has had is convincing

the Indian consumer not just to purchase its products but also to pay a fast food premium, which

this paper references to the per unit monetary premium a consumer pays for a product at a fast-

food chain over a traditional meal from a local street vendor.1 That is to say, achieving success

for a foreign multinational corporation, selling a product unfamiliar to the consumer, requires

1 A rough estimate of the average price of a wholesome meal at a local street vendor: minimum Rs. 50 ($0.66) and
maximum Rs. 200 ($2.64) - See Appendix

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breaking the market by a marketing strategy that is unconventional in comparison to its previous

techniques at home.

India as a business investment destination

Not only is India the second most populous nation in the world, with 1.21 billion citizens, but

also has the youngest economy, with the median age being only 25; indeed, the quarter of the

world’s under-25 population lives in India. However, it isn’t just these demographics that compel

multinational companies to invest in a foreign country, given the little prospects of breaking even

until at least a decade, but also the prospect of turning a profit. Until 1991, the Indian economy

was clogged by excessive state intervention, regulation and protectionism that had repelled

foreign investments and denied the emergence of a consumer culture. The liberalization reforms

that the administration of PM Narsimra Rao undertook in the early 90s laid the foundation for

unprecedented growth and the emergence of a Western-style consumerism amongst a burgeoning

middle-class.

The reforms of ‘91 included reduction of import tariffs, deregulation of nationalized markets and

industries, lifting of controls on capital inflows (FDI) and reduction of taxes. The revitalization

of the private sector and the end of the License Raj, the infamous nickname of the raj (rule) of

licensing corruption, led to economic growth rates of 7.5% during 1994-97 and over 9% in the

global bull run of the early 2000s; India’s financial sector remained steady even during the Asian

financial crisis of the late 90s.2 Per-capita income is up from a mere $345 in 1991 to $1,700

today, turning the country from a low-income to a middle-income one. This transformation over

decades has brought half the country’s population into the ‘middle-class,’ which has been

2 https://www.cato.org/publications/policy-analysis/twenty-five-years-indian-economic-reform

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defined by economists at Mumbai University as people spending anywhere between $2 and $10

per capita every day. While such spending is a fraction of that of the American consumer, in

consideration of Purchasing Power Parity it carries weight as it includes individuals like

carpenters, street vendors, drivers etc who are able to maximize their skills for social mobility.

Moreover, the number of households with a disposable income of $10,000 has increased from

2.5 million in ‘91 to 50 million in 2015.3 This impressive growth has created a consumerism-led

middle class that mostly consists of nuclear families, who are actively exposed and fond of

Western culture and increasingly consist of working mothers. These factors have transformed the

Indian consumer, who earlier was less keen on leisure and entertainment due to low and stagnant

incomes, especially by the rise of nuclear families in which women continue to work after child-

birth; this specifically has changed the narrative amongst Indian households where traditionally

the mother provided for all meals, being a house-wife. With both parents working, middle-class

households enjoy double the income and thus are more likely to spend a larger proportion of that

income on leisure and entertainment activities. India’s foodservice market is forecasted to reach

$ 95.75 billion by 2025, with an estimated CAGR (Compound Annual Growth Rate) of 10.3%

during the forecasted period.4

Interesting to note is that due to a substantial portion of its economy being the informal sector,

India only has 3% of its ‘fast-food’ industry chained throughout the country. Majority of fast

food is supplied by local and regional street vendors who operate in markets of very small

radiuses; without the ability to raise capital, being informal and unregistered, they have little

scope of reinvesting profits and expanding in order to create economies and scale. Therefore,

3 https://www.weforum.org/agenda/2016/11/6-surprising-facts-about-india-s-exploding-middle-class/
4 INDIA FOODSERVICE MARKET - GROWTH, TRENDS, AND FORECAST (2020 - 2025)

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multinational fast food giants have seen a scope of greater potential for not only increasing

revenue but also expanding their networks of chained stores; compared to India 5, the American

market is quite saturated as about 54% of fast food restaurants are chained.

5 https://www.youtube.com/watch?v=BXXdcgchAVw

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 India has over 10 million street vendors, mostly in urban cities, which are mom-n-pop shops that sell local cultural

food items on the pavements; being part of the informal sector, they often lack in hygienic standards as they are

immune from regulation but are cost-effective due to low operational costs

Moreover, as a developing nation India suffers from several structural problems that have always

made it a difficult market for multinational corporations to lucratively operate in. It lacks

necessary infrastructure that makes not just production but also transportation expensive,

inevitably leading to high costs; the government bureaucracy is also grindingly slow and

ineffective, riddled with corruption and the practice of bribing to fasten processing of permits

and licenses.

