Speaking to CNBC-TV18, Amit Jatia, Vice Chairman of Westlife Development, the fast food chain's master franchisee, said prices would increase 3-5 percent this year but would remain affordable.
Even as the introduction of a Masala Dosa Burger was widely ridiculed on social media, the response to the new item on the McDonald’s menu has been encouraging, said Amit Jatia, Vice Chairman of Westlife Development, who expressed optimism that the fast food chain’s sales would double in the next 12-18 months.
Westlife Development is the master franchisee of the fast food chain’s operations in southern and western India.
Speaking to CNBC-TV18, Jatia said he hoped adding the Masala Dosa Burger to McDonald’s existing breakfast menu of Indian staples would replicate the success of the McAloo Tikki burger.
Jatia also said there would be a 3-5 percent hike in prices in 2017, but would insisted the price points would remain attractive and affortadble. He said McDonald’s had lost nearly 10 percent of its business soon after demonetisation was announced in November, but recovered after moving quickly to enable cashless transaction,
“People have to eat irrespective of whether there is monetisation or demonetisation,” he said.
Jatia said McDonald’s typically opens 30-35 new outlets a year, and was on track to the same in the current financial year.
Below is the transcript of Amit Jatia’s interview to Reema Tendulkar and Nigel D’souza on CNBC-TV18.
Reema: It has been about three days. The focus is clearly back on the company. Everyone on twitter is talking about your new breakfast menu. Can you tell us how the response has been, what the demand has been and any revenue numbers that you are focusing on because of this particular addition to your breakfast menu?
A: Generally, the feedback has been quite outstanding. If you read all the media reports, if you read all the bloggers’ reports, people have loved the innovation that we brought on the breakfast menu with McDonald’s. The Dosa Masala burger, the Masala Scrambled Eggs, particularly have found a lot of interest from the consumer as well. In fact, I remember reading one article yesterday in the times of India where they talked about how authentic the taste of the Dosa Masala was and they were pleasantly surprised with the work that McDonald’s India did. It kind of reminds me of the alu tikki days when in 1997-1998, we brought in the alu tikki and eventually it became a cult in the burger business and I am hoping that that is what the Dosa Masala burger along with the Masala Scrambled Eggs do for breakfast. Although breakfast is a long-term strategy for McDonald’s, the key is to be able to make breakfast on the go available to the consumers. So, we do expect that it will take time, but we think it is a positive step in that direction.
Nigel: You must be having some targets in your mind, some particular kind of projections as well. New product being launched, everyone goes ahead and wallops it. But what kind of projections you have for this particular product? Do you have some numbers in mind going ahead?
A: Globally, breakfast is a very important part of the McDonald’s menu and in India, we introduced breakfast, but this is the first time we have completely reinvented the menu. So, over the last few years, we have taken a lot of customer feedback, we have done focus groups and based on all the learnings, we have launched this new menu. This new menu is healthy, it is wholesome, all the products are by and large grilled except for the hash brown. So, the first idea would be over the next 1-2 years to at least double the breakfast sales. While we do not break up the numbers for breakfast as yet, we think that breakfast can grow four-fold from where we are today. But in the at least in the next 12-18 months we want to double the base of breakfast. Very long-term, I expect breakfast to be almost as strong as lunch which is one of the really strong departs for McDonald’s in India.
Reema: What percentage of your overall revenues come in from the breakfast sales? Is breakfast growing faster than lunch and the other categories? How do you split your revenues?
A: While we do not share breakup of our departs in terms of sales, all I can tell you is we see it as a USD 2 billion opportunity in India. So, the total breakfast sales we think is worth USD 2 billion in sales and we clearly want to be leaders in that particular segment. So basically, from where we are today, if we are doing Rs 100 in breakfast today, we want to take that to Rs 200 in the next 12-18 months. It is an ambitious target.
Nigel: Growing up, I was a fan of some of those burgers that came out of McDonald’s. But something that used to worry us, particularly when you are growing up is the pricing. Last year, you took a price hike in January, 3-6 percent. 2017, what kind of a price increase are you going to be taking? You must be having some numbers in your mind.
A: McDonald’s has been one of the most consistent brands to give our consumers consistency of pricing as well. So, we have backward integrated all the way to the farms. We do not work with middle-men and all our agricultural work that we do, we have been able to benefit that to the consumer. So, all of 2016, we took only a 3 percent price increase. Typically, we take anywhere between 3-5 percent and 2017 will be similar. It will be in the 3-5 percent range only.
Reema: What has been the impact of demonetisation? Did it dent your sales and has there been a consequent recovery? Any numbers you could share since what has happened in November, December and January?
A: Sure, although results are yet to be announced. Ballpark, the brand’s foundation has really worked very well for us. While, of course immediately following the announcement, liquidity was completely sucked out and we lost about 8-10 percent of business, but only in November. In December we had a very healthy recovery primarily because of our ability to be able to do cashless transactions. Cashless transactions move from about 20-22 percent all the way to 75 percent and have settled at about 50-55 percent currently. So we have had a good run. Fact of the matter is that McDonald’s, price points are very attractive and affordable and eventually people do have to eat whether monetisation or demonetisation and McDonald’s stood very strong with its offerings and with the fact that we did cashless transactions.
Nigel: At the end of Q2, you had around 250 restaurants. Could you tell us how many new restaurants did you open up in the third quarter? And also, out of these restaurants, how many of them are leased out properties and how many of these properties are owned?
A: Basically we have not announced our results for the third quarter, so I cannot share specific numbers. But typically, we are opening 30-35 restaurants a year and we are pretty much on track in FY17 to be able to do that. So, that is that. As far as owned versus leased, it is primarily leased, but we do long-term leases of 20-25 years. So that is pretty much where we are. We do have owned properties as well, but I would say 90 percent plus would be leased.