Indian Hospitality Industry 3

Fast Food Scene in Indian Hemisphere

The chronology of Indian fast food scene takes us back to early 70’s, when we saw Narula’s launch the first American style fast-food outlet in Delhi. They were “The First” to introduce Burgers and Pizza’s in India. This was followed by Vijay Mallya’s UB Group launching pizza chain McDowell’s Pizza King in early 80’s. Then came Wimpy’s the British fast-food chain in late 80’s. McDowell’s Pizza Kings closure in 1987 gave few lean years to the industry and then came Dominos Pizza, followed by Pizza-Hut. Finally McDonald made a grand entry in late 90’s. The turn of the century (21^st century) saw brands like Barista, Costa Café, Pizza Land and finally Starbuck and Dunkin Dounuts. Keeping in view that three decades have passed. I thought, it would be a good idea to look into and study success and failures of the fast food industry in India and also evaluate what has been happening to Indian fast food Industry.

Global Hospitality Consultants conducted an exhaustive study of each product and brand and discovered some startling facts which are being presented before my readers. 

American Fast Food

1.Nirula’s Restaurants chain: Nirula’s Restaurant chain was started by two senior Nirula brothers in 50’s and they opened some rather exciting Restaurants like La Boheme, Gufa, Chinese Room and Nirula’s Bakery. They were very innovative in their concepts compared to competition at that time and were considered one of the best brands in 70’s and early 70’s. Both the brothers had a son each, the sons were sent abroad to study. Older one, Lalit Narula came back to India in mid 70’s and opened an Indian fast-food chain in Connaught-place, serving Mutton-Chops & Omelets with Hash browns and Dosas. They did exceedingly well. In late seventies they opened the Americanized fast-food, serving Burgers and Pizzas. The product compared to their international counter-parts was quite sub-standard but having no competition they ruled over Delhi for decades. When the younger brother Deepak Nirula came back to India, (after graduating from Cornell University) and he started Ice-Cream Parlors with twenty odd flavors of ice-cream. India had never seen anything like that before. People went crazy. 15’ X 20’ feet ice-cream parlor in Connaught-place used to earn more revenue than all their other brands put together. They also opened an up-market restaurant called Potpourri serving café food with Salad Bar, first time in India. Those years Nirula’s had Midas-touch, what-ever they touched become success. They expanded to over 35-40 outlets and finally sold their business to a Singapore fund. Today, unfortunately Nirula’s is in a pathetic state and we would not be surprised if we might see those closing operations by 2015. Present owners are looking at various option to exit including selling the chain.

2.Mac-Dowell’s Pizza King: In mid 80’s, Vijay Malya, owner of McDowell & Company decided to launch a Fast-Food chain called McDowell’s Pizza King. They were the first Professionally Managed Fast-Food chain serving three sizes of pizzas with two types of base - thin and thick. Along with that they were the first one to cameup with Grilled Sandwiches and Salad Bar in each restaurant. McDowell’s Pizza King was headed by Mr. Kisan Mehta, President U.B. Group; the waves “Pizza King” created in the food industry have never been matched before or after. Their flagship restaurant in Connaught Place opened to a mile long queue. India Today wanted to do a cover story on us and international magazines like Times and Newsweek wrote about Pizza revolution coming to India. All in all they opened 12-15 outlets in Delhi and Mumbai. Unfortunately Pizza King’s waterloo came with a) Launch of Mumbai’s Operation b)Vijay Malya’s UB group getting into financial mess with Indian Government

     Mumbai Fast-Food market was very confusing. But Mr. Mallya forced us to open Restaurants in Mumbai without conducting marketing study as he believed that Mumbai market would be twice the size of Delhi market and that was the biggest blunder for us and chain’s undoing. Pizza King’s biggest competition in Mumbai was a Dabba-Wala. While weekends were sold-out in most of the restaurants but weekdays were very low. As all the Restaurants were franchised and that led to total chaos and disaster.None of the outlets were able to recover (very high) Rent. Mumbai collapse also led Delhi operation in major financial crunch. Finally in 1987 McDowell’s Pizza King closed their doors to the market. This was an abrupt and  unceremonious end to the most successful fast-food chain, ever, in the country. When Mac-Dowell’s Pizza King opened in Delhi total Pizza market was worth Rs. 17/18,000 per day. When they closed after three years Pizza King alone sold more than 150/160,000 worth of Pizzas every day- a growth of over 100% every year. I feel they were way ahead to their time.