Role of Globalization

Globalization has caused an evolution in multinational corporations’ market plan; the fact that

they operate on multiple continents, with each having diverse culinary norms and preferences,

has led them to organize marketing into Globalized or Localized strategies. Globalized, or

standardized, strategy includes creating strategies that perceive the world as a single

homogenous market. That is to say, companies use a standardized technique in pricing,

packaging, promotional campaigns and distribution channels across all individual country

markets. Standardization aims to diminish costs as by standardizing tested processing methods

across all markets companies can avoid experimentation in production. This is evident in

McDonald’s long established Speedee Service System that replicates the automobile assembly

line to maximize output while at the same time minimizing cost and time. The System also

avoids use of skilled and specialized ‘cooks’ and instead employs a large number of unskilled

workers, each of whom does a small and specific task. This even extends to the layout of the

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kitchen which is designed not to facilitate the quick preparation of a variety of food but to

produce a very large volume of very few items; McDonald's restaurants all across the world have

an almost similar layout and workers in one continent are likely to be following the same work

ethic that is followed by those in another.6 On the other hand, recognition of the challenge of

breaking into markets that are in countries with unique and unfamiliar consumer preferences has

promoted Localized strategies that involve localizing existing marketing techniques as per

appropriate market and consumer circumstances. This adaptation strategy allows foreign

companies to meet the local demands appropriately and to compensate for any R&D investment

costs through potential of high market share and competitiveness.

McDonalds, and thus other fast food companies, has come to realize that succeeding in a foreign

market like India requires a mixture of the two strategies; thinking globally but acting locally.

That is to say, an operation that is standardized across the world but a marketing plan that is

localized as per the domestic customer’s needs.

The case of McDonald’s India

It was the first multinational fast-food giant to enter the Indian market when it launched as a

50:50 joint venture with regional partners, Hard castle Restaurants Private Limited and

Connaught Plaza Restaurants Private Limited, in the historically metropolitan city of Mumbai in

1996. Now, McDonalds runs 300 outlets across the country, with 200 more expected to be

completed by 2020. Acknowledging the risks involved in entering a foreign developing market

6 https://science.howstuffworks.com/innovation/edible-innovations/fast-food.htm

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with cultures and social norms vastly different from the West, McDonalds has embraced the less

risky technique of licensing its brand name. By providing just the original brand concept and

operating system, the company has been able to minimize risks as local investors and businesses

have put up their own capital; this technique is not just limited to the Indian market as about 93%

of all global McDonalds’ outlets are franchises.7

A. Evident Challenges

The fundamental characteristics of fast-food that distinguishes it from convenience foods or

traditional dining are that it takes little time to prepare, offers a limited selection, is ‘finger food’

and the silverware and plates are either disposable or not even needed in consumption. It is

important to underscore that prior to the influx of multinationals, the Indian culture of fast-food

was vastly different from the conventional Western conception. As for generations the Indian

consumer has had the option of eating inexpensive fast-food at his local street vendor’s,

multinational corporations like McDonalds needed to figure out how to break this habit and

incentivize him to experiment with foreign brands selling culturally unfamiliar food items that

too for prices with a fast-food premium; indeed, this required asking the consumer to entirely

revamp his life’s routine. Previously Indians perceived burgers and sandwiches as snacks, thus

also needed to be convinced that they can be wholesome meals.

Another cultural phenomena that made market penetration difficult for foreign fast-food was the

practice of Indian families eating at least one ‘sit-down’ meal together on the dining table;

having a family-oriented culture, Indian households make leisure decisions based on the tradition

7 https://corporate.mcdonalds.com/corpmcd/franchising/overview.html

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of families spending time together. The company’s market research in 2003 showed that the

average Indian family went out to eat only 3 out of the 100 meals eaten per month.8

(Shopping + Casual Dining) and (Family Outings) combine to roughly account for 32% of the Indian’s consumers

leisure and entertainment activities; more often than not, both go hand in hand

Interestingly, domestic ‘fast-food’ chains like Haldirams didn’t necessarily face such a problem

as they produce products that cater to this very practice. Amongst their several take-out items are

the popular samosas and chaat, which are eaten with the hot beverage chai. Whether or not

Indian families are able to eat breakfast in the morning together, they certainly gather together

for the mid-evening chai. Therefore, given the time it takes to cook the side-dishes, Indian

consumers purchase the samosas and chaat at food chains like Haldirams which they can eat

with their families with the home-brewed chai. Therefore, multinational companies had a two-

