McDonald’s eyes the full meal market with its new spicier and chunkier range
Any dish that takes more than a minute to assemble would not find its way into this kitchen. While connoisseurs of fine dining will crinkle their noses at the thought, this is one of the factors that gives the world’s largest selling fast food chain its size. McDonald’s replicates the same efficiency, which does not detract from the taste, in its Indian market as well. How it laid the groundwork years before it launched its first India store in 1996 has been chronicled in detail.
After securing a place on the breakfast table, McDonald’s now wants to play a larger role in main meals.
Last month, it launched a new range of burgers and wraps with chunkier and spicier fillings called Spicy. The range will ensure that consumers don’t turn away from its outlets when looking for a full meal. It will also make for larger tickets as McDonald’s adds outlets faster than before. But what the launch does not reveal is how the quick service restaurant chain worked backwards — as far back as the equipment vendor in the supply chain to get the new products tailored to its vision.
Amit Jatia, vice-chairman of McDonald’s India and managing director of Hardcastle Restaurants, McDonald’s franchisee for the west and south, says, “The new products make for a large serving; so they work as a complete meal.
Earlier, consumers who wanted more spice in the patties, felt tied down with the existing choices. When quizzed in our research, they said, ‘Give us more spice’ for main meals.”
While McDonald’s had made snacking and group celebrations easier on the pocket with its Happy Price Menu, starting from Rs 20, its core menu’s pricing and portions had to straddle both snacking and full meals with burgers and wraps. The quintessential patty was made out of pounded chicken, vegetables or paneer pressed into form, starting from Rs 45 to Rs 78. The new Spicy range, starting at Rs 89, has chunkier cuts of chicken thigh and much larger 110 gm paneer slabs with a crispier spice coating to make for a more filling meal.
Vikram Bakshi, managing director of McDonald’s India and owner of Connaught Plaza Restaurants, the franchisee for north and east, says, “There was a gap in our premium offerings. We had the entry-level and mid-tier covered with our products. However, there were customers who spent around Rs 250 to Rs 300 per head for a meal, who would earlier have headed for a casual dining experience. They are our target audience.” He claims Spicy now makes for 23 per cent of McDonald’s sales. “A higher ticket size would make for a substantial share in revenue,” Bakshi adds.
The entry-level products contribute 23 per cent, while the core menu of burgers and the older wraps bring in 20 per cent, and beverages the rest 14 per cent. With more premium products slated for launch later this year, McDonald’s expects its higher-priced menu to bring in about 40 per cent going forward. Bakshi says, “It is very early for a concrete trend to emerge but we have seen 25-30 per cent of sales coming from consumers of mid-tier or entry-level graduating to the premium segment, the rest is incremental sale.”
“Premium products make sense for a fast food chain which focuses on dine-in, unlike delivery-led business models, where the product has to be more mass-oriented,” observes S Ranganathan, research head at LKP Securities, who also tracks Jubilant Foodworks, a Jubilant Bhartia Group Company that holds the master franchisee rights for Domino’s Pizza in India, Nepal, Sri Lanka and Bangladesh.
Higher ticket sizes will also play a role in increasing same store sales, Ranganathan points out. It will help Hardcastle with its expansion plan this year, which, if it is realised, will be the fastest for McDonald’s India so far. Following its development licence last year — the parent corporation sold its 50 per cent stake in 2010 allowing Hardcastle to handle its own investments and costs — Hardcastle plans to open 30 restaurants this year against 21 last year. On its part, Connaught Plaza plans 15 more. Both the franchisees claim double-digit same-store sales from their 212 stores (80 per cent of them are in the top six cities).
Working backwards
The Spicy range was conceptualised at a McDonald’s menu vision workshop, held every year to decide on a rolling plan of menu items to be introduced over the next three years. The need to have a spicier and meatier range in its core meal menu was first felt a year and a half ago. All the function heads, the two franchisees and McDonald’s international representatives seemed to agree. “We had a headstart with Spicy Chicken that was sold in other markets, but there were no vegetarian options,” points out Jatia.
Abhijit Upadhye, senior director, national supply chain and menu management of McDonald’s India, says, “The menu management process is like a three-legged stool with the owner-operator, the corporation, and the band of supplier all being part of the process.” Once the menu workshop decided on the price range, the type of product and the category, the suppliers were immediately brought into the loop. “We have more than one supplier for a category, who are briefed in the first meeting to come up with ideas fitting our menu vision. Once they come back to us, we finalise the suppliers who will work with us on that product,” says Upadhye.
Locking one supplier for each of the services it needs such as patty, buns, flavour-coating system and sauces ensures the supplier is more committed to McDonald’s instead of having to worry about undercutting by another vendor. “Of course, the vendor would have to convince us that of all his buyers, we are the most competitive,” says Upadhye.
