Jun 25, 2008

The Food chain rush

Bring them on: The food chain rush ( June '25,2008, Economic Times)
When Eli Zedaka was approached by a customer asking if Falafel’s served “Jain” cuisine, the director of JB N JEG Foods that owns Falafel’s in India , did not know what hit him.Falafel’s , the West Asian cuisine chain, had just opened its first Indian outlet in South Mumbai and for Zedaka who had lived in Israel for more than three decades, the “Jain” request was a global first. But this was certainly not to be the last. Having opened shop in a locality predominantly inhabited by Jains, a community that is strictly vegetarian, minus even garlic, onion and potatoes on their plate, similar requests kept trickling in. Soon Zedaka got in touch with chef Guy Itzhaki, his partner who handles Falafel’s operations globally, to localise the Falafel Hummus . The result was ‘Jain Falafel’ , the company’s first localised offering — minus the onion and garlic, but with the original taste of Hummus intact. Falafel’s is certainly not the first international food chain to play the localising game in India. McDonald’s , the US fast food major has perfected the act of saying “no-beef” , while pizza chains have select outlets dishing out only vegetarian toppings. But the story is not really about localising to suit diverse Indian tastebuds. It’s about how the not-so-big international food and beverage chains are willing to bend backwards to serve Indian customers , build a strong customer base and lock up market share, before the big names — Taco Bell, Burger King and Starbucks, among others — come and woo customers. The market, to risk a pun, is piping hot. According to a survey by consulting major AT Kearney, the Indian quick service restaurant (QSR) market is expected to grow at a compounded annual rate of 10% to touch Rs 30,000 crore by 2011. Amit Jatia, managing director and JV Partner , McDonald’s India (West and South Region) adds that a decade back, the eating-out frequency was only 3-4 days a month in the big cities like Mumbai and Delhi. This increased to six days a month in 2004 and is currently at eight days a month. The frequency will only get better with more and more consumers opting to eat out, particularly on weekdays. In cities like Bangkok, for example , consumers eat out on 45 occasions in a month. No wonder, the food and beverage chains are eager to push investments into emerging markets like India. Over the next three-five years, Australian coffee chain Gloria Jean’s Coffees, US Pizza (which began its journey in Sweden) and Falafel’s put together, will invest over Rs 250 crore and add another 700 outlets to their existing tally.Others like the Italian chain Costa Coffee (300 outlets in the next 3-4 years, from the present 40), pizza chain Papa John’s (100 outlets in three years) and the South American Bembos also nurse similar ambitions. Why the hurry? “Growth is essential to achieve economies of scale,” reasons Myles Felt, vice president - international, of the US-based Papa John’s . There is another side to the coin: a snail-paced growth in global markets. Papa John’s , that has more than 3,250 Papa John’s restaurants worldwide, will have a bulk of its new restaurants in newer markets like India. Felt says, “We could see that our expansion in the US would slow down at some point due to market saturation. So we decided to expand overseas to continue adding shareholder value.” By the end of 2008, Papa John’s will have over 500 international restaurants in 29 markets. Even brands like Starbucks have similar thoughts playing on their minds. In a statement to Brand Equity, the company said it was “reviewing all options and evaluating how we will proceed related to our entry into one of the fastest growing economies in the world.” According to a Euromonitor International report, Starbucks’ future position as the leading coffee specialist depends greatly on its global expansion efforts. With nearly 4,500 coffee-houses in 45 countries, Starbucks aims to increase the international store count by 20% every year, and both China and India will be two key target markets in achieving this target. Burger King, which is facing fierce competition at its hometurf from McDonald’s , KFC and Subway , has no choice but to expand its international operations — which means it can’t afford to ignore India for too long. As if it’s working with the script, the Indian market has also taken off at the right time. Akbar Khwaja, managing director, United Pizza, owner of US Pizza, says the company was struggling to keep three restaurants running in 1995 in Bangalore. But all that changed, he says, after Pizza Hut, which entered India in 1995 with deep pockets, started aggressively marketing pizzas two years later to increase its acceptability not just among the elite but also the middle class. US Pizza today has 62 outlets across the country. “The market is booming but only a few have capitalised on it,” agrees Ravi Saxena, MD of Citymax Hotels India, part of Dubai-based Landmark Group and the franchisee for Gloria Jean’s in India. Paul Robinson, country head, Costa Coffee India, adds: “Our entry timing was near perfect as the presence of a few local chains had already exposed consumers to the cafe culture.”

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