8 https://www.bbc.com/news/business-30115555

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layered challenge: to not only convince the Indian consumer to experiment with American fast

food items, but also increase the frequency of going out to eat. After more than two decades of

successful holistic marketing, McDonalds and other prominent brands have managed to

revolutionize the habits of the Indian consumer. Eating out has become more active and frequent

with Indian families going out 9-10 times of 100 meals a month; due to this cultural change,

McDonalds has managed to attract over 320 million active customers in the country..9

Haldirams has mastered the fast-food model by combining low costs production and quick serving with a traditional

cultural menu

B. Story of marketing success

Interestingly, companies like McDonalds have tackled the uncertainty amongst Indian

consumers, unfamiliar with American food habits, about fast-food chains by portraying their

value proposition not as another food venue but as a provider of the ‘American experience.’ Ajay

Kaul of Jubilant Foodworks highlights “Indians have a bias towards anything American; it is

perceived as ‘happening’ and trendy.”10 Indian customers willing and able to pay the premium to

dine in McDonalds choose against local street vendors in order to gain that exotic experience.

9 https://www.bbc.com/news/business-30115555
10 See Appendix

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This is a result of the country of perception that triggers certain mental and psychological effects

on a foreign consumer due to the country that the brand is associated with. The United States is

revered by India’s burgeoning middle class due to its cultural liberalism and high standards of

living; the millennial youth of Indian society have emerged from the liberalization policies of the

early 90s and see themselves connected to the global thought processes of liberal ideas and

modernization. Until liberalization, the society didn’t have much of a ‘consumer culture’ and

social norms were overtly traditional and conservative; choosing McDonalds to dine in is not just

a vicarious way of experiencing America but also a way of associating oneself with its modernity

as an act of rebellion. Fun fact, when Starbucks opened its first store in New Delhi in 2013,

within a few hours of opening the management staff had to hire bouncers to control the long

queue of millennials, eager to taste the coffee they’d been implicitly marketed through American

movies and shows, in order to prevent a stampede.11

Moreover, inherent in their value proposition is a meal in a plush air conditioned store; being a

tropical country close to the Equator, India experiences temperatures as high as 45℃ (113℉) in

Summer and Autumn months; a consumer willing to pay the fast-food premium also makes that

decision based on this convenience which he cannot receive from a outdoor street vendor.

11 The author was personally present

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 The company markets itself as a “family restaurant”

to attract the Indian consumer who often spends

outdoor leisure time with his family

The penetration of the Internet and the global linking of telecommunications networks have led

to a convergence of lifestyles and consumer preferences, at least to a considerable extent. Those

Indian consumers looking forward to the ‘American experience’ do so because their

psychological conceptions of leisure are gradually converging with those of Americans, as they

experience rising incomes and standards of living. However, this economic phenomena hasn’t

overshadowed the key social norms of the country which keep Indians’ core values permanent,

leading companies like McDonalds to engage in marketing adaptation to make their brand image

and products appealing to unfamiliar consumers. These values can be numerous and trivial, like

the habit of the family eating at least one meal together every day, but a few stand out and can be

deal breakers if ignored in marketing strategies. For example, beef eating is considered sinful by

Hindus and similarly pork by Muslims; given that the former account for 80% of the population

and the latter almost 15%, Western fast-food chains have had to completely overhaul their menus

to adapt to this market.

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It was impossible for these companies to engage in a straight extension of their meat products,

like beef or pork burgers, as the Indian consumer would have immediately rejected them;

therefore, they engaged in product adaptation through both backward and forward invention by

not just changing the type of meat that would be used but also changing or adding new flavors

that cater to the Indian palate. The Big Mac Beefburger is the company’s signature product

throughout the Western world; however, promoting it as the key introductory product would not

only have been a sales failure but also could have easily provoked a revolt by religious

fundamentalist groups against the audacity of a foreign brand imposing sacreligious tastes on the

Indian consumer. Therefore, in the Indianization of its menu and an effort at competing with

local street vendors, McDonalds launched the “Aloo Tikki” burger, a cutlet made out of mashed

potatoes and peas flavored with traditional Indian spices, essentially a modernized version of a

common street food item. The burger became so popular and famous that the company soon

started exporting the concept to its Middle-Eastern outlets as Gulf consumers tend to share some

culinary preferences with Indians. Priced at just Rs. 20 ($ 0.26) not only was it extremely cost-

effective, as it reduced the fast-food premium close to zero, but also was an item that could be

sold at any time and day of the week. Important to note about the deep inter-link between

religion and culture in India is that religious traditions and rituals affect dietary habits and

choice; amongst Hindus, the majority of the population, certain days involve strictly vegetarian

meals and some even require day long fasting; as Hinduism isn’t a monotheist doctrine and

instead includes several deities with each having its own ‘day,’ the ‘vegetarian days’ aren't’ even

synchronized amongst all Hindus as different sects follow different rules and dates. Therefore,

