Maharaja Mac: The adaptation of international brands in India

8th Dec, 2014

In early November, Burger King opened its first outlet in India, and as luck would have it, it was in my local shopping mall in Saket, New Delhi. The queues were long, and now a month later it has a one-in-one-out policy. Menu treats include: “veg chili cheezos”, “chicken tandoor grill” burger and the “mutton whopper”.

Best of all, as with all Indian fast-food retailers- they deliver to your home or office. It is no exaggeration to say this will be high on the list of India-isms I will miss when I eventually leave these shores. Burger King is following in the well-trodden footsteps of McDonald’s, who opened their first Indian bolt hole way back in 1996, now with 350 outlets across India.

As the looping queues indicate, there is money to be made in French Fries. Crisil, a research firm, estimate that India’s quick-service restaurant (QSR) industry will double from 2013’s $550 million by 2016. This growth will be driven mostly by increases in disposable income as the economy clambers to its feet, and India’s demographics; a fact that I feel India’s politicians have yet to fully realize in campaigns is that 60% of India’s population is under 30.  They are open to, excited by and interested in international brands.

Appealing to an Indian consumer comes with some specific quirks. First, meat is pretty much off the menu. Between 20-40% of Indians are vegetarian (statistics complicated by the inclusion of eggs), and thus a varied vegetarian menu in QSR is fundamental to success. Capitalizing on this, McDonalds launched the ‘McSpicy Paneer’ burger as a premium option in their restaurants. Don’t knock it until you try it, it’s excellent.

McDonalds aren’t alone. Dominos offers a vegetable-heavy pizza menu; Starbucks range includes a croissant filled with potato, cheese and red chilies. The Aloo patty in Subway is so popular it’s almost always sold out by 2pm.

Nestle, having been in India since 1961, have had plenty of time to hone their Indian-palate friendly range. “Project Epicure” was undertaken in 2006, studying 1500 households. What they learnt helped them retain and gain customers, in example the cheap, spicy carbohydrate snack- Maggi noodles.  This research (among other endeavors) has allowed Nestle to sell more packaged foods than any other firm in India.

It is not just in taste where international brands have adapted. Hindustan Unilever decided to make a messy supply chain in rural India work in their favour. “Project Shakti” employed 45,000 rural women as Avon-type sales agents. Benefits abound, for both the women involved who find employment, and also at the community level where they instruct how to wash hands properly and reduce disease. (The fact that this increases sales of Unilever soap is a happy coincidence too).

This is a notoriously price sensitive market. The three leading domestic cellular-phone makers Lava, Karbonn and notably Micromax have had success by selling Android based phones with iPhone type features, but at a considerably lower price. Using Google’s Android One as an example, they plan to offer a new smartphone handset for only $100, Mozilla hopes to further this with a $25 smartphone handset.

As with QSR, the potential in the cellular phone market is enormous. The next few years are to see annual growth in smartphone purchases of a whopping 40%. In order to capture the lower-income buyers, Lava allows ‘side loading’ of music or videos for those who cannot plump for relatively pricey 3G connections. Apple is almost off the menu-it seems relatively ‘uncool’ in India to have any kind of smartphone other than an Android.

However, in the spiritual home of juxtapositions, it is not as easy as just putting a spicy paneer patty on the menu or slashing costs for an international brand to reap success here.

McDonalds began work on their supply chain a staggering six years before market entry. It is well documented that it took them nearly a decade to smooth out their distribution processes once here and to adapt their menu for an Indian consumer. The success of the McSpicy Paneer burger is down to the two years of R&D to bring it to life.

Uber, the taxi App, now up and running in five Indian cities has found India-specific problems too. In India, the product specific in-car mapping software is often patchy. Secondly, Uber runs on smartphones, difficult in a country with only 13% of its 600 million mobile owners using them. The Asia-Pacific head Allen Penn states that the traffic in Indian cities is the worst of all places they are in, so this meant more adaptation.

Back to food- international and domestic supermarket brands have whole-heartedly failed to lure customers into their air-conditioned, wide-aisled stores. Indian-owned supermarkets only account for 2% of grocery sales in India, unable to dominate due to the perception that the millions of kiranas (family run corner shops or stalls) are cheaper and easier. Basically, they are; building enormous or even medium-sized stores with wide product ranges is not as big a pull as you’d think; in India the traffic to get to these locations as opposed to a walk-able corner shop is deterrent enough.

A fact I find less lamentable is the impact India’s roads are having on the luxury car market. Lamborghini made only 1% of its sales in India last year, despite a stock market boom resulting in a doubling of the number of dollar billionaires in India.

With all these markets intricacies, what will become of international brands in India? Ever-changing policy rules, with varying complexity continue to affect the ability for international firms to set up India. Success, it seems, is partly dependent on finding an Indian partner well versed in the industry specifics. Burger King delayed their market entry by some years until teaming up with Indian QSR industry-buff Everstone Group.

Although since 1993 India has been a Coca-Cola friendly country, it was only in the 1970s that the Indian government kicked them out. It seems unlikely that with a sputtering economy (and a self-advertised reformist PM) that FDI would be discouraged on nationalist or moral grounds. Yet cultural sensitivities around the serving or meat, or even “western style” jeans needs to be noted.

I thoroughly enjoy the Indian friendly menus from international food brands. The level of R&D behind shows a desire to truly understand and appeal to the Indian customer. Of course, it is fundamentally profit driven, but I believe the dullest side effect of globalization to be the homogenization of what we all eat, watch and wear. Marks & Spencer and Zara have both found happy and lucrative homes in Indian malls, yet with products almost identical to any outfit in London or Barcelona.

International brands must note that outside of the forward-thinking (and now heavily saturated) cities of Delhi, Mumbai, Chennai and Bangalore, the consumer is unlikely to be a smartphone wielding 20-something with disposable income set aside for fries or polo shirts. Their success depends on adaptation to Indians, not the other way around.

Grace Lown is an Economics graduate born and raised in London. After graduating with her MSc in International Relations, she earned her wings in a London think-tank. Currently living and working in Delhi, India.