Getting it right
However, the challenge in the development of the Spicy menu lay in getting the paneer (cottage cheese) product for the vegetarian option right. McDonald’s had earlier served crumbled paneer pressed into form for one of its wraps but not a bigger paneer block product which it planned to do now. “Since we were aiming for a more robust patty with the chicken burger that would be considered more premium by the consumer, we had to come up with its equivalent for vegetarians. In Indian vegetarian cuisine, that distinction goes to paneer,” points out Upadhye. However, while paneer is a tasty by-product of milk consumed in almost all the homes and mostly loved by all, McDonald’s had a hard time getting an organised supplier with the right preservation and quality product in place because there were not many around. “Our product ideas are demand driven rather than dictated by supply chain viability. Since the very beginning, we have had to lay the supply chain down ourselves and so paneer was no different once we chose it,” says Upadhye.
To give the paneer-eaters a substantial bite just like the one for chicken-eaters, the paneer slab had to have the right consistency (couldn’t be either soggy or rubbery) and be large for the patty to fry well. Good Day Foods, its paneer supplier, claims McDonald’s has become its largest paneer buyer whose demands had to be met with additional capacity.
Once the paneer supply was figured out, the company had to find ways of coating the paneer patty. “On chicken, coating a flavour is easy. Being a natural protein, it absorbs the flavour. In a processed food environment, coating paneer with the flavoured spice was a task,” recalls Upadhye.
The form in which the paneer was coated was critical. Crumbled paneer pressed into blocks and pre-flavoured paneer didn’t make the cut because either they didn’t make for a mouthful of bite or were too unwieldy. For coating, McDonald’s worked its way back to the supplier which equips patty-maker Vista with the coating machine. Hand samples shown to the German equipment maker finally led to a machine that could flip the paneer thrice for the coating process, especially for this range. Vista had to install a new line at its end to enable the coating of the patties supplied to it.
Unlike its other markets, McDonald’s had to ensure that the flavour houses came up with the proprietary Spicy mix without any MSG (monosodium glutamate, a flavour-enhancing ingredient which has fallen into disrepute for its alleged harmful effects on health). The sauce too was worked out to taste like a tandoori mayo rather than plain mayo to set off the paneer. The flat bread for the wraps at 11 inch are bigger than the earlier wraps (8 inch).
While the Spicy range took around a year and a half from conceptualisation to launch, McDonald’s is working to cut down the launch time of its future products. Upadhye and team has put together a product library based on international precedents or its own or suppliers’ R&D. “We have started dishing out more and more recipes across categories such as burgers, sides, desserts and beverage for internal sampling. If one of them clicks in-house or marketing asks us for a product quickly, these products can be rolled out in four months, cutting down launch time by a year. All this goes into a library of ideas with details such as cost structure, price points and even dipstick consumer feedback,” says Upadhye. The chain’s international products also provide headstarts. For example, the McNuggets chicken pieces brought in with Rs 15 crore of investment, in contrast to the Spicy range that needed work on the vegetarian menu and required Rs 25 crore.
Electronic ciphers
Aficionados and reluctant diners alike have been trooping in to try out the new Spicy products, thanks to some innovative marketing. Bakshi puts the marketing costs at Rs 15 crore. Rameet Arora, senior director, marketing, McDonald’s India, says, “We used this opportunity to put up a brave new face with a technology-laden teaser.” McDonald’s put to work Quick Response (QR) codes that could be used as mobile phone tags. Displayed on hoardings in different cities and on small cards given out when dining at the stores, all one had to do was scan these square barcode-like graphics with their camera phones and decipher the hidden message (about the launch) with a QR code-reader. A video viral humanised the products at McDonald’s, which were seen interacting on all the popular social networking platforms with their apprehensions and excitement about the four new members for company.
The online teaser campaign alone drew 2.5 lakh hits, according to Arora. The phasing out of the older wraps — Chicken Mexican and Paneer Salsa — was conveyed through slides at the stores with ‘Going off to Mexico’ or ‘Taking off for salsa’. The main campaign which followed, turned the focus to “How spicy is Spicy”. “We will make this interactive like never before. There are three responses that consumers can choose from — too hot, too cool, just right. The TV ads depict the different reactions with an ingenious use of music. Eighty per cent of our stores are also connected, whereby when a consumer has one of the Spicy products, her picture and her choice of ‘How Spicy’ will flash across all the stores in real time. Going forward, we will look at electronic hoardings in cities to do the same and a Spicometre in newspapers to broadcast the previous day’s rating average,” says Arora.
While the jury is still out on whether the Spicy range is spicy enough as the social network buzz indicates, McDonald’s rivals KFC, owned by Yum! Brands, too has thrown in its gauntlet. It launched a Hot Zinger chicken burger (Rs 89 minus taxes) with an increased spice quotient coinciding with the Spicy launch, albeit with a quieter launch campaign.
No prizes for guessing, the fight for the Rs 2,000-crore quick service restaurant market has moved on from low-priced menus to spice-spiked food. Will India bite?