McDonalds realized it would be more pragmatic to introduce and promote a vegetarian product

as a universally acceptable one. In fact, McDonalds guarantees to the Indian consumer that

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vegetarian and non-vegetarian products are developed separately right from the food processing

plant to the point of serving as workers preparing one type of items are not allowed to prepare

the other; even the mayonnaise used in the veg burgers is egg-less. Similarly, other brands like

Dominoes and Pizza Hut have engaged in product adaptation to provide a greater variety of

options for the Indian consumer’ unique preferences. Dominoes collaborated with the

internationally famous Michelin star chef, Vikas Khanna, to expand its menu to 12 different

vegetarian pizza options.

Vikas Khanna (right) poses with Narendra Jaravta, Head Chef of Dominos India, in a television advertisement.

Khanna is perhaps India’s most famous chef; having been a chef at the White House and the host of Masterchef

India

Interestingly, India lacked a supply chain for the key burger ingredient lettuce. Most restaurants

that previously served the item used cabbage as an acceptable substitute. Therefore, in order to

maintain its universal formula for burgers, McDonalds established its own local supply chains

for the vegetable through vertical integration with local producers. Realising the opportunity of

inexpensive labor supply in the country, the company started vertically integrating the supply of

not only its ingredients but also almost all equipment; refrigerators, freezers, kitchen fabrication

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and furniture are all locally produced as domestic manufacturing is much more cost-effective

than importation.

Inherent in McDonalds’ marketing strategy has been market segmentation combining

demographic, geographic and income considerations. Both the cause and consequence of India’s

rapid economic growth has been urban metropolitan cities; rapid industrialization has been

concentrated in hot pockets of growth that have created these urban cities, habiting both white

and blue collar workers, that are rapidly growing as more job-seeking individuals migrate from

rural areas. A prime example is the city of Gurugram, Haryana, which didn’t even exist over two

decades ago. Located less than 15 miles from the capital, New Delhi, the city was nothing but a

small village before real estate corporations like DLF started building office buildings to house

multinational corporations; demand for nearby housing provoked an unprecedented housing

boom by DLF itself; and as corporate workers with rising disposable incomes settled in, a new

metropolitan consumer culture was produced as a reaction. Far from a village, the city now

boasts an urban population of 1.5 million, 26 shopping malls, seven golf courses and accounts

for almost half of the tax revenue of its state.12 Mckinsey estimated that while it took India 40

years to create a 250 million urban population from 1971 to 2008, it will only take half that time

to create the next 250 million.13 It is in these metropolitan cities that multinational fast-food

giants have segmented their target audience, high disposable income earners who are willing and

able to pay the fast-food premiums in their times of outing and leisure specifically in the

shopping malls, where they first purchase consumer goods and then eat in the food courts.

12 https://www.ndtv.com/gurgaon-news/the-gurgaon-story-a-mirror-to-indias-growth-458043
13 https://www.mckinsey.com/featured-insights/urbanization/urban-awakening-in-india

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 Amongst Gurugram’s several malls is Ambience Mall, the largest in

the country, that has a kilometer long shopping experience on every

floor; it hosts 230 stores and food outlets, from domestic brands to

international luxury ones like Louis Vuitton

Rising median incomes and consumer culture also shape the social fabric, which in turn

determine the changing lifestyles of the consumers. The rise of metropolitan cities has actually

severed the ties young adults, recently graduated and initiating a work-life balance, traditionally

had with their parents and extended family. Increasingly, office-going young adults are living

independently; renting out apartments with their fellow colleagues in apartment complexes near

their office locations. This independence has produced not only a money constrained, which the

average Indian consumer has always had, lifestyle but also a time constrained one. That is to say,

these working young adults don’t necessarily experience food consumption in the traditional

‘family sit-down’ manner anymore. Due to workload and incompetence in culinary self-

sufficiency, they are increasingly relying on take-out from fast food restaurants to minimize the

time spent in preparing or consuming meals. Nielsen has pointed out that Indian millennials

spend almost 10% of their income in restaurants versus just the 3% spent by their Gen-X

counterparts.14 Interestingly, certain analyses of McDonalds’ classic ‘M’ logo have speculated

14 https://www.nielsen.com/in/en/insights/report/2017/whats-cooking-with-indian-diners/

