Food chains learn fast

Sayantani Kar, Business Standard
Mumbai, April 30, 2014

"Those who have tasted it loved it. But we are also enjoying the buzz created by those who have just heard about it," says Sanjiv Razdan, general manager – Pizza Hut & Restaurant Excellence, at Yum! Restaurants India (Yum) about the chain’s latest product, the Birizza. The combination of Indian-style rice with a bread crust and gravy on the side has triggered varying reactions among consumers, ranging from bemused, incredulous to curious, especially on social media. After rolling out tandoori pizzas, it is offering a take on the Indian tawa pulao/biryani. Detractors have underlined how the concept is at odds with the chain’s branding, a concern that Razdan says is laid to rest when one samples the product.

While quick service restaurants (QSRs) had entered the food scene with Indianised menus, the market has also had a lot of products withdrawn since then. After the initial success, is it now a case of more misses than hits in new menu-items for these QSRs?

Why fix what ain’t broke

Devangshu Dutta, CEO, Third Eyesight, says QSRs have a set of core items that define the branding of a chain. "Beyond these, other products will come and go."

For Pizza Hut, the contribution of its core product – pizza – is around 60 per cent, according to Razdan. Senior officials at McDonald’s say that for the burger chain the core mid-range menu of burgers, wraps and fries comprises around 40 per cent, while the premium range which is seeing the most product innovations contributes around 23 per cent, the entry-level ‘happy price’ menu 23 per cent and beverages 14 per cent – categories that also see the chain revising its line-up often.

Why do the QSR brands, then, look to expand beyond their core? Dutta says, "New items bring in additional footfalls, drive up price-points and ticket sizes, adding to margins in these times of low consumer spending." Fast-food chains sure need the help with the three major companies – Jubilant Foodworks, Yum and Westlife Development (owns Hardcastle restaurants which is the franchisee of McDonald’s in the west and south) – seeing a decline in growth ranging between 2.6 and 9.8 per cent in the December quarter.

The chains’ reasons

For Birizza, Razdan says, "We wanted to get new users for not just our brand but for the category as well, ie. who don’t like pizzas. It was time to take a big leap rather than incremental innovation such as a variant of a pizza." He informs that the birizza would be a permanent fixture as rice is a preferred staple in most of India.

Pizza Hut’s sister brand, KFC, owned by Yum, had already experimented with a flavoured rice meal with gravy. Razdan says Pizza Hut Sri Lanka too had recently set a precedent with rice. "We had to introduce something with Pizza Hut’s twist and hence, the crust," says Razdan.

President and COO of Dunkin’ Donuts India, Dev Amritesh, says they have to keep in mind the palate of the Indian audience in picking flavours, spices and herbs. The doughnut chain managed by Jubilant FoodWorks that also handles Dominos, is set to enter its second metro city, Mumbai, in May and has recently launched wraps and a bagel bun-burger. Amritesh says, "New product development keeps the brand promise of being an adult QSR brand in mind. It is not for the first-time QSR customer, but an evolved one. So the menu would have some complexity with a story behind the items and a western vocabulary." Dunkin’ is currently tailoring its new products such as the Tough Guy burger, which has a bagel bun instead of the usual bun, to make customers get their ‘mojo’ back.

For McDonald’s, it is about premiumising its menu. After its chunky McSpicy range, it is now pushing the Royale range that is its most expensive.

The strategy would increase the ticket size and serve the customer at different meal-times too.

Lessons from the misses

But what about the products which lost their spot on the limited menus, typical of fast-food chains? The lessons are being ploughed back in product innovations. "We have learnt that we can’t get new customers by just bringing in more of our international flavours. So, even with a pasta range abroad, more pastas in India would not mean more customers in our fold," says Razdan. Pricing, especially in this climate of low consumer spending, is another lesson. "With both our new big pizza and Birizza, we are mindful of the prices. Now, we have pizzas which are on an average 23 per cent more than the regular size of competition without a price hike."

Senior director, marketing, corporate communication and menu management at McDonalds, Rameet Arora, says, "We have learnt to launch products that preserve the credibility of the brand. To keep interest levels up, we have always had limited edition products such as chicken popcorn, cheesy fries and a Mexican spice festival range."

Dutta says that chains often don’t mention the trade-offs: "A low-margin product could become the default order, and it may not be profitable, requiring a trade-off between footfalls and profitability. For example, the McAloo tikki burger has been made unavailable in some markets and certain outlets of McDonald’s." Abheek Singhi, partner and director at The Boston Consulting Group, says "Eighty per cent of the time, new flavours and food products don’t work. Often they are not meant to garner volumes but generate excitement."

(Sourced from Business Standard.)