Global food service chains seem to be cashing in on the growing appetite of Indians to consume fast food. The average Indian’s platter is huge and there seems to be a lot of scope for everyone, be it Domino’s, McDonald’s or KFC, to cash in on this opportunity. Market experts are amazed by the stupendous growth rate of all these players in the Indian market. No wonder, world’s largest coffee chain Starbucks, since its stepping into the Indian domain in October 2012, has opened stores at an average of one every two weeks, making India its fastest-expanding market. The quest for serving the best food from an integrated value chain has prompted Future Consumer Enterprise Limited to launch the India Food Park, a 110-acre world class facility in Tumkur, Karnataka.
If it is not food, then it is definitely beauty and this fact is well proved by homegrown consumer goods player Marico’s beauty and wellness arm, Kaya, which reported its maiden profit in the June quarter and going forward will adopt a capex-light strategy to fuel growth and sustain margins, including opening more low-cost Kaya Skin Bars and selling its products online. Another wellness chain, VLCC, after setting a strong foothold in the domestic market is charting out aggressive expansion plans to capture global markets like Africa, South Asia, South East Asia and the Middle East.
India Food Park launched in Karnataka
Future Consumer Enterprises Limited launched the India Food Park recently. The Food Park is a 110-acre world class facility in Tumkur, Karnataka that integrates the entire food value chain from farm to plate at a single location with the best-in-class infrastructure and technology. The facility is the first of its kind to be commissioned and has been developed with close partnership and support of the Ministry of Food Processing Industries, Government of India and the State Government of Karnataka.
The prime minister of India, Narendra Modi, and the chief minister of Karnataka state, Siddaramaiah, presided over the inaugural function in the presence of Harsimrat Kaur Badal, Union Minister for Food Processing Industries. Among other dignitaries present there was the founder and Group CEO of Future Group, Kishore Biyani.
The India Food Park boasts of a state-of-the-art cold chain infrastructure, pulping and IQF lines, spiral freezers, mechanised sorting facilities, packaging and quality testing centres, rice, spice, flour mills, grain silos, warehouses and R&D centres along with other facilities such as rain water harvesting capacity of 4.5 million metric tons, 7,500 sq.m of MSME facilities for entrepreneurs and food producers, a plug-and-play facility, with flexibility and in-built modularity, and packaging units.
On the project completion, the facility will have around 50 units for food processing and dedicated plants for the manufacture of Indian savories and snacks, frozen food products, chutneys, pasta, dry fruits and nuts, chocolates, and much more. The India Food Park will employ close to 10,000 people eventually and aims to positively impact the livelihoods of farmers, producers and agri-entrepreneurs in Tumkur and beyond.
Biyani of Future Group said: “India Food Park is an ambitious project. It has the potential to aid thousands of farmers, directly employ 10,000 people and quadruple the value of the food products that enter through the gates. It is one giant rasoi, where the golden harvest of Indian farmers will find new value in the hands of Indian consumers.” Products developed at the India Food Park will be retailed through Future Group’s retail formats such as Big Bazaar, Food Bazaar, Foodhall, KB’s Fairprice, Big Apple and Aadhaar as well as through general trade and other modern retailers. Collection centres for the procurement of agri-produce are being set up in places like Kolar, Chikkaballapur, Doddaballapur, Chamarajanagar, Chikmagalur and Shimoga to facilitate farmers to directly sell their produce to the units that operate from the park.
Global food service chains on a growth spree in India
The space is enormous, but the lines are getting increasingly blurred among the top players. Global food service chains are already beginning to cannibalise on each other’s core offerings with Domino’s serving chicken wings a la KFC; McDonald’s pushing wraps; and KFC dabbling with burgers. Experts too agree that in spite of similar meal offerings, the focus should remain on core products. As all players want to stay relevant throughout the day, they are vying with each other to maximise revenues and hence the concept of offering identical menus. Domino’s might have secured the top slot for now, but the pizza versus burger fight has just started. As an increasingly health conscious West avoids fast food, the battlegrounds have clearly shifted to the wallets and waistlines of Indian consumers.