15
that it serves a certain Fruedian effect on the consumer, subconsciously representing a mother’s

breasts. Louis Cheskin, a physiologist and consultant to the company in the 1960s, reflected that

the logo reminded customers of nourishing breasts, which made them hungry. If this brilliant

psychological trick is true, perhaps it explains the eagerness of working young adults in India,

who culturally grow up in households that prime mothers’ nourishment through home cooked

food, as they are unable to provide for themselves due to busy schedules and distance from

home.15

The Case of Dunkin’ Donuts

Dunkin’ entered the Indian market with great enthusiasm and rapid expansion by creating

hundreds of stores as soon as possible; however, in less than a decade that the brand has been

active in the industry, it has become the archetype of the failure of an international multinational

to capture the Indian consumer. In 2018, the company announced that it would be closing almost

half of its stores due to lack of profitability and operational efficiency after being active in the

market for only five years; it opened its first store in 2012, a relatively late start compared to its

competitors.16

Launching through franchisees in partnership with the domestic firm Jubilant Foodworks, which

also launched Dominoes, though, did not bring astuteness in Dunkin’ marketing strategy in the

Indian context. It replicated its morning ‘breakfast-first’ sales routine in the West, where its

consumers are workers who begin their day with coffee and bagels/donuts, in a country that not

only prefers to eat breakfast at home, instead of “to go,” but also exclusively prefers tea or chai

15 McDonalds the Indian Way: How it has entered and as well how it sustained in Indian market;
Ashok Kumar Venkata; 2014
16 https://medium.com/better-marketing/why-dunkin-donuts-failed-in-india-62bbbabc0227

16
over coffee. Moreover, Dunkin’ failed in product adaptation, at least initially, as it maintained

the same menu it has consistently marketed in the West; Indian consumers prefer home cooked

breakfast that is produced according to their cultural and religious considerations; a “bacon-egg

n’ cheese” is unappealing in such a market.

However, the company eventually did engage in adaptation to a certain extent when it

introduced donuts that catered to local tastes; such as the “mango donut” and “lychee coolattas”

which are derived from nationally popular fruits. Nevertheless, such a strategy was bound to fail

as Dunkin’ misunderstood the Indian consumer’s very perception of the “donut.” Although

Indian cuisine has a large list of sweets, which are often gifted and eaten at special occasions, no

consumer would be attracted to the idea of eating high-calorie donuts for breakfast; Indians

categorically associate donuts with pastries. Purchase of donuts, or other sweets, is inherently an

impulse decision and cannot be modeled in the projection of a regular stream of revenue; making

it a weak primary product for a company that has ‘Donuts’ in its very name. This actually is a

marketing crisis that Dunkin’ is facing globally, since consumers worldwide are becoming more

health conscious and thus repellent to frequent purchase of high-calorie sugary products;

therefore, in early 2018 the company officially changed its brand name from “Dunkin’ Donuts

DD” to simply “Dunkin’ DD.”17 Ironically Dunkin’ subsidiary, Baskin Robbins, has performed

increasingly better than its parent company. This is a result of BR focusing its marketing

strategy singularly on its signature product, ice-cream. Unlike the donut, Indians have long had a

culture of eating ice cream as a dessert after dinner or at special occasions. Therefore, once BR

was able to localize its products, by introducing culturally appropriate flavors, and responsibly

strategizing its marketing efforts, it became an immediate hit with Indian households.

17 https://www.businessinsider.com/dunkin-donuts-changes-name-no-donuts-2018-9

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The case of Domino’s

As part of the few multinationals that entered the market in the mid-1990s, Domino’s has

evolved into the most successful pizza provider in the country with a market share close to 70%;

indeed, the Indian market is the company’s second largest after that of the United States. Jubilant

Foodworks, its sole franchisee, experienced $510 million in sales in Fiscal Year 2018 which is

18% higher than in FY2017; infact, it has had double digit sales growth in 13 out of the past 14

fiscal years.18 The key to this success has been astute product adaptation, its trademark quick

delivery and sophisticated online ordering technology. At its entrance in the 1990s, the pizza

bore an unfamiliar perception by the Indian consumer and walked a thin line of being too foreign

and being not foreing enough. It of course, nonetheless, carried with it the beneficial country of

perception advantage as it gave an Indian the ability to feel connected to the global consumer

culture by being able to purchase a product from one of the top fast-food brands in the world.

