Text size:

  • Small
  • Normal
  • Large
A cook slides a pizza onto a serving plate in the kitchen at a Pizza Hut restaurant in Mumbai, March 29, 2011. A number of fast-food and cafe chains that are flocking to India would do well to take away lessons learned by established rivals such as McDonald's in navigating a market beset with obstacles. Industry experts say patience and flexibility in a country where dietary traditions rule may well define successful global restaurant brands in India. The stakes are high, with India's quick-service restaurant market worth $13 billion and growing roughly 25-30 percent a year, according to Euromonitor and market research firm RNCOS. India's entire food-service market is estimated at $64 billion. Picture taken March 29, 2011. To match analysis INDIA-FASTFOOD/ REUTERS/Danish Siddiqui (INDIA - Tags: BUSINESS FOOD)
© Danish Siddiqui / Reuters
A cook slides a pizza onto a serving plate in the kitchen at a Pizza Hut restaurant in Mumbai, March 29, 2011. A number of fast-food and cafe chains that are flocking to India would do well to take away lessons learned by established rivals such as McDonald's in navigating a market beset with obstacles. Industry experts say patience and flexibility in a country where dietary traditions rule may well define successful global restaurant brands in India. The stakes are high, with India's quick-service restaurant market worth $13 billion and growing roughly 25-30 percent a year, according to Euromonitor and market research firm RNCOS. India's entire food-service market is estimated at $64 billion.  Picture taken March 29, 2011. To match analysis INDIA-FASTFOOD/      REUTERS/Danish Siddiqui (INDIA - Tags: BUSINESS FOOD)

Hungry for a slice of the action

With slim pickings in Europe and the US, international restaurant chains are looking at the Indian market and licking their lips.

After initially giving pizza the cold shoulder, Indians are suddenly crazy about it. And with the US and Europe still grappling with economic malaise, the market in India offers huge potential for foreign chains - and PizzaExpress aims to be in on the action. Pia Heikkila reports

Masala dosas are out and pizzas are in, proclaims Kamal, 19, as he munches a slice of spicy pepperoni pizza in one of Mumbai's hundreds of pizzerias.

A quick tour around Mumbai's eateries reveals he is right. Those restaurants offering pizzas are packed even on weeknights. Indians are mad about pizzas and don't seem to be able to get enough of the Italian pies.

Now PizzaExpress, one of the UK's largest pizza chains, is planning to launch operations in India.

"The deal is signed and confirmed, but it's still at an early stage," said a PizzaExpress spokeswoman. "Our plan is to open a first restaurant some time next year, but we cannot give you any more details at this stage, nor can we reveal any financial details of the deal."

PizzaExpress is hungry for a slice of the fast-growing market. The organised restaurant market in India should grow nearly fourfold from the current US$1.5 billion (Dh5.51bn) to about $5.3bn by 2015, according to the National Restaurant Association of India.

Analysts say India's immense restaurant sector offers potentially huge returns at a time when foreign companies' domestic sales may have stalled. Shushmul Maheshwari, the chief executive of RNCOS, a market research house, says the current economic difficulties in Europe and the US meanrestaurant chains in those locations have had to seek growth outside their home markets.

"India is an emerging economy with a growing middle class," he says. "Our industries are doing better than elsewhere right now, and people have more money to spend, relatively speaking, on eating out."

The country is still virgin territory for multinationals. "[The] Indian consumer is very food-centric, for starters. They want to spend on food," says Hemant Kalbag, a partner and vice president and the head of the consumer industries and retail practice for AT Kearney in India. "Secondly, it's a large, disorganised market, which is serviced by one-man operators, thousands of street vendors, and it is still largely uncharted territory [for outside operators]."

The many success stories also inspire new entrants.

"Domino's and its partner Jubilant FoodWorks are great examples of the sector's potential," Mr Kalbag says. "Jubilant FoodWorks was at one time valued higher than Domino's globally.".

PizzaExpress has signed a joint venture agreement with Bharti Family Office and Gourmet Investments, which will help the restaurant chain establish itself in India. Starting operations in the country would not be possible without the partnership deal. The Indian government has suspended the recently announced easing of restrictions on foreign direct investment (FDI) after two years of back-and-forth.

If a consensus was ever reached on FDI, it would bring more restaurant chains to India, Mr Kalbag says.

"When the situation will change, there will be obviously more entrants. Right now foreign companies need a [joint venture] partner, which means they have to give up partial control to an outsider, and many may not be able to find a suitable partner."

Despite the growing appetite for foreign food and potential regulatory easing, restaurant chains would still need local partners to get their approach right, says Tony Fitzpatrick, a managing partner at the consultancy Franchise Your Business.

