The QSR to have 5% price hike from April 1
‘SPICY and MASALEDAAR â€“ EAT AND SAY WAH! WAH! â€“ COMING SOON’ is what the home page reflects when you open the website of one of the leading QSR chains of India, McDonald’s. Banking on the conviction, â€˜All goes well if it starts wellâ€™, McDonald’s has brought a dedicated menu range for a wholesome breakfast meal for the first time in India. In an interview with Pitch, Vikram Bakshi, Managing Director, Northern and Eastern Region, McDonaldâ€™s India shares his companyâ€™s outlook towards becoming the â€˜King of Out-of-Home Breakfastâ€™ segment along with their marketing strategy enroute. Excerpts:
What is your marketing strategy for 2013? How are you going to shape up your 4Ps?
Starting with product, the ingredients used in our products are sourced locally and we along with our supplier McCain work with farmers to produce varieties of potato. Right from McEgg to McSpicy products, we would continue to come out with different products this year ,such as ‘Spicy and Masaledaar’. We have recently introduced our breakfast products that include McMuffin with various ingredients like egg, veg stuffings, spinach, corn as well as global favourites such as Hash Browns, Pancakes with coffee.
In terms of price, we have been very competent, which is why we have still stuck around to Rs 25 despite rise in commodity prices and would like to follow this approach as long as we can. When it comes to promotion, we would continue our focus on offers and schemes for our valued customers such as a free McMuffin was put on offer between 8 AM and 11 AM on National Breakfast Day.
In terms of place, we are following a cluster based approach, which is like having 3-4 restaurants in a radius of two kilometres to reach out to consumers in a much faster way. Business is not done on the basis of spread as there is supply constraint. The idea is that we want to spread ourselves sensibly. So, we do it in such a way that we provide across quality products at a good price. We see Kolkata as a cluster of east and Chandigarh and Ludhiana having huge potential where we are going to follow a cluster based approach.
What is the marketing spend for this year?
We have set aside 6 per cent of our overall sales for marketing out of which 5 per cent is going to be for direct marketing and 1 per cent on promotions. We still spend a major part, which is 75 per cent of our advertising budget on electronic media, and the remaining goes into digital, bill boards, radio and print.
How are you positioning yourself differently from your competitors?
We are the first ones to introduce the concept of out-of-home breakfast in India. We have a first mover advantage as competition is not a worry and hence we think that we have positioned ourselves quite differently than the rest.
How is Indiaâ€™s out-of-home breakfast market different from other developed countries?
The out-of-home breakfast market in India is still in its nascent stage. Breakfast contributes only 4 per cent of our overall revenues in India whereas it contributes 25 per cent in developed countries. We have 300 outlets in India out of which 150 will serve the breakfast menu. There is an option for home delivery also.
How are you planning to increase your brand value?
Brand extension is going to be our prime focus for this year. For us brand extension drives through delivery, breakfast, extended hours and kiosks. Brand extension contributes 25per cent to our sales and we want to take it to 50 per cent. Our aim is that every restaurant should have three brand extensions. Apart from this, we have also worked on the interiors of our stores and have given them a new trendy look.
How are you going to scale up your breakfast presence in India?
There are three things that we need for a strong breakfast campaign which are infrastructure, place, products and awareness. Since, infrastructure and place are already there, we need to work on introducing new products and spreading awareness about breakfast in India. McDonaldâ€™s has 300 stores pan India out of which 150 will offer the â€˜Breakfast Menuâ€™. Apart from this, they would also extend the official working hours of the breakfast outlets starting from 8 AM in winters and 7 AM in summers.
Is there a price-rise on your cards considering the hike in service tax given in the budget?
Yes, there has been an increase in the service tax and that would impact our prices. We would have a five per cent hike across all categories from April 1.
What is the main focus area of McDonald’s this year?
With four distribution centres in Noida, Bangalore, Mumbai and Kolkata, the company would focus on brand extension which would help us to increase our brand value. We are planning to set a part of our marketing spends on â€˜Brand Extensionâ€™ which would mean having more of kiosks, drive-through, better delivery management, breakfast menu and operationalising extended hour. Also, we would be focusing on store expansions pan India like Bangalore, Chennai, Ahmedabad and Kochi. With four distribution centres in Noida, Bangalore, Mumbai and Kolkata, the company would focus on brand extension.
Breakfast will have single largest investment from our side and this is something we are very clear about. Fifty per cent of our brand extension budget will target at this. Out of the 5 per cent of sales spend will be on marketing, out of which 2 per cent will be brand extension. Our aim is that every restaurant should have three brand extensions.
What kind of impact has the slowdown made on McDonald’s?
Our same store sales have dropped. Last year, the same store sales registered a growth of 15-16 per cent and this year, they have dropped by single digits.