The sole main competitor to Domino’s reign has been Pizza Hut, but the latter commands a

secondary status in the market with only 430 stores compared to the latter’s 1,320. Moreover,

revenue from the Indian market accounts for a small fraction of Pizza Hut’s global revenue,

accounting for only 1% of its system sales. Although the brand took advantage of the ‘family

outing’ culture by focusing on in-dining restaurants and services, the same technique it employs

in the United States, that strategy incurs high operational and renting costs that reduce profit

potential and the ability to penetrate into more local markets. It also fails at lowering its fast-food

18 https://www.livemint.com/companies/company-results/jubilant-foodworks-q3-net-up-7-5-at-rs103-7-
crore-11580305392990.html

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premium, causing a price-averse consumer to naturally prefer Dominos’ whose “Pizza Mania”

costs just Rs. 45 ($0.60)/pizza on an order for four, a premium of near zero.

The key to Dominos’ competitiveness has been successful integration of digital marketing in

product outreach, especially to rural areas. Unlike its other fast-food counterparts, the company

took the risk of expanding to low-income regions by using its sophisticated, yet also user-

friendly, digital ordering system to engage customers. It understood that the penetration of

smartphones is much deeper than laptops or tablets, especially in said regions, amongst its 560

million internet users; infact, it was the first company to launch online and mobile ordering in the

country; as of January 2020, more than 20 million Indians have downloaded its ordering app. In

2013, online ordering accounted for just 13% of its sales but by 2019 it grew to almost 75%. This

online ordering system was perfected with Dominos’ iconic ‘30-min or less’ delivery service that

guarantees delivery in said time and in failing to do so offers the pizza(s) free. This feat is very

impressive given the country’s deteriorating infrastructure and overwhelming traffic; not even

some local restaurants are able to beat this 30-minute target. Furthermore, the company extended

Localization strategy through the revolutionary micro-product adaptation which involves

inventing new products catered not just to the average national flavor preferences, like

McDonalds’ “Aloo Tikki” burger, but also to regional tastes. Along with its “Chicken-Tikka”

and “Paneer Masala” pizzas that any average Indian will be attracted to, Dominos introduced

hyper-localized pizza pies like the “Spicy Banana Pizza” that caters to certain southern states

which have culinary traditions that use green bananas. Moreover, the company has perfected the

dine-in/order online ratio by investing in high-operational cost restaurants in those localities

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where customers tend to prefer dining out and concentrating on high-speed delivery in those

areas where ordering online is more common.

The story of the other pizza competitor, Papa John’s, is another classic example of a

multinational fast-food giant failing to engage in Localization in a market that is vastly different

from its home country’s. Not only did it price its pizzas higher than Dominos and Pizza Hut,

having too large of a fast-food premium to sway the average Indian consumer, it took product

adaptation for granted and didn’t introduce any new pizzas that catered to local tastes. In

comparison, even Pizza Hut performs better in the fast-food premium index having introduced

pizzas priced at less than $2. Given that pork and beef options were already out of the question,

leaving only chicken, the brand’s menu was short with limited unique choices. Eventually Papa

John’s permanently left the Indian market in 2017 by closing 66 of its stores.19

Indian fast-food industry today

The four major multinational brands that were among the first to enter the market enjoyed almost

a decade long period of exponential growth and successful product experimentation; however,

recognizing the business potential in the Indian market, several other brands have recently

entered to stir up competition. Indeed, Dominos and McDonalds experienced 50.4% and 43.5%

sales growth in 2012 respectively; but due to the recent influx of competitors, by 2015 those

numbers fell to 19.7% and 3.2%.20 The earlier presumption was that market concentration by the

four major brands would saturate the market and permanently capture the Indian consumer taste

to enforce artificial barriers to entry.

19 https://www.cnbc.com/2020/04/28/how-dominos-beat-papa-johns-and-pizza-hut-in-indias-pizza-
war.html
20 https://www.youtube.com/watch?v=XPL0kYXkxx4&t=28s

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Thus, in reaction to this unexpected market evolution the ‘big four’ (McDonalds, Pizza Hut,

Dominos and KFC) have engaged in further product adaptation not only to win back earlier

customers but also to capture those new ones part of the country’s rising population growth rate.

As new multinational brands like Burger King overthrew the status quo conception of the burger

in India, McDonalds responded by introducing the “Maharaja Mac,” an Indianized replica of its

famous “Big Mac;” this reinvention was revolutionary by the fact that the Maharaja Mac also has

vegetarian options, with patties made from corn and cottage cheese.

