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KFC Vs Mcdonalds in India

Jalandhar is chicken country, as one would expect every nook and cranny in Punjab to be. It also happens to be a harbinger of India's fast-food future, thanks to a head-to-head fight between two iconic American companies in this bustling city. KFC and McDonald's, whose famous signages the Golden Arches and Colonel Sanders dot the highways and high streets of the world, are now squaring off in Butter Chicken Country. KFC has opened an outlet half a kilometre from McDonald's second restaurant in the town. In restaurateur talk, that is sniffing distance.

The fight between KFC and McDonald's, bitter rivals for market sweepstakes in many parts of the globe, is cast in the same mould as some of the greatest brand battles in corporate history Coke vs Pepsi and Nike vs Adidas. But for nearly 15 years since they entered India, the competition between the two resembled a boxing bout that promised a knockout, only to be called off before start. Jalandhar changed that. Battle Royale In the past few months, the fast-food restaurant chains have taken jabs at each other, offering similar dishes, matching prices and opening restaurants in close proximity. KFC, which primarily serves chicken, has taken aim at its burger rival with some of its own burgers called Zingers. For customers who prefer chicken inside buns, there is a snack called, well, Snackers. McDonald's has responded with nuggets for those who like to chomp on chicken. A hamburger company in the eyes of the world, McDonald's was quick to adapt to India's vegetarian ways with a fare packed with McAloo Tikki Burger, McVeggie and Veg Pizza McPuff. KFC has retaliated with the Veg Zinger burger, Veg Strips and Veggie Snacker. Big Mac has targeted KFC's signature dish, the Hot and Crispy Chicken, with the recently launched the McSpicy Chicken Burger. Pat came the Hot Zinger from KFC. Not long ago, the beverages menu at McDonald's was limited to a coffee, cold coffee and Coke. In contrast, KFC's Krushers label of beverages includes variants of yoghurt, sparklers and dairy products. McDonald's has now bumped up its beverage range to include mocha, hot chocolate, tea, iced tea and cappuccino. KFC, meanwhile, has introduced a Kafeccino variant. The fight has also spilled over to pricing. KFC recently began offering its Streetwise range targeted at college students for less than Rs 50, nearly seven years after McDonald's has kept its Happy Price Menu untouched at Rs 20. The companies have also started operating outlets within a stone's throw away from the other. At Andheri in Mumbai, for instance, KFC opened a third restaurant recently, matching its rival's tally. They also co-exist in Delhi's crowded Lajpat Nagar market, among other places. The gloves are finally off in the KFC-McDonald's fight. Their battle royale promises to define not just their fortunes in India, but also that of a raft of smaller rivals, some foreign, many Indian and the limits to which the Indian restaurant industry can be stretched to accommodate all.

What's Cooking? Both companies have begun an ambitious expansion strategy in India, powered by breakneck investments. KFC will add 50 restaurants to its existing 120 by the year end. The company's ambition is to operate 500 restaurants in India by 2015. It has invested $100 million to date. Plans are afoot to invest another $120 million. McDonald's is no less ambitious. The company is targeting 1,000 restaurants by 2020. It opened 33 new restaurants last year. Hardcastle Restaurants, which runs McDonald's in the south and west and recently bought out the joint-venture stake of the parent company to become a licencee, plans to open up to 70 stores next year, says vice-chairman Amit Jatia. It will be the franchisee's biggest expansion in the past 15 years. McDonald's also plans to invest Rs 1,000 crore to boost growth. Vikram Bakshi, managing director of Connaught Plaza Restaurants that has a joint venture with McDonald's in the north and east, says he is not worried. "Even if they [KFC] come right next to us they do that often they realise they gain nothing." he says, Jalandhar outlet continues to be one of McDonald's' highest selling restaurants. Still, Bakshi admits to gaps in the pool of products. "To their Zinger, we've had our Spicy Burger. [But] I don't have to tell you how worried they were...they had to call their Zinger Hot Zinger," he chuckles. Jatia, however, sought to play down the contest between the companies. "We compete with everybody in the market." Niren Chaudhary, managing director of Yum! Restaurants India, which operates KFC, Pizza Hut and Taco Bell in the country, shared a similar sentiment. He pointed to the "gigantic" potential of the Indian restaurant industry. "The branded restaurant business is estimated to be less than 2% of the total industry," he says. That is piecemeal for an industry estimated at Rs 43,000 crore and growing at 5-6% a year. The organised segment is estimated at Rs 8,500 crore and growing at 20% a year. Thought For Food The National Restaurants Association of India views the market with the same rose-tinted glasses. India's 1.2 billion people are getting richer and eating out more, it said in a report last year. "With the increase in disposable incomes of the average Indian consumer, the market size and potential of restaurants are expected to further grow." Shushmul Maheshwari, CEO of research firm RNCOS, says the food consumption pattern of urban Indian families have changed dramatically with the growing influence of western culture. "Indians have started dining out and have moved on to accept different varieties of delicious food from the world." As if on cue, plenty of restaurant chains, including Starbucks, Hooters, Burger King and Grand Canyon Coffee, are betting on India. Given the impending entry of rivals, KFC and McDonald's seem to have combined the luck and skill needed to be in the right place at the right time. The development in many cities of the infrastructure needed for fast food to flourish, including malls with food courts and highways with drive-through locations, has been a big help. Today, after 15 years in India, both chains say with confidence that they have put fast food on the Indian menu. From modest beginnings KFC was forced to shut shop a year after it entered India in 1995 while McDonald's 100th restaurant took 10 years since its entry in 1996 they are expanding fast, selling a broad range of foods wherever paying customers may be found.