"Even if they no longer would require an equity partner, they will certainly need to do careful due diligence and link up with people with local knowledge," he says. "They need to do both business and cultural research and open pilot restaurants in every area they intend to develop, since what works in one area is no guarantee it will work in another."

PizzaExpress, now 46 years old, is an old hand at overseas expansion as it already has 450 restaurants in Britain, China, Europe, Hong Kong, Japan and western Asia. This is not PizzaExpress's first bid to enter India. In 2004, the group established a joint venture with the VK Modi group, but the venture failed to take off and was quietly folded. But this time, India is ready for the frutti di mares and al funghis because locals are now more familiar with Italian food.

"PizzaExpress has good chances as the market is limited to two to three national chains and local players for some cities," says Saloni Nangia, the senior vice president and the head of retail and consumer products at the analysis house Technopak. "There is an opportunity for a slightly upmarket and premium offer, initially in the top 10 to 15 cities," she says.

The Indian pizza market is dominated by two American companies, Domino's and Pizza Hut. Domino's is the market leader by far and is expanding aggressively. The group recently said it aimed to double its outlets in India to more than 800 over the next five years.

"If all goes to plan to add at least 80 stores annually, we should be opening our 500th Domino's Pizza store some time next year," J Patrick Doyle, the company's president and chief executive, told Indian media.

Both brands have been successful in adding pizza to the daily diet in India. But it has not always been so. When the two US giants entered India in the mid-1990s, pizza had limited appeal. It was seen as foreign and exclusive. Any foreign restaurant entering the market needs to "Indianise" its products and surroundings.

"Customisation of the menu is very important, as is getting the pricing right," Mr Kalbag says. "[The] Indian consumer wants value for money. They will compare the foreign offering to local food prices. Setting is also important. You have to provide an entertainment where people can spend time. Eating here is a social experience unlike in many other countries."

PizzaExpress is likely to follow in the footsteps of many other international brands such as Starbucks and set up in Mumbai or Delhi. Most multinational companies want initially to test their products and pricing in the principal cities before moving into smaller cities. Location is crucially important for any foreign restaurant entering India.

"McDonald's, for example, go to great lengths to investigate the local market and will not grant a licence to anyone unless they can be convinced through statistics that it will support a franchise. Other brands will need to follow their example," Mr Fitzpatrick says.

business@thenational.ae

twitter: Follow and share our breaking business news. Follow us

Back to the top

More articles


Editor's Picks

 Cityscape Abu Dhabi 2014 will run until April 24, 2014. Fatima Al Marzooqi / The National.

In pictures: Cityscape Abu Dhabi 2014 opens
at Adnec

Key developments and master plans are being unveiled at this year’s property exhibition in the capital.

 Marina Square apartments Reem Island: Q1 2% rise. Studio - Dh65-68,000. 1BR - Dh75-95,000. 2BR - Dh110-145,000. 3BR - Dh170-190,000. Q1 2013-Q1 2014 no change. Sammy Dallal / The National

In pictures: Where Abu Dhabi rents have risen and fallen, Q1 2014

Find out how rental prices in the prime locations in Abu Dhabi have altered during the first three months of the year and the current rates you will pay according to data provided by Asteco.

 Designed by London-based Thomas Heatherwick, founder of Heatherwick studio, the park will feature an outdoor cinema, an organic garden, picnic areas and cafes and restaurants. Photo courtesy Salama bint Hamdan Al Nahyan Foundation

Futuristic Abu Dhabi park to be built in the desert shade

Spread over 125,000 square metres, Al Fayah Park, on Airport Road, will be covered by a sand-coloured canopy, 20 metres high, with the appearance of cracked desert land from above.

 Room with a view from one of the 21 duplex penthouses located in the Gate Towers sky-bridge. The sports courts and swimming pools can be seen below. Courtesy Alda

In pictures: Aldar’s Gate Towers Penthouse Collection on Reem Island

Aldar launched its Gate Towers Penthouse Collection at Cityscape Abu Dhabi. The launch features 21 penthouses spanning the skybridge, with each having a private indoor pool and incredible views.

 The Wind, Energy, Technology and Environment Exhibition takes place from April 14 to April 16. Above, the Dewa showroom during last year’s Wetex. Jaime Puebla / The National

April corporate and economic calendar for the UAE and overseas

From Cityscape to Wetex to stock-market holidays to nations reporting first-quarter GDP figures, here is our helpful calendar of April's business events in the UAE and internationally.

 Get the latest information on credit cards, bank accounts and loan products in the UAE. Mark Lennihan / AP Photo

Rates report: Latest on UAE loans, accounts and credit cards

Souqamal.com brings you the latest interest rates on banking products in the UAE.

Events

To add your event to The National listings, click here

Get the most from The National