Praxis Business School Retail Business Plan On Snack Bar A report Submitted to Prof. K. DashrathramanIn partial fulfilment of the requirements of the course Retail Management On 7th August 2011 By Ashwin Agarwal (B10004) Deepika Agrawal (B10007) Nishant Khattwani (B10013) Sushmita Agrawal (B10035)
1. Environment Scan a. Retail Scenario In India Finally Followed by Manufacturing Kirana Stores era Hawkers …….. Mom necessitated carried out and Popup the small the first Stores stores and Currency Retailing in specialty was Push Carts stores . exchanged with goods Barter and System servicesRetail word comes from the French word retailer, which refers “cutting off, clip and device”.Retailing is the interface between the producer and the individual consumer buying forpersonal consumption. This excludes direct interface between the manufacturer andinstitutional buyers such as the government and other bulk customers. A retailer is one whostocks the producer’s goods and is involved in the act of selling it to the individualconsumer, at a margin of profit. As such, retailing is the last link that connects the individualconsumer with the manufacturing and distribution chain. Indian retail sector comprises oforganized and unorganized sector.Organised retailing refers to trading activities undertaken by licensed retailers, that is, thosewho are registered for sales tax, income tax, etc. These include the corporate-backedhypermarkets and retail chains, and also the privately owned large retail businesses.Unorganised retailing, on the other hand, refers to the traditional formats of low-costretailing, for example, the local kirana shops, owner manned general stores, paan/beedishops, convenience stores, hand cart and pavement vendors, etc.
The Indian retail industry has grown at a Compounded Annual Growth Rate (CAGR) of 13.3%for the period FY06-10. The growth in the Indian economy since the last decade and thechange in consumption pattern of the Indian populace in terms of higher proportion ofmiddle class population, greater proportion of working women etc can unarguably be linkedto the growth of the Indian retailing industry. Of all the segments in retail, the contributionof ‘food & grocery’ remained the highest at 58% of the total retail sales during FY10, withthe ‘clothing & footwear’ segment remaining the second largest contributor occupying 10%of the total retail pie during the same period. However in terms of growth figures, the‘entertainment, books & sports goods equipment segment outperformed the other retailsegments registering a CAGR of 22.5% during the period FY06-10.In spite of the growth, the industry remains largely fragmented with the organized retailingstill at a nascent stage. In case of overall retailing revenues, the food & grocery segmentaccounted for the highest share at 58% of the total retailing pie aggregating Rs.11.49 lakhcrore during FY10. In the organised retailing, the food & grocery segment stood as thesecond largest contributor with revenues aggregating Rs.24273 crore during the sameperiod. However, the organised retail penetration of other segments such as clothing &footwear, entertainment & books and furniture & furnishing surpassed that of the food &grocery segment.The Indian retail industry has witnessed rampant growth over the last decade. However,during the economic recession since the latter half of FY09, the retailers especially in theorganised segment suffered a set-back in the form of declining revenues and halt in theircapex plans. The unemployment situation, further aggravating the fear of job losses duringthe recession, resulted in muted consumer spending with the consumers choosing to spendon necessities rather than discretionary items; the industry thus witnessed decline infootfalls, conversion rate, which was especially apparent in the decline of same store sales.The slowdown in consumer spending led to the inventory being stacked up resulting in a lowinventory turnaround ratio, registering a decline to 4.3 times during FY09 from 4.8 timesduring FY08. Before the onset of recession, the large scale expansion plans of the Indianretailers warranted an increase in inventory and greater store operating expenses in theform of rentals and staff expenses thus increasing the working capital requirement.However with the economic recession in effect, the retailers faced a liquidity crunch owing
to difficulties in raising funds both from the equity as well as debt markets. Additionally, thefunds raised during the economic boom attracted higher interest rates thereby affecting theretailers ability to service the interest as well as principal repayments during the downturn.The total interest outgo of the retailers as tracked by CARE Research registered a y-o-ygrowth of 78.6% during FY09.Even though, post recession, the industry is witnessing a gradual turnaround, it is met by afew stumbling blocks that constitute the challenges ahead for the Indian retail industry viz.higher store rentals as compared to retailers globally, taxation & other policy regulations,inefficiencies in supply chain management and higher rate of shrinkage.In spite of the said challenges, CARE Research expects the Indian retail industry to grow onthe backdrop of expectant rise in the country’s Gross Domestic Product (GDP) during theperiod FY11-FY13. The rise in income level of the Indian populace, in turn, is expected tofuel the domestic consumption ultimately resulting in higher revenues for the Indianretailers. Importantly, CARE Research expects the penetration of organised retail in the totalretail pie to increase by FY13 owing to the expanding reach of the retailers to tier-II & IIIcities accompanied by higher consumer spend on discretionary items. Also, in an attempt toincrease margins, CARE Research expects the retailers would restore to adapting measuressuch as increasing the share of private labels in the total store sales, reducing store leveloperating expenses etc.Key Players in Indian Retail Sector Pantaloon Retail (India) – The first Pantaloon store was opened at Gariahat in Kolkata in the year 1997 covering 8,000-square-feet area. Over the years, the store has undergone several transitions. When it was launched, the store mostly sold external brands. Gradually, it started retailing an eclectic mix of external brands as well as private labels. Initially, it positioned itself as a family store targeted across age and gender groups but later it shifted its focus towards being a fashion store and gave more emphasis on the youth. As on Dec 2010, Pantaloons had around 44 stores spread across major cities in India.
