KFC’s dominance in the fried chicken market is being challenged with the entry of several other quick service restaurants (QSRs) on its turf. After Jubilant FoodWorks, the master franchise of Domino’s Pizza in India, announced the entry of chicken brand Popeyes, known for spicy New Orleans-style fried chicken and chicken sandwiches, in January, Wow! Momo, the home-grown startup has now entered the fray by launching Wow! Chicken.
Westlife Development, the franchisee of McDonald’s, has already introduced fried chicken in its 125 stores in south India and plans to soon launch the food item in the western region too. The company has ambitious plans to become the largest player in this market in the country.
“The McSpicy Fried Chicken is a bone and chicken product that we introduced two years ago, especially for our customers in the south,” said Saurabh Kalra, chief operating officer, McDonald’s India West and South.
“In the first year itself, on average, chicken has added more than Rs 50 lakh a year to the revenue of restaurants that offer McSpicy Fried Chicken. The customer response in cities like Hyderabad and Chennai has exceeded our internal targets as well. So we are confident that in the coming years it will add significantly to the revenues of our restaurant and our business,” he added.
While the entry of new players can potentially threaten KFC’s hegemony in the segment, the entry of so many new players raises the question, why now?
Ripe for growth
India is one of the largest chicken-consuming nations in the world. According to industry experts, it is the fifth largest consumer of broiler chicken globally.
“We produce about 8 million tonnes of broiler in the country, which is not far behind China, which produces about 11 million tonnes,” Ravi Swarup, partner, Bain & Company, told Moneycontrol.
According to Swarup, only about 10-15 percent of this market comprises HoReCa or hotels, restaurants and caterers, meaning that the bulk of the consumption is limited to homes.
“India is a chicken-eating nation and it is preferred over other meats but it is largely home-cooked or unorganised,” Swarup added.
However, with increasing urbanisation, the QSR segment is set to see rapid growth and industry stakeholders expect the fried chicken segment, too, would gain.
“The QSR market is pegged at $6 billion in India currently and this has grown from $2 billion in 2015,” said Swarup. “The market is expected to grow at 20 percent CAGR (compound annual growth rate) and double to $12 billion by 2025-26. QSR chains have a 50 percent share in this market which is expected to grow to 65 percent in the next five to six years,” he said.
QSRs operating in the chicken segment have a 20 percent share in this market, according to various industry estimates. The fried chicken segment is slated to scale up rapidly as the overall market for QSRs grows.
There are other reasons for the entry of ‘old’ and ‘new’ players in the segment. According to experts, the segment also offers the next avenue for growth for QSR players. “While fried chicken was the first to take off in Southeast Asia, in India, pizza and burgers found takers given the preference towards wheat-based cuisine in some parts of the country,” said Rajat Tuli, partner at global management consulting firm Kearney.
“However, Indians have become more experimental with food and consumers are more likely to try out different cuisines. Hence, the fried chicken segment offers the next arena for growth to QSR companies,” he said.
Companies operating in the segment have realised the opportunity. “Fried chicken is a Rs 2,000-crore market in the country. However, you know, there was no next second big thing to KFC and there was no home-grown QSR chain which could compete with KFC. It was a very untapped but a huge category,” said Sagar Daryani, CEO and co-founder, Wow! Momo Foods.
Customisation and differentiation
The new players in the segment are betting on differentiated offerings. McDonald’s, for instance, marinates its McSpicy Fried Chicken with ghost pepper chilli, given the region’s preference towards spicy food.
“The McSpicy Fried Chicken has been created based on deep consumer insights. It is spicy and marinated in such a way that it is flavourful till the last bite,” said Kalra.
Wow! Chicken similarly has rolled out a ‘healthier’ take on fried chicken. “Our products do not have any MSG and are also without skin as it is considered to be unhealthy,” said Daryani.
The company has introduced several new variations of fried chicken and also customised them to suit the Indian palate.
“India runs on tandoori chicken and so grilled chicken is one of our core offerings,” he said.
Changing dynamics
The entry of these companies is set to change the market dynamics. KFC has so far had a free run of this market and has the largest share of this segment, but it is clear that competition is set to intensify. And KFC is preparing for this eventuality. The company is betting on an ‘Indianised menu’ and omni-channel approach to take on the competition.
“Over the years, we have remained relevant to the Indian consumer by bringing in global innovations and adapting to cultural nuances to suit the palate and preferences of our Indian consumers. The Biryani Bucket, Chizza are some such examples, where we came up with a distinct KFC take on locally popular cuisines, keeping our iconic fried chicken at the core of these creative experiments,” said a KFC India spokesperson.
“We continue to build on such India-specific innovations and offer our Indian consumers the craveable taste of KFC through various formats,” the spokesperson added.
Industry experts feel that given the growth potential, there is enough room for everybody.
“It is not a constrained market and there is an opportunity for everyone to grow. However, we will have to watch out who will be able to tap the opportunity swiftly,” said Bain’s Swarup.
The new companies in the segment will have to address backend challenges to get a foothold.
“Sourcing chicken is the biggest challenge these companies face,” said Swarup.
“A large part of the supply market in India is the wet market and if the companies want to offer high-quality chicken to health-conscious consumers at scale, then sorting out the supply side is going to be critical success factor,” he added.
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