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Is anyone missing McDonald’s?

LiveMint logoLiveMint 18-07-2017 Sundeep Khanna

On 29 June, people in Delhi woke up to life without McDonald’s. Twenty one years after the golden arches first appeared in the country, there would be no big Maharaja Mac, no fries, no McPuff in the nation’s capital, as Connaught Plaza Restaurants Pvt. Ltd (CPRL), its north and east India licensee shut 41 of its 55 restaurants following its failure to renew their eating house licences.

The temporary closure did not particularly bother anyone. Customers who did not know came, saw the shuttered stores and moved to the next food outlet. Quite simply, McDonald’s has ceased to matter.

That’s because the India of 1996 when the fast food chain first came to India and the one in 2017 are two different worlds. Indians looking for a burger in those days had the option of going to Nirulas in Delhi and local joints elsewhere. Today, the Indian customer has the option of choosing from global chains like Burger King, Carl’s Jr, Chili’s, Dunkin’ Donuts, Dominos and, of course, a whole host of local chains and specialty restaurants. These two decades that mark McDonald’s own transition in India from Big Mac to Maharaja burger, have seen the iconic US fast food chain lose its lustre even while its performance in India has been above par. Indeed, the 77-year-old company is often cited as a success story among the multinationals that came to the country post liberalization.

In the intervening years since the fast food chain first came to India, its popularity in its home market has taken a dive with American customers inspired by the slow food movement against obesity and unhealthy fast foods and put off by its junk food image, abandoning its fare in favour of healthier alternatives from newer outfits like Chipotle. In addition, competition from smaller but nimbler chains like Burger King and Wendy’s has hurt. Consequently, the number of McDonald’s locations in the US is set to shrink for the third year in a row.

Even worse, its ranking in Fortune’s World’s Most Admired Companies list is down from 16 in 2009 to 48 in 2017. Ascribe that in some part to the ingredients it uses, the inherently unhealthy nature of the food it peddles and the fact that it just simply tastes awful. Celebrity chefs like Jamie Oliver have done their bit famously dubbing the McDonald’s burger as fit for dogs.

The criticism and the competitive pressures along with changing consumer tastes across the globe have taken a toll. Earlier this year, McDonald’s ceded control of its China business in a $2 billion deal to private equity company The Carlyle Group and Chinese state-owned investment firm CITIC Group.

To its credit, the golden arches stooped to conquer the Indian market, indigenizing the choices, and rationalizing prices. Yet for all its success, it could do little to contain the challenge of a new breed of Indian QSRs which have become McDonald’s and more. At the heart of McDonald’s success was always its ability to serve up relatively cheap and accessible food at great speed to its customers. You could be in and out of its stores, well fed at low cost, all within 15 minutes.

On each of those counts, the Indian consumer is spoilt for choice. The growth of chains like Haldiram’s and Bikanerwala is driven by the same set of features with the vital difference that they offer a cornucopia of options. Indeed, today, it is possible for the customer to get an entire thali in the same time that it would take to get a burger and fries at a McDonald’s outlet. No surprise then that Haldiram’s turnover trumps that of McDonald’s and Dominos combined. 

In the US, McDonald’s big success this year has been the all-day breakfast. But Veg McMuffin and Sausage McMuffin are hardly the kind of delicacies that will appeal to the Indian palette early in the morning. Dosa, idli and chaat which found an expression on the McDonald’s menu in India are hardly rarities in the country while the salads and oatmeal it added to its menu in the US last year, haven’t made their way to India.

Clearly, products like burgers and colas are at the end of their lifecycle and the dilemma for companies like PepsiCo Inc., The Coca-Cola Co. and McDonald’s is how to abandon what they have been best known for, while searching for their next winner.

Sundeep Khanna is a consulting editor at Mint and oversees the newsroom’s corporate coverage. The Corporate Outsider will look at current issues and trends in the corporate sector every week.

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