Shopper’s Stop- A menswear store owned by K Raheja in the Mumbai suburb ofAndheri in 1991 has now transformed into Shopper’s Stop, with 27 departmentalstores. The company entered airport retailing in a joint venture with the NuanceGroup. It also launched India’s largest hypermarket, hyper city. In 2005, it bought theCrossword bookstore chain.Lifestyle-Growing from one store in Bahrain in 1973, the NRI-led Landmark Grouptoday operates over 5 million sq ft in the Middle East and India. The group’s firstLifestyle store in India opened in Chennai in 1999. Now it has 325,000 sq ft inChennai, Hyderabad, Bangalore, Gurgaon and Mumbai. Its first hypermarket,branded as ‘Max’, is expected to open soon.Reliance Retail- Reliance Retail Ltd, a subsidiary of Reliance Industries Ltd, has anaggressive plan to expand its retail network across India. It entered the food andgrocery segment in November 2006 through its convenience store format RelianceFresh. The store offers a range of fruits, vegetables, personal care, home care andkitchen utensils. It focuses on building a strong relationship with the agri-businessvalue chain and sources directly from wholesalers. Reliance Retail also plans toinvest Rs 25,000 crore on hypermarkets, supermarkets and specialty stores in thenext four years.Aditya Birla Retail-The Company, which will operate under the brand ‘More’, hasselected two formats – hypermarkets and supermarkets – for its initial foray. Thefirst store has opened in Pune. Last January, the company acquired Trinethra SuperRetail, which has given it more than 5, 00,000 sq ft and a strong presence in theSouth. The Birlas’ outlay for the business over the next three years is Rs 9,000 crore.Bharti Retail- The world’s largest retailer Wal-Mart, which is entering India, choseSunil Mittal’s Bharti Enterprises as its partner in India. The venture has alreadystarted with the cash & carry (wholesale) format, which could be extended to retailoperations once foreign direct investment is allowed in multi-brand retail, as isexpected.
The Indian retail sector can be broadly classified into:a) FOOD RETAILERS There are large number and variety of retailers in the food-retailing sector. Traditional types of retailers, who operate small single-outlet businesses mainly using family labour, dominate this sector .In comparison, super markets account for a small proportion of food sales in India. However the growth rate of super market sales has been significant in recent years because greater numbers of higher income Indians prefer to shop at super markets due to higher standards of hygiene and attractive ambience.b) HEALTH & BEAUTY PRODUCTS With growth in income levels, Indians have started spending more on health and beauty products. Here also small, single-outlet retailers dominate the market. However in recent years, a few retail chains specializing in these products have come into the market. Although these retail chains account for only a small share of the total market , their business is expected to grow significantly in the future due to the growing consciousness of the buyers towards health and appearance.c) CLOTHING & FOOTWEAR Numerous clothing and footwear shops in shopping centres and markets operate all Over India. Traditional outlets stock a limited range of cheap and popular items, in contrast, modern clothing and footwear stores have modern products and attractive Displays to lure customers. However, with rapid urbanization, and changing patterns of consumer tastes and preferences, it is unlikely that the traditional outlets will survive the test of time.d) HOME FURNITURE & HOUSEHOLD GOODS Small retailers again dominate this sector. Despite the large size of this market, very few large and modern retailers have established specialized stores for these Products. However there is considerable potential for the entry or expansion of specialized retail chains in the country.