That includes rural areas and small towns, the unlikeliest of places for burgers and crispy chicken to flourish. Colonel Sanders and Ronald McDonald have made their way to airports, railway stations, BPOs and even SEZs. They have also taken root along the highways. "There is a significant spring in their step now," says Arvind Singhal, managing director, Technopak Advisors. Piping Hot They are also making money. KFC's Chaudhary says the company has grown nearly two times in the past four years. McDonald's says its south and west offshoot has turned profitable. The offshoot's revenues grew at a compounded 35% in six years. The north and east division is doubling turnover every three years. Both their investments will be funded through internal accruals. Bakshi says McDonald's has finally reached a "takeoff point". Chaudhary says the market is ready only now and KFC has the advantage of just starting out in India. Never mind that it took 16 years. Their optimism stems from a burgeoning population short of time and flush with money who frequent hotels, restaurants and malls. Likewise, half the population is 25 years or younger. They are the target consumers for both KFC and McDonald's. RNCOS' Maheshwari says the varied demographics in India present a big opportunity for fast-food business. "Every age group represents a separate market Indians below 14 years of age are more than the total population of most of the emerging markets." The new markets look just as promising. McDonald's is considered the poor man's meal in the West, but in India's small towns, the company's executives are pleased that it holds a halo of aspiration around it. "In B-towns, people come to McDonald's as if on an outing in large numbers and in their best attire," says Bakshi. Still, some analysts have chafed at the snail-paced growth of the fast-food giants in India. "Hundred-odd outlets in 15 years is minuscule," says Singhal. "They have underestimated India's potential and over-hyped the challenges." He says the opportunity was there 15 years ago. "I would have gone to eat a burger 15 years ago." he growth of the two chains in India is the polar opposite of that in the US. According to financial services company UBS, three-quarters of Americans already live within three miles of a McDonald's outlet. Two-thirds live within three miles of a KFC. "They have not been able to expand yet as the majority of the population in India still prefer homeprepared food to fast food," says Maheshwari. Trouble Ahead Local rivals, meanwhile, are chomping at their tail. Restaurants such as Bikanerwala and Haldiram's have learned to sell traditional road-side cuisine and dishes in a clean and hygienic environment through modern-format setups. A clutch of ethnic fast-food chains such as Jumbo King and Goli Wada Pav of Mumbai, Kaati Zone of Bangalore, Ashrafilal Kulfi and Honest Pav Bhaji of Ahmedabad too is bracing for a fight. There is also the threat of Domino's Pizza, which has emerged stronger after initial hiccups, and other MNC rivals such as Subway, Papa John's, Texas Chicken, Chilli's Grill & Bar and Cinnabon. Domino's runs 392 stores across India as of June 2011. Ajay Kaul, chief executive officer of Domino's, says the company will continue to expand the store footprint. "Even in existing cities, there are opportunities for opening more stores."

For their part, McDonald's and KFC say the slow-paced progress was intentional. "What we have done in these 15 years is getting our model right, from the menu to pricing to the viability of the business," says Bakshi. KFC's Chaudhary says one has to be careful against getting misled by the "1.2 billion number". "The macro-economic environment in India is far better now than it ever was," he says. Restaurants, they say in unison, are unlike other retail businesses. For one, the infrastructure is boggling. And the chains are willing to wait out to open a restaurant at a prime location. McDonald's' first shop in Delhi did not come up at the central Connaught Place but at Basant Lok. Pinakiranjan Mishra of Ernst & Young, a consultancy, gives the companies credit for the caution. "They have spent years looking at the price points and the fare in India. They have understood the market." That's not to suggest the future is bright. Besides competition, the restaurant business in India is also fraught with troubles. Supply remains iffy in small towns and rural areas while the cold chain continues to be patchy. KFC and McDonald's are known for fattening products. India is no different and the scrutiny will only increase in future. Rentals and real estate prices continue to escalate and could take a take a toll on liquidity. There has been no letup in commodity prices in recent months. Loyalty is not one of the virtues of the teenager, the target consumer of these companies. The rest are finicky, to put it mildly. During the initial years, McDonald's' service time averaged 75 seconds. Today, it has improved ito 58 seconds. But the customer thinks "we've become slow", says Bakshi. And both restaurant chains sorely miss skilled people. In this setting, industry watchers predict an interesting fight between the two rivals. Besides their newfound affinity for breakneck expansion, they share a similar growth strategy. They plan to fill gaps in metros and flock to emerging towns. KFC is present in Kochi and McDonald's is studying the market there. McDonald's will launch a dessert called McFlurry in September. Its dessert menu appears thin while KFC serves three varieties, including sundaes. Bakshi says McDonald's holds huge advantages over KFC. "Our entire logistics and backend allow us to keep prices at a certain level." Truth is KFC has managed to keep prices on a par with its rival on most of its fare. For now, the verdict among experts is overwhelmingly in favour of McDonald's. Future Brands MD and CEO Santosh Desai says McDonald's has got it right from the beginning. "They have been careful to portray itself as a family restaurant." Maheshwari says McDonald's has been faster in understanding the Indian market. "KFC is still perceived as a non-vegetarian restaurant." Still, KFC has hit the ground running in India after its re-entry in 2003. Its 100th store came up in Chennai's T Nagar in 2010 while McDonald's took 10 years to reach the milestone. "India is a land of infinite opportunities. They [McDonald's] are chasing their own destiny and we ours," says KFC's Chaudhary. Regardless of how they fare, experts say the upshot of the competition will be fast food becoming commonplace in India, a fact of modern life, though Singhal says it will take a great deal of doing to dislodge the samosa in India. A McSamosa then? Yes, if it is on a tray off the counter and wrapped in paper.