Previously the ‘big four’ enjoyed not only a first-mover advantage but also convenience in

differentiation; as they were the only four American fast-food brands, they could differentiate

themselves from the local street vendors by portraying the exotic ‘American experience’ as their

key value proposition. However, with the entry of several new multinational brands, they have

lost that convenience. After decades of exposure to American fast-food, consumers are well

aware of the latest offerings and trends; and with more brands to choose from, they demand

deeper differentiation for their loyalty.

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This figure delineates the cost-leadership environment amongst foreign multinational brands in

the industry, relative to an average street vendor. Each scatter plot denotes a brand’s cheapest

product, as of their June 2020 menus, which is compared with the average price of the cheapest

product at a local street vendor to calculate the various fast-food premiums. Unsurprisingly, due

to its Speedee Service System and successful vertical integration, McDonalds is the clear cost-

leader in the industry, having reduced production costs to the extent that its “Aloo Tikki” burger

is priced even more competitively than a street vendor’s. The Consumer Dilema Threshold

represents the per-unit price after which an average Indian consumer conducts a conscious cost-

benefit analysis in his choice of food venue. The average price at a street vendor ($0.66) is

considered the general price range a consumer may have in mind when comparing the options of

dining at one of the several multinational brands. The ingenious success of McDonals’ marketing

strategy in India has been that since cost reduction allows it to price its cheapest product below

the average local-domestic competitor, being below the threshold, it leaves the consumer with

little disincentive.

22
On the other hand, KFC lags most in cost-leadership having the highest fast-food premium (2x),

which is twice the premium for Burkey King (x). While this may seem like an indication of

marketing failure, KFC compensates for this unusually high premium through astute product

differentiation and focus. When a company is unable to reduce production and total costs, it

concentrates on achieving superior performance in another important customer benefit area,

pursuing it after identifying one or more narrow market segments and focusing on them. In 2012,

KFC launched the “So Veg, So Good” campaign that represented its Localization efforts in

adapting to the fact that almost 50% of Indian consumers are vegetarian, with 1 in 10 items on its

menu eventually becoming vegetarian.21 However, by 2016 the brand realized that a vegetarian

product adaptation that was so different from its company goal, given that it has “Fried

Chicken” in its name, was amounting to only about 10% of its sales revenue and showed little

signs of growth.22 Therefore, sticking to its internationally famous reputation as the leader in

selling fried chicken, KFC differentiated itself as a seller of exotic ‘American style’ chicken

items for whom Indian consumers would be willing to pay a 2x premium due to hygiene

concerns and comfortable air-conditioned dining experience. This strategy was in reaction to the

realization from market research that the myth of a strictly vegetarian India was actually far from

the truth; accurate calculations report that only about 20% of the nation’s population only eats

vegetarian meals, with some cities like Kolkata and Chennai having only 4-6% vegetarians in

their populations.23 Moreover, the modern millennial population that has been exposed to global

schools of thought has come to either reject the traditional dietary restrictions as too conservative

21 https://economictimes.indiatimes.com/industry/cons-products/food/kfc-increasingly-putting-vegetarian-
items-on-its-indian-menu-to-cater-to-customers/articleshow/16314308.cms?from=mdr
22 https://qz.com/india/738982/kfc-is-ditching-indian-vegetarians-to-do-what-it-does-best-sell-fried-
chicken/
23 https://www.bbc.com/news/world-asia-india-43581122

23
or at least concede their irrelevance in an industrialized capitalist society. As a burgeoning

middle class, with higher disposable incomes to meet premiums, becomes more health conscious

it is repelled by the doubtful hygiene maintained by local street vendors; part of the informal

sector, they are left immune from governmental health regulations and checks; most vendors

don’t even use gloves while cooking and serving. This is especially pertinent to meat products as

almost every summer the country faces threats of the ‘bird-flu,’ a disease spread through

chickens in poultry farms.24 Unlike the street vendors, brands like KFC not only are subject to

publicly-disclosed health regulation but also advertise their cleanliness standards to their

consumers. Thus, a combination of these differentiation factors compensates for KFC’s high

fast-food premium which a loyal segmented customer base is ready to pay.

