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
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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.
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