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3.Wimpy’s: A famous Burger chain from England made an entry in India some time in 1985. Their product was reasonably good and in first few years they were quite successful too. Unfortunately chain’s back-up organization miserably failed and they started losing one restaurant after another. Although Wimpy’s still exists in Delhi but is not the Wimpy’s which came to India but a very poor product? Rather sad end to my favorite Burger chain from England.

4.Domino’s Pizza: Next chain to come to India was Domino’s Pizza in 1996, most successful American Pizza delivery chain. After the closer of McDowell’s Pizza King a big gap was there between demand and supply of Pizza in the market and this Delivery concept Chain fill the gap created by closure of McDowell’s Pizza King. Domino’s delivery of Pizza in 30 minutes was instant hit. Their Pizza products were average but they have the best delivery system in the world. They have been growing since then and today have over 100 outlets in Delhi alone. They became envy of most of the restaurants because they were able to provide pizza to client from not a very expensive location and that too in just 30 minutes. Although today nearly all Pizza Restaurants are providing Home Delivery but Domino Pizza remains king of Pizza Delivery.

                                                               

5.Pizza Hut: Pepsi’s one important arm is Yum Brand Inc. owner of Pizza Hut restaurants world-wide, a Pepsi product. They launched their first Pizza Hut in India on June 1996 with first outlet in Bangalore. Today they have over 170 Restaurants and more the 11 take away outlets. Pizza is a meal close to majority of the middle class Indians food needs providing them large quantity of Carbohydrates (Pizza base), Sauce (tomato), vegetables and protein (cheese and assorted meats). All Indians are very comfortable eating Pizzas because they feel that this is closest to what they eat. I remember when I opening Milkfood Fast Food in Amritsar our largest Desi Ghee Dealer from Amritsar complimented me in front of his Boss saying “that Roti with tomato sauce and cheese (Pizza) was very tasty”.

Pizza Hut, when they came in, brought American Menu, along with Pizzas they had Salad Bars and Sandwiches, In all their restaurants, although the product was way below the American standards but still we saw a lot of rush and an up market clientele was always waiting outside the Restaurants. That was the height of success that Pizza Hut achieved. In late 2000 onwards, slowly people realized that the Pizza Hut was as expensive as eating in a good restaurant or coffee shop and quality of some of their products like Soup and Salad Bar were way below, seems Pizza Hut also realized that and they stopped having Salad Bars in their Restaurants. Today Pizza Hut has a large number of successful restaurants all over India. They also have quite a profitable delivery system but unfortunately as far as the Pizzas go they are as good or as bad as the Domino’s. My final verdict is, with people becoming aware of Gourmet Pizzas. Pizza Hut is losing the market although they are still doing well commercially but instead of the up market all knowing clientele they now have people who don’t know any better.

6.KFC (Kentucky Fried Chicken): Pepsi’s second fast-food restaurant chain in India is KFC, which was launched in Bangalore in 1995 followed-up with an outlet in Friends Colony, Delhi. Both the restaurants to start with were quite successful and even the product was well received but unfortunately they got themselves into a lot of negative publicity because of health factor. They were blamed for  adding Monosodium glutamate(MSG) more than prescribed limit to make Chicken more tasty and they were frying chicken in pork fat. Unfortunately, due to these reasons, they closed both outlets.KFC was again re launched in 1999 in Bangalore, but they opened Delhi outlet much later in  Rajouri Garden, which has a very large population of Punjabi community great lovers of chicken. Today they have over 280 outlets in India. Unfortunately to survive in India, KFC the Chicken people survive not by selling fried chicken or even chicken Burger but their over sixty five percent revenue comes from vegetarian food, beverages and desserts, not their core competence.

     7. McDonald's, Family Restaurants(!): For every Fast Food Fanatic McDonald's is the God

of modern fast-food. Fact is they are responsible for elevating quality of fast food to the level of excellence. Ray Kroc founder of McDonald's was a man of great vision and it is because of his principles and value, even today, after 40 years of operations and hundreds of newer successful concepts McDonald's is still No.1.

              Like Yum Foods, McDonald's also launched their first outlet in 1996 in Vasant Vihar.