e) DURABLE GOODS The Indian durable goods sector has seen the entry of a large number of foreign Companies during the post liberalization period. A greater variety of consumer Electronic items and household appliances became available to the Indian customer. Intense competition among companies to sell their brands provided a strong impetus to the growth for retailers doing business in this sector.f) LEISURE & PERSONAL GOODS Increasing household incomes due to better economic opportunities have encouraged consumer expenditure on leisure and personal goods in the country. There are specialized retailers for each category of products (books, music products, etc.) in this sector. Another prominent feature of this sector is popularity of franchising agreements between established manufacturers and retailers. b. Key Drivers1) Changes in demographics- India has the lowest median age of 24 as compared to developed countries. The composition of the Indian population is shifting towards the age group of 20-49 i.e. the working population with purchasing power. Thus, India has the largest ‘young’ population in terms of sheer size and this young segment is the major driver of consumption as they have the ability and willingness to spend.2) Increased credit friendliness- There has been a radical change in the Indian consumers’ mindset regarding credit. With the easy availability of credit and declining interest rates, personal credit has witnessed growth. The boom in financing has resulted in an increase in spending on housing and consumer durables such as two-wheelers and cars etc. Also the use of plastic money has led to a significant increase in consumers engaging into shopping and eating out.
3) Rising Incomes- India is the second fastest growing economy in the world. A larger number of households are getting added to the consuming class with growth in income levels. Increasing instances of double incomes in most families coupled with the rise in spending power is further fuelling the growth of retail sector. Though this growth is most evident in urban areas, it has also taken place in rural markets.4) Media- There has been an explosion in media as well during the past decade. This media bombardment has exposed the Indian consumer to the lifestyles of more affluent countries and raised their aspirations and expectations from the shopping experience — they want more choice, value, service, experience and convenience.5) Consumer Behaviour- The growth of modern retail is linked to consumer needs, attitudes and behaviour. Rising income levels, education and global exposure have contributed to the evolution of the Indian middle class. As a result, purchasing and shopping habits have been inculcated and are increasing day by day. Today, people are willing to try new things and look different, which has increased spending on health and beauty products apart from apparels, food and grocery items.6) Rural Market- The rural market is beginning to emerge as an important consumption area, for most key consumer durables and non-durable products. In response, manufacturers of consumer goods have begun developing new products and marketing strategies with the rural consumer in mind.7) Supply Chain- The consumer goods sector has been transformed by increased liberalization, continuous reduction in customs duty, a shift from quota to tariff-based systems for imports and sophistication in manufacturing over the past few years. Entry restrictions for multinationals have been removed in nearly all sectors. All this has enabled chain retailers to enjoy better range, depth and sourcing options as well as improved average margins. There has been a proliferation in the range across all
categories, with a simultaneous increase in the supply of products and quality retail space.8) Entry of Corporate- In contrast to the situation a decade ago, the level of interest in retailing as a growth opportunity has increased visibly now. Large conglomerates like the Tata’s & ITC have initiated investment in retailing. Big business houses today are in a position to provide the Indian masses with shopping satisfaction, entertainment, quality products, educated salespersons, product information and discounts.9) Foreign Retailers- The increasing attractiveness of the sector has drawn the interest of a number of global retailers. With the opening up of the economy, more and more MNCs have entered the Indian business arena through joint ventures, franchisees or even self-owned stores. While foreign retailers cannot start operations on their own mainly because of FDI restrictions on the sector, a number of companies, are exploring entry options. In apparel, Benetton, Lifestyle and Zegna are already in business, and Dairy Farm has a number of retailing joint ventures in India.10) Technology- The computerization of the various operations in a retail store — including inventory management, billing and payments as well as database management, widespread use of bar coding, point-of-sale terminals has changed the face of retailing drastically. Apart from providing the retailers with better and timely information about their operations, the technology also performs tasks such as preventing theft, promoting the stores goods and creating a better shopping environment. This is done with the help of closed-circuit televisions, video walls, in-store video networks, and other forms of interactive applications ranging from CD-ROMs to virtual reality to let customers select and buy products.
