MUMBAI — India has long had a reputation as being unfriendly to foreign businesses, but when it comes to fast food, international chains are being warmly welcomed by a young, upwardly mobile population.
In the past few months, Taco Bell, Krispy Kreme, Burger King and McDonald’s have either announced plans to expand in India or have opened new outlets around the country. Krispy Kreme was the latest to open a new store with its first outlet in Delhi last month, adding to its five branches in Bangalore.
Despite the country’s economic troubles, the average middle-class Indian consumer’s spending power is steadily increasing, with more people, particularly women, entering the workforce. In addition, Indians’ increased exposure to international cuisine through the media and travel makes the country a desirable destination for international food chains looking to expand globally.
“In India today, I think people are acquiring new tastes rather than changing their tastes, because it takes a whole generation to actually change tastes,” said Pinakiranjan Mishra, partner and national leader for retail and consumer products at Ernst & Young India. “As more and more people acquire money, there are a lot of new consumers who are experimental in nature.”
According to a study done by analysts at Technopak, a management consulting firm in Gurgaon, the Indian market for chain restaurants was an estimated $2.5 billion in 2013 and is expected to grow to $8 billion in 2020, driven by the growth of what is known as quick-service, or fast food, restaurants.
“The Indian market is growing at a slower pace than what China has done but the potential is as large,” said Saloni Nangia, president of Technopak. “India also has a young age profile, many more people eating out and international influences coming in. Some of the international brands could replicate, to some extent, the China story in India.”
Burger King, the world’s second-largest burger chain behind McDonald’s, has joined with Everstone Group, an India-focused private equity and real estate firm, to bring the restaurant chain in India. The first branch is expected to open in the first half of 2014.
The agreement with Everstone Group is Burger King’s latest attempt at finding an Indian partner, after talks with the developer DLF and the retailing conglomerate Future Group failed several years earlier.
Sameer Sain, co-founder and managing partner at Everstone Group, said Burger King was an appealing investment because it could thrive even in a bad economy, as people will still go out to eat but not at expensive restaurants.
“There has been some slowdown in growth,” he said, “but it continues to remain a very good opportunity in the long term.”
Meanwhile, McDonald’s is expanding in India with the introduction of the McCafe, a coffeehouse-style chain. In October, Hardcastle Restaurants, the licensee for McDonald’s in South and West India, announced the opening of the first McCafe in Mumbai.
“Currently we are seeing consumer sentiment to be weak, and our same-store sales have been negative this quarter,” said Amit Jatia, vice chairman at Hardcastle Restaurants, said in December. “But I don’t think you can form your long-term strategy based on an immediate event. Any brand looking to enter the Indian market should not be looking at only this year to make their judgment call.”