Westlife Development Limited, whose subsidiary Hardcastle Restaurants Private Limited holds the master franchise for McDonald’s in southern and western India, is eying a piece of India’s Rs 5,000 crore fried chicken market. The company introduced fried chicken on its southern menus two years ago, but COVID-19 interrupted expansion plans. With the second wave of the pandemic waning, Westlife Development plans to aggressively market the new food category. Smita Jatia, managing director of Westlife Development, spoke to Moneycontrol about the company’s game plan to grab a share of the market, which is dominated by Kentucky Fried Chicken Corporation, or KFC. Edited excerpts:
Why have you entered the fried chicken category, given that your mainstay is burgers? How large is the opportunity in this segment?
McDonald's has always been a QSR (quick-service restaurant) brand that caters to all meal occasions in a day. We have offerings in the snacking category, for coffee occasions, desserts, breakfast as well as meals. Now, in the last 10-15 years, we have dominated the snacking occasion through burgers. The Indian consumers saw the burger as a snack because it's very similar to vada pav. Today, we are the undisputed snacking and burger leaders and hold more than 75-80 percent of the burger market in India. However, we are also strong on meal occasions because of our big burgers such as Maharaja Mac and McSpicy as these burgers are consumed during mealtimes. And this is something we have been trying to build over the last couple of years and are very successfully playing in the meal space. Now in the south, we found out that the fried chicken category was huge. It is close to about a Rs 5,000 crore category and fried chicken was an integral part of a meal occasion in the region.
Also, outside of India, in countries like the Philippines, Malaysia, and Indonesia, fried chicken was always a part of the McDonald's menu. In India, we were creating awareness for burgers so it was not introduced here. But now there is a great opportunity for us to start building on it. The fried chicken category will help us in getting more out of the meal occasions and also help us build AUV (average unit volume) in the south.
How many of your stores in the south offer fried chicken? And when do you plan to introduce the item in the western Indian market?
All of our 125 south stores sell fried chicken. So all the stores in Karnataka, Telangana, Andhra Pradesh, Kerala, and Tamil Nadu. We introduced it in the south because the market is easier to tap in the beginning. And once we have our learnings, we will be introducing it in the west for sure. We see huge scope for this product, in several small towns in the west.
Two of the largest franchises of KFC have recently raised funds and have aggressive plans for the segment. How will you grab a share of the market in this fiercely competitive environment?
The competition has always been there and the IPO (initial public offering) or fund raise is not going to make them fiercer. These companies, between 2005 and 2010, were aggressively opening stores, and then afterwards from 2013 to 2016, we saw them close more than 100 stores. We don’t think launching an IPO or getting flush with money helps anyway in gaining market share. There is a market absorption rate of opening new stores. Just because a company has money, it can't open 100 stores and grab market share. Out-of-home consumption of food in India at this point of time is very nascent if you compare it with other countries.
How much market share are you aiming for in the next one year?
We cannot share a number, but we will definitely strive to be the market leaders starting with the south...
In Q1, you reported that sales in June 2021 were similar to pre-COVID June 2019. What's the status now?
We are well on track to reach the levels where we were in pre-COVID times. And this is with only a 70 percent recovery of dine-in because until August 15 in Maharashtra, restaurants were only open up till 4 PM. The state houses 60 percent of our QSRs. Our convenience channels, which are creating new habits with the consumer, are growing well and giving us that share of wallet. Dine-in would also recover and increase gradually and we don't see any cannibalization happening on the new convenient channels, whether it is deliveries or drive-throughs, or on the go. These are new habits, which have been built for new occasions and are incremental to dine-in occasions.
Some restaurant operators and QSR companies are trying to bring down the dependence on food aggregators. What’s your take on this?
We have been a partner with these aggregators since the onset of their journey. They have grown because of us, and we have grown because of them. We always had partnerships, and we always had our cost structure commercials with them, which was sustainable. And hence we don't see that reducing aggregators will help increase our margins. Hence, we never take increasing sales through aggregators as a threat to profitability.
What are your plans for the festive season?
We have our fingers crossed for a very good festive quarter. The customers are just fed up with what happened in 2020 and then the second wave. They want to venture out, have some happy moments and celebrate. And that’s good for us because we are an impulse-driven business. Also, we are completing 25 years of McDonald's next month. So, combined with both internal and external celebrations, we are hoping to have a great quarter.
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