They followed with outlets in Greater Kailash, Green Park, Connaught Palace in Delhi and similarly opened McDonald’s in Mumbai. Today all together McDonald’s has over 1500 outlets in India. Today even in India they are the largest fast-food chain serving chicken and vegetable Burgers& Wraps in different combinations. Unfortunately in last 27 years of operation in India, I notice that they went away from basic principles and the values on which Ray Kroc build McDonald as the best fast-food chain in the world. In India to save money local franchises created sub-suppliers picked-up inferior quality product and the most alarming was compromise on hygienic and quality standards. The most alarming decision was to start home delivery service in India of Burger which has a safe eatable life of 10 minutes (McDonald's quality specification) and delivering to customer in 30 minutes. Thus by their own standards compromising on the health and safety of their customer (kindly read my blog dated 29^th June 2010- Dream Gone Sour). My personal feeling is that, McDonald’s is well aware of what is going on in India, but refuses to interfere because they do not have the required freedom to function. Today with liberalization in economy; they have taken charge of the operation. I really hope they will try to rectify all what is wrong in McDonald’s India.

Another point to note that MacDonald’s core competency product has been Burgers, Chicken and meat but ironically enough in India they are surviving on sale of Softy ice creams & Sundays and Aaloo-Tikki Burger, which constitute up to 70% of their revenue.

8.Dunkin Donuts: Fast Foods latest concept in India called Dunkin Donuts. They were introduced last year by Bharti Industries, owner of Dominos India. After the success of Domino’s Pizza, the company has launched Dunkin Donuts, in the Indian market. They serve

variety of donuts made in their central kitchen. They have no outlet where fresh donuts are prepared and served. Automatically this is the reason for their donuts not. Selling so well, because of which they are surviving on the sale of Sandwiches and newly launched sub-standard Burgers. Its an interesting paradox, to see the Dunkin Donuts publicity and marketing collaterals having photographs of all kinds of foods except Donuts. Today they have 16 outlets. My prediction is they will only survive if some miracle happens, otherwise we expect them to fade away into the blue like many other brands.

There are other smaller fast-food outlets like Papa Jones Pizza, Pizza Express, and Pizza corner, Café Coffee Day, Barista and Costa. Some of them have done well but most of them are still struggling to survive. Reason being the Indian eating trends. Most of the international chains go out of the way to changes in their core competence by trying to adapt to Indian taste and flavors. How will it work? A large part of our huge middle class has travelled abroad and has tasted the original and loved it. So we all look for the taste we had in USA, Europe, Middle-east or South-east Asia. If they want an Indian fast-food, thus would prefer to go to Indian fast-food restaurant .At no stage will I try to find the taste or flavor of Chana-Bathura or Tandoori Chicken in a Burger or a Pizza joint.

Indian Fast-food in Delhi and Northern India

  Today Indian Fast Food is doing extremely well. In north Chana-Bathura and Chaat, in Mumbai Pao-Bhaji and Vada-Pao and south Indian food all over India. In Delhi, today there are three major Indian fast-food players; between them they control 65-70% of fast-food market. For decades, all Halwai shops also have been serving food along with Indian sweets, Chana-bhatura, Samosa and Chat has become essential part of our everyday snack. In early 80’s, most of these shops had small sitting area of 3-4 tables where they served Indian snacks, soft-drinks etc. for the people who came to buy Indian sweets. The real change came after the closure of Pizza King between 1987 to 1994-95, because the vacuum created by the closure of large fast food chains (except Narula’s) forced people to look for never pasture and renovated Halwai Shops with larger food choice attracted masses to visit sweet shops in large numbers. Stores like Haldiram, Bengali Sweets Shop, and Nathu’s Sweets, all started acquiring more and larger shops next to them and started to increase the menu items. First genuinely successful Indian fast-food, was in Friends Colony by the name ‘Nathu’s Sweets’ where only 1/4^th space was given to the sweets and the remaining to cafeteria style sitting followed by Haldiram, Bengali Sweets Shop and Evergreen Sweets House. Today after nearly 26-27 years, there are four invincible leaders.

1.Haldiram: Haldiram, even today is most professionally managed sweets shop and restaurant. There first successful venture as self service restaurant was in their central kitchen at Faridabad Road followed by Ring Road, Lajpat Nagar and subsequently a very large Central Kitchen and Restaurant on NH-8,Gurgaon. By this time they got into a mode of standardizing the product and working as a very successful system in all there outlets. Today they have over 22 large restaurants in Delhi-NCR serving 40 t0 50 thousand everyday and by an estimate their             profitability would be the highest in the city.