In terms of store count, Domino’s is more than double the size of Big Mac772 versus 350! And in market share, the 14.2 per cent for McDonald’s is less than what it is for Domino’s at16.2 per cent. Though Domino’s has always had a bigger store count, it took the pizza brand more than a decade and a half to overtake its American rival in revenue. McDonald’s is of course not giving up without a fight. The company for the longest time made the most of its start in India. While Domino’s revenue was Rs. 303 million in 2001, McDonald’s was way ahead at Rs. 946 million. In terms of number of outlets, there was not much difference between the two players in 2001 – McDonald’s 105 to Domino’s 128. However, over the subsequent years, the gap kept widening at an astonishing pace. By 2011, when McDonald’s was comfortably pacing its expansion spree and had touched the 250 mark, Domino’s was galloping at 437.
Home delivery continues to be the lynchpin of Domino’s strategy and has evidently paid off well. It marks a shift in consumer perception of the QSR category from being aspirational to convenience driven. One would not drive down 5 km to hunt for a restaurant when one has better options to choose from. This is where Domino’s scores a point. After making the brand synonymous with home-delivery and popularising the ‘Hungry Kya?’ campaign, driving pizza as both a food and snacking option, Domino’s tweaked the other parts of the mix. In 2008, it brought down the price of pizza to Rs. 35 from Rs. 60. This increased acceptability, induced consumption and pushed home delivery. Experts feel that the pizza came home first, and stayed an in-home consumption item. The burger remained for long an item consumed at a QSR outlet. This made a big difference. McDonald’s failed to crack the home delivery code. Another important factor that helped Domino’s lead the race was its positioning as a meal replacement as compared to
Meanwhile, KFC had 21 outlets in 2006. While it took four years to reach a store count of 100, the next 100 happened in just two years. Now its store count stands at 307, and the company has set an ambitious target of 1,000 stores by 2020.More popular for its non-vegetarian offerings, KFC broke off those perceptions and established itself as a choice for everyone, feel marketing experts. Product innovations, including vegetarian and non-vegetarian menus and even meal options like rice, helped it expand its reach. Clever localisation along with consumer education also boosted the company’s performance. KFC showed that they have a separate vegetarian and a non-vegetarian kitchen.
Also encouraged by the response to Starbucks stores in major Indian cities, the world’s largest coffee chain is now eyeing tier-2 and -3 cities. The move comes after Tata Starbucks, the joint venture between Tata Global Beverages and Seattle-based Starbucks Coffee Company, reportedly decided to open outlets that are half the average size of existing ones for faster expansion in India. Stating that Tata Starbucks was “growing aggressively” in India, Chief Executive Officer Avani Davda said in a media report that it has identified more than 50 tier-2 and -3 Indian cities with the right kind of infrastructure.The company is open to trying out different formats that Starbucks has introduced globally, including smaller Express stores and drive-thru outlets, which account for more than 40 per cent of the US company-operated stores with higher average sales. The coffee chain has opened 58 stores across Mumbai, Delhi–NCR, Pune, Bengaluru, Chennai and Hyderabad in 23 months. Since opening its first outlet in India in October 2012, Starbucks has opened stores at an average of one every two weeks, making India its fastest-expanding market. According to the company, Indian cities in the south, west and north offer great growth potential for Tata Starbucks.
