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McDonald’s Takes the High Road as Competition for India’s Consumers Heats Up

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Following on the heels of rival KFC's new value-priced menu, McDonald's India has taken the opposite tack, rolling out a premium-priced menu designed to further broaden the chain's consumer base.

Both moves illustrate the potential for a diverse product strategy in markets like India. This is particularly true for fast food chains, many of which have the opportunity to straddle multiple price points and eating occasions in a way they have only begun to do in many developed markets. Indeed, the sheer diversity of India in particular makes these types of strategies essential—maintaining growth rates at their current lofty heights will require a concerted effort to target all consumers, from high-income to low-income, young and old, as well as a willingness to attack new dayparts and product categories head on.

“Spicy” line aims for upmarket casual dining

As noted in previous articles (see “Fast Food Price War Brewing in India as KFC Rolls Out Low-priced Menu,”) McDonald's has long pursued a multi-tiered pricing strategy in India, using the value-positioned “Happy Price” menu to target students, young people, and other low-income groups, with its “Core Menu” and extra-value meal offerings oriented more towards middle-class families with children and other higher-income groups. Within the last month, however, the chain has added a third tier with its premium “Spicy” menu, featuring sandwiches and wraps with bigger, thicker portions of chicken and paneer cheese, fried in a crunchy, spicy coating. While the Happy Price menu aggressively targets low price points, the Spicy menu goes the opposite direction, with company officials noting the importance of attracting higher-income consumers looking for a full meal, and willing to spend anywhere from Rs 200 to Rs 300 (US$4.50-6.50) per person, a significant step up from the Happy Price menu, which features items starting at just Rs 20 (US$0.45).

With the new menu, McDonald's is taking dead aim at a more upmarket, casual-dining focussed market without diluting its appeal to consumers looking for quick bites at low prices. The fact that it can successfully do both (early indications suggest strong sales for the Spicy line) is indicative of the sheer breadth of the growth potential for fast food chains in India and elsewhere. While early expansion often mirrored that seen decades before in developed markets, particularly in the emphasis on child-focussed, family dining, the last 2-3 years have brought far greater segmentation. As completion heats up, particularly in the very largest cities, operators have begun to look farther afield, to lower-income consumers, second- and third-tier cities, and now the upmarket segments targeted by the Spicy line, as broad expansion in incomes brings with it a similar expansion in potential consumers.

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