 2.Bikaner: Bikaner Sweets Shop and Restaurant although started little late, they had franchised their name extensively but the first successful venture as a professional Restaurant opening in sector-29, Gurgaon. Where they had created Restaurant-cum-Banquet-cum-Sweets Shop in nearly 20,000 square feet area. Their menu is very similar to Haldiram. Their service style, method, system and procedures are 100% copy of Haldiram. Today they are the second largest player for opening at least one of outlets every year. Bikaner like their better half has over 22 outlets in NCR.   

     3.Evergreen Sweets House: This sweet shop was opened by four brothers who worked hands on to start with and by early 70’s established themselves as one of the best Halwai’s shops in the country. Remembering their success in 70’s, I remember at Diwali they took-over Green Park market area supplying sweets to most of the middle class in South Delhi and even today they are rated one of the top Sweet Shops. As for the food from the very start, every day they used 30-35 covers in a sweet shop serving food like Chana-bhatura and Chaat. They got in touch with us in 2003, as they had taken-over a shop next to their old shop and wanted to open a shop similar to Haldiram and Bikaner and wanted my help to design and start the place. We (Mr. Shyam Chopra and Myself) discussed the weaknesses and strengths of existing Indian fast-food chain and designed a model unique, yet very appreciated. One of the biggest weaknesses in most of existing fast-food chains was their self-service system. Guest going with his family had to stand in queue to select what they wanted to eat while the family sat occupying the table so that nobody else would take it away. After cutting the bill the man went to various counters as per his order and would place the order. Then would wait for his order to get ready and bring the food to the table and then they all ate the food. On an average such a table took minimum of45 minutes of occupancy. In Evergreen, we decided to have waiter service and captains to receive the guest, make them comfortable, take their order and start serving the food immediately. By doing so, we converted Evergreen into the most comfortable, convenient and reasonably priced restaurant in the country. We were reducing the time of table occupation at a time by half at peak hours. This concept has worked so well that their ownership has themselves confirm that today their business is much more profitable than sweets business. Their menu not only includes Pasta and Pizza but also Chinese and Dim sum. I personally feel that these concepts are so strong and in future we will see many more such restaurants doing successful business

4.Sagar (Ratna) Restaurant

 In 1986 after leaving Mcdowel Pizza King, I took upjob as GM Centaur Srinager. After three/ four months I visited my home town ,Defence colony  NewDelhi and came to know about a newrestaurantin Def Col market serving amazing Dosas.I liked the product so much that I wanted to meet the owner of the restaurant. After praising his product, I offered him a place in my Hotel to openSagar in Srinagar. He was very excited and agreed. After six months when I came back to Delhi to sign him, he just looked through me. His world had changed, there was a queue of between 50 to 100 people waiting to get into that small place. Within days he bought over first and second floor of his shop plus first and second floor of next shop. Rest was history. He became most sort after concept in Delhi. Very soon from one outlet today his company own nearly 70 Restaurant, before he sold 75% equity to a new York base fund. Unfortunately, today quality of food has gone down and menu prices have gone up. I feel Sagar is going Narula’s way.

Conclusion

Final evaluation clearly shows that nearly most of the International fast food operators didn’t have it easy in India. Worldwide quality, recipes, service standards and reputation has been compromised at all levels. MacDonald is surviving by selling softy ice-cream and aloo tikki Burger, delivering products with a edible shelf life of ten minutes, after half an hour. Evidently the hygiene standards have been compromised by all international restaurant chains. Pizza Hut which boasts of high quality International Pizzas are trying to compete with Domino in quality and most of the time losing to them. KFC sell everything but their main product. Dunkin Donut sell more sandwiches and burgers then Donuts. In India it’s all topsy-turvy, but the question is why? Its High time they took a closer look at the Indian Fast food scenario  and realized that Indians of today want the original taste; they don’t eat Chana Bhathura in Mumbai and Batata Vada in Delhi. Similarly International operators must bring same quality of product, high hygiene standards and most importantly the same Menu and flavors to India, or else they will be rejected sooner than later.  


Written By Anil Chak and Virat Varma