Strategy Secret behind Ronald McDonald's success in India

India's first McDonald's outlet opened in 1996, but the story of the company setting foot in India precedes that filling the team with great pride. Pride because of all the research, hard work and back-end work that went in to make the brand a success in India. Abhijit Upadhye, senior director supply chain, Menu Management and New Business Channels, Mc Donald's India breaks it down. By Sayoni Bhaduri Year 1990 was the year when McDonald's decided that India offered a lucrative business opportunity. But to tap into the nation's fast food potential there was long process of research, back-end development, a total of which took six years to bring the first McDonald's outlet in India. India was missing some of the key elements which are an imperative for our business food processing and cold storage facilities, says Abhijit Upadhye , senior director supply chain, Menu Management and New Business Channels, Mc Donald's India. He Abhijit Upadhye further adds that food processing then was just limited to ice creams and chocolates and McDonald's needs went beyond these into meats, vegetables, condiments etc. The cold storage facilities suffered similarly with a lack of quality.

Secret Santa: Suppliers

The first step for the company in such a scenario was to identify and bring together partners and suppliers. We connected local suppliers with out international suppliers and encouraged them to form joint ventures, says Upadhye. This not only allowed McDonald's to tap into the local supplier segment, but also transfer of information and technical know or equity how from international counterparts. Most of these JVs have expired now and in most cases one of the two parties have taken over complete stakes in the company, he further adds. Most of these suppliers also began as being exclusive suppliers to McDonald's but now have branched out and have their businesses expanding. Working with the suppliers McDonald's is one of the things which distinguishes McDonalds from competition. Upadhye talks about their special partnership with the suppliers, We do not have any signed documents tying our suppliers to us, it is completely based on trust. We call it the handshake agreement. The underlying principle here is the trust with product offering which is unique. With such a huge market and volumes, it is not easy to find suppliers overnight. We have also been lucky that none of our suppliers have broken the trust and bailed on us suddenly, he adds. Also as part of their policies, McDonald's helps their suppliers to grow with them. The company would help the suppliers achieve optimum potential. They follow a system of Open Book Policy where McDonald's

has full access to all the suppliers costings and together they chart out a plan to lower costings and increase profits. Another strategy that McDonald's successfully implements is the sharing of best practices. Each supplier goes through a Supplier Appraisal audit undertaken by McDonald's. These suppliers are then graded on a Supplier Performance Index. This index is a structured format similar to an employee appraisal. Those suppliers who score the best, their practices are then documented and distributed to other suppliers to achieve the same high standard productivity.

India centric R&D

There were only three categories of products which were imported french fries, oil and Happy Meal toys. Of these french fries saw the last imported consignments in 2007. To bring in the right international quality standards for the french fries the background work began in 1999, starting from the right quality of potatoes to the cold storage; McDonald's worked on creating the right infrastructure from scratch. While working on McDonald's own product innovation and new ranges, they also work closely with their suppliers helping them with their R&D, This extended arm of R&D is almost twothree years ahead, elaborates Upadhye. When the gestation period is longer so is the planning cycle. He further adds that these processes had to be implemented as McDonald's stands for affordable QSR and to allow customers the same affordability these measures had to be taken to profit in the long run. And that too without compromising quality standards. Not just infrastructure, wherever there was scarcity of produce, McDonald's went one step ahead to cure the issue at the stem. For instance, they worked with the poultry industry to standardise quality product also processing. Processes such as deboning never existed in India before we introduced them in India, says Upadhye. They even had an agronomist on board the McDonald's crew in India to monitor the right growth path of the Iceberg lettuce which previously was never grown in India. Slowly the volumes grew and with an assured growth which made up for the investment McDonald's made in the back end systems. The company invested as much as `300-500 into the back end systems and building a supplier chain network over two-three years, adds Upadhye.

Standardisation, savvy!
Perhaps one of the most interesting facet for McDonald's is India's predominant vegetarian menu, upto 60 per cent. The entire menu R&D took place in India in our innovation centre in Mumbai, Upadhye said. He also informs that mayonnaise used in India is all eggless, similarly monosodium glutamate (MSG) which is quite commonly used internationally is avoided in India. Food without MSG has been redesigned with coatings, etc, so as not to have any discrepancy in tastes. Religious sentiments play an important role while devising menu for India. A McVeggie burger is a complete Indian R&D based product, but the recipe is defined according to international norms. The aim is to localise international norms, trends and tastes, to fit the needs and requirements of India, adds he. Many of these

customised products have seen great success in other international market, for instance the Middle East and Fiji Islands. Based on responses to these products the innovation centre in Mumbai can customise the products according to the tastes of the region, he adds. All products are designed in such a way that it tastes the same across the globe. A McFry will taste here or any other international outlet, and there are checks and balances put in place to assure this level of standardisation, says Upadhye. The latest entrant in the McDonald's bouquet of quick service fixes in their Breakfast menu served from 7.00 am to 11.00 am. The aim of introducing this was to create a differentiator, and we had seen a great demand in this segment and not many were catering to it, says Upadhye. It can be said that McDonald's fascination for standardisation crosses regular benchmarks. Upadhye elaborates, All our food products have to be within weight, size, shape specified internationally. These products then are not only judged on their physicality but also their taste by a sample target and then is scored out of 100. All of our suppliers have to abide by these specifications. These tests are done in three tiers lab tests, quality assurance test and scoring by independent scorers. There are also standardised tools for the final product to reach the customer, manufactured by a standardised equipment manufacturers. The outlet staff too has a parameters to judge a bad quality/unstandardised product. Biggest achievement according to Upadhye for McDonald's has been the fact that all new entrants in India's QSR business have to use the same supplier as them. Today the company has 12-15 core suppliers who work closely with them and a total of 50 suppliers is what takes to bring together a complete McDonald's meal in India.