However, regardless of multinational companies’ success with the burgeoning middle-class of

India, the ‘linguistic barrier’ blocks their ability to tap into an even larger segment of the national

market. The reason that the middle-class is fascinated with the American experience is that most

are either fluent or at least familiar with English; this linguistic ability allows them access

information about the American culture via social media, movies and TV shows. However, by

segmenting only the English-speaking section of the Indian middle class, multinational brands

may be losing out on sales growth. A more thorough analysis, adding social characteristics of

lifestyles and propensity to consume, delineates only 28% of the country’s population as

‘middle-class’ -- of which 14% is lower middle class and only 3% upper. Moreover, the

conception of the middle class as a sole urban phenomenon is untrue given that more than 32%

of the comfortable middle class and 23% of the upper have been shown to reside in rural areas. 25

24 https://www.who.int/india/health-topics/avian-and-other-zoonotic-influenza
25 https://www.livemint.com/news/india/the-anatomy-of-india-s-middle-class-1556088919798.html

24
The rural population is less likely to be fluent in English and much more likely to communicate

in the market through its regional mother tongue. Given that the menus of multinational brands

are printed only in English and that their staff is instructed to stick to the English script, a native

language speaker might feel intimidated to experiment if he/she experiences a linguistic barrier.

Here, Dominos has been revolutionary by implementing Hindi and other regional languages in

its online and mobile ordering systems. However, it may still make sense to focus the target on

English-speaking middle-class consumers as eventhough the low-income groups form a larger

section of the population, each of their consumers may have little disposable income to spend.

Unless companies are able to maximise the “low price, low margin and high volume” strategy,

they won’t find tapping into the low-income market lucrative.

Nonetheless, there inevitably is potential for high economic growth rates in the future, given that

developing economies grow faster due to the ‘catch-up effect;’ as industrialization and job

growth causes increases in influx of migrants from rural areas and 1 million young-adults 26 who

join the country’s workforce every month, the Indian fast-food industry will naturally become

the global hot-spot for foreign investment after China. However, domestic firms like Haldirams

have derived the ‘fast-food know hows’ from multinationals and implemented them in the

modelling of their own stores; they now provide the same air-conditioned and hygienic services

that foreing brands differentiated themselves with, that too while serving traditional cultural

items that the Indian consumer is already familiar and comfortable with. The successes of the

Indian foodservice industry will be the ones who are able to provide the best customer value

26 https://www.business-standard.com/article/current-affairs/do-12-mn-indians-join-workforce-annually-
data-peg-number-at-less-than-half-118052100105_1.html

25
triad (quality, service and price) in consideration of the fact that new competitors, both foreign

and domestic, continuously enter the market every year.

Bibliography

1. Interview with Ajay Kaul, former CEO of Jubilant Foodworks from 2005-2016; Senior

Advisor to Chaayos

2. India Foodservice Market - Growth, Trends and Forecast (2020 - 2025); Mordor

Intelligence: https://www.mordorintelligence.com/industry-reports/india-foodservice-

market

3. Warsi, Khurshid & Nisa, Syeedun. (2005). Food Retailing: Fast Food Industry. SSRN

Electronic Journal. 10.2139/ssrn.664962.

4. Panwar, Diksha & Patra, Sidheswar. (2017). LOCALIZATION IN FAST FOOD

INDUSTRY: A CASE STUDY ON MCDONALD'S STRATEGY IN INDIA.

Researchers world - Journal of Arts, Science & Commerce. 8. 70-74.

5. Chitnis, Miss. (2019). A Study on Scenario of Fast-Food Industry in India. International

Journal of Trend in Scientific Research and Development. Special Issue. 88-90.

10.31142/ijtsrd23071.

6. BBC; How McDonald’s conquered India: https://www.bbc.com/news/business-30115555

7. Wall Street Journal; Inside India’s Fast-Food Battle: https://www.youtube.com/watch?

v=XPL0kYXkxx4&t=28s

8. CNBC; How Dominos Won over India: https://www.youtube.com/watch?

v=EK6_QNZa4S4&t=25s

9. CNBC; Why Dunkin’ Donuts is Failing in India: https://www.youtube.com/watch?

v=BXXdcgchAVw

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 Appendix

Data and Calculation of Fast-Food premium Index:

Cheapest Item ($) Fast- Food Premium

($)

Dominos $1.31 Veg Regular Pizza Rs. 49 = $0.65

McDonalds $0.26 Mc Aloo Tikki burger Rs. -30 = $ -40

Pizza Hut $1.71 Veg Margherita Pizza Rs. 79 = $ 1.05

KFC $4.64 5 Leg pieces Bucket Rs. 300 = $ 3.97

Burger King $2.65 Veg Masala Whopper Rs. 150 = $ 1.99

Dunkin’ $1.05 Big Joy Original Veg Rs. 29 = $ 0.38

Burger

Subway $1.99 Chicken Teriyaki Sub Rs. 100 = $ 1.32

Street Vendor $0.66

Fast- Food Premium

($)

Dominos $0.65

McDonalds -$40.00

Pizza Hut $1.05

KFC $3.97

Burger King $1.99

Dunkin’ $0.38

Subway $1.32

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