Homegrown beauty and wellness brands on a growth trajectory
Homegrown consumer goods player Marico’s beauty and wellness arm, Kaya, which reported its maiden profit in the June quarter, will adopt a capex-light strategy to fuel growth and sustain margins. The company also plans to open more low-cost Kaya Skin Bars and sell its products online as part of the strategy.Following its demerger from Marico in April and subsequent listing in July this year, Harsh Mariwala-promoted Marico Kaya Enterprises had reported a marginal net income of Rs. 63 lakh on a revenue of Rs. 70 crore in the June quarter. This was the maiden profit by the company that was set up way back in December 2002. The Kaya chain is present in 26 locations in the country with 87 clinics in India and 18 overseas, mostly in the Middle East, serving over 7 lakh customers. The company currently plans to adopt an asset-light strategy to sustain margins and profitability. Hence, it has plans to open more low-cost standalone kiosks called Kaya Skin Bars and focus on selling products through the online channel, for which the company has tied up with a few e-commerce portals already. Kaya Skin Bar is a product-only format. This will enable the company to engage with its customers at multiple touch-points. The Skin Bars are also expected to scale up this model much faster and the company may opt for the franchisee model for the same. By the end of the year, the brand plans to have at least 20 Skin Bars.While a normal Kaya skin clinic costs around Rs. 1 crore to set up, a kiosk would require just about Rs. 35–40 lakh. Kaya Skin Bars are a new retail format focused on offering more products than services, with the head-count capped at three per outlet as against eight to 10 people at regular clinics. The first Kaya Skin Bar was launched in Bengaluru in January 2013, and each store is spread across less than 500 sq.ft. area, while a skin clinic measures over 2,000 sq.ft, said Subramanian[Who?]. “While the Skin Bars offer skincare products, skin clinics provide technology-led cosmetic dermatological services,” he added. In other words, the Skin Bars will compete with The Body Shop, Kiehl’s and L’Occitane, among others. On the capex plans, it could be around Rs. 100 crore over the next 2 to 3 years with an annual spend of Rs. 25–30 crore. Also the improved performance and the first profit is not a one-time blip but for the long term.Last year, it had revenue of Rs. 290 crore, of which 60 per cent came from domestic operations.As to the overseas expansion plans, Kaya would be limiting itself to the Gulf markets, where it has 17 clinics now, 13 of them being in the UAE. Kaya, the specialised skincare and beauty solutions provider, contributed around 7 per cent of Marico’s Rs. 4,000-crore topline last fiscal.Beauty and wellness services is a Rs. 20,500-crore market, growing at 20 per cent per annum and the organised sector, which accounts for 25 per cent of this market, is growing at a rapid pace, according to consulting firm Booz & Co.Meanwhile, wellness firm VLCC is closing in on a global acquisition as part of its ongoing expansion, while it is also looking to expand aggressively in Africa. Kenya, Tanzania, Uganda, Nigeria and South Africa are some of the countries identified by the company where it will open its slimming and beauty care clinics. “We are in real acquisition mode and we are in talks with several companies in the wellness domain. You will soon hear an announcement from us,” VLCC Founder and Vice-Chairperson Vandana Luthra told PTI. Luthra, however, refused to divulge details such as size and geography of the acquisition that is on the cards.Last year, VLCC had acquired Singapore-based Global Vantage Innovative Group, which owns and operates three firms that manufacture and retail cosmetic products and solutions.In 2012 the company acquired majority stake in Malaysia-based Wyann International, which owns and operates a chain of 22 slimming and beauty outlets across Malaysia. On expansion in Africa, Luthra said: “There is an open ground for us to expand very fast in the whole of Africa, as there is a huge opportunity and need for our kind of business. The plan for opening centres is very aggressive in Africa.” After Kenya, the company will open centres in Tanzania and Uganda followed by Nigeria before entering South Africa. The company opened its first centre in Africa in Kenya, in collaboration with the Kenya-based Sameer Group earlier this month. VLCC has also started retailing its personal care products in the continent. Going forward, the company plans to focus in the four markets where it is already present – South Asia, South East Asia, the Middle East and Africa. VLCC also plans to open centres in Saudi Arabia, Egypt and Pakistan.The company’s international operations at present contribute 30–35 per cent to the group revenues. Currently, about 60–65 per cent of VLCC’s group revenues come from services and the balance from products. The company operates 300 outlets comprising beauty and slimming centres, nutrition institutes and exclusive beauty zones in 16 countries.