c. Key ChallengesFactors Description ImplicationsBarriers to -100% FDI not permitted -Absence of globalFDI -Franchisee arrangement players allowed -Limited exposure to best practicesLack of -Government does not - Restricted availabilityIndustry recognize the of financeStatus industry -Restricts growth and scaling upStructural - Lack of urbanization -Lack of awareness ofImpediments -Poor transportation Indian consumers infrastructure - Restricted retail growth -Consumers habit of - Growth of small, one- buying fresh food’s store formats, with administered pricing unmatchable cost structure - Wastage of almost 20%-25% of farm produce
High Cost of - Pro-tenant rent laws - Difficult to find goodReal - Non-availability of real estate in terms ofEstate government land, location and size zoning restrictions - High land cost owing to - Lack of clear ownership constrained supply titles, high stamp duty - Disorganized nature of (10%) transactionsSupply Chain -Several segments like - Limited product rangeBottlenecks food and apparel - Makes scaling up reserved for SSIs difficult -Distribution, logistics - High cost and constraints – complexity of sourcing & Restrictions of purchase planning and movement of - Lack of value addition food grains, absence of and increase in costs by cold chain infrastructure almost 15% - Long intermediation chainComplex - Differential sales tax - Added cost andTaxation rates across states complexity ofSystem - Multi-point octroi distribution - Sales tax avoidance by - Cost advantage for smaller stores smaller stores through tax
evasionMultiple - Stringent labour laws - Limits flexibility inLegislations governing hours of operations work, minimum wage - Irritant value in payments establishing chain - Multiple operations; licenses/clearances adds to overall costs requiredCustomer -Local consumption - Leads to productPreferences habits proliferation - Need for variety - Need to stock larger - Cultural issues number of SKUs at store level - Increases complexity in sourcing & planning - Increases the cost of store managementAvailability of - Highly educated class - Lack of trainedTalent does not consider personnel retailing a profession of - Higher trial and error in choice managing retail - Lack of proper training operations - Increase in personnel
costsManufacturers - No increase in margins - Manufacturers refuseBacklash to disinter mediate and pass on intermediary margins to retailers2. Choice of Retail Business:a. Reasons for choiceFastfood JointName: - AddaBusiness description: To open a food joint, serving a variety of fast food. The valueproposition is to make available all kinds of fastfoods preferred by individuals which can beconsumed at any point of time during a day. The attraction factor would be a joint whichwould serve the following eatables:- Chats Rolls(Veg/Non-Veg) Puchka Fruit juices Different types of sandwiches Fruit salads Cold drinks Mineral water Jhaal muri Churmur
at cheaper rates and there would be provision for sitting as well as take away. This jointwould be located in Park Street in kolkata as currently there is no such organised retailproviding such a service. The target audience for the above joint would be the working classhaving corporate offices nearby and the youth. The joint will be spread on a 1000 squarefeet area and will have a wooden floor.Reasons for choice: Location: As Park Street is considered as one of the most convenient locations in kolkata from where every aspect of entertainment is easily accessible and at that juncture there is no such fastfood joint which provides such a variety of choices. Urbanisation: With rising media exposure and consumer mobility, hanging out at food joints in prime locations has been seen as a means of lifestyle in most cities. Edge over local competitors: The eatables provided by the local competitors are all scattered in different locations without a proper sitting arrangement. The edge which we have over these existing players is that we are bringing all the different types of products which they serve less than one roof along with providing them with a congenial environment. Other reasons o As it is a made to order industry, demand forecasting is less required o Scope for unlimited innovations according to the taste of the consumers o Easy availability of raw materials with less initial investment b. Others evaluated but dropped and whyLaundromatOne of the alternatives was to open a Laundromat. But it was discarded because we feelthat the Indian market is still not ready to accept this concept. Here the local laundries havecaptured the major market. There exists stiff competition and hence scope for growth islimited for a new player. Also, several added expenditures like maintenance, handling ofmoney which includes collections and loading coin changers, advertising, insurance,
licenses, rent, personal property tax, depreciation and interest charges are cutting a majorpart of the profits.We therefore felt that in this sector we wouldn’t be able to differentiate ourselves from thelocal laundries already existing and hence opening a Laundromat did not incite us.Highway cafeAnother alternative was to open a cafe lounge on a highway which would be atleast 4 to 5kilometres from the city with added facilities like a ps3, foosegame and a wifi facility.However, there are lots of challenges in pursuing this idea. One challenge we faced was thesecurity factor where customers would find it unsafe travelling on a highway at night.Another hurdle we faced was the temperament of the consumers which was not in favourto drive till highways to enjoy coffee. The plan would incur lots of capital expenditure. So,we concluded that with an uncertainty of walk-ins, which will lead to less return on per sq.ft. basis, the plan will not be feasible to carry.3. For chosen retail business: a. Environment scan i. GlobalThe global fast food market grew by 6.6% in 2008 to reach a value of $154.7 billion. In 2013,the global fast food market is forecasted to have a value of $200 billion, an increase of29.3% since 2008. The global fast food market grew by 3% in 2008 to reach a volume of 85.8billion transactions. In 2013, the global fast food market is forecasted to have a volume of94.7 billion transactions, an increase of 10.4% since 2008. Quick Service Restaurant segmentleads the global fast food market, accounting for 66.3% of the market overall value.Americans leads the global fast food market, accounting for 52.4% of the market overallvalue.Since, 1970, Americans spent about $6billion in the growth of fast food industry. In 2013,global fast food market is forecasted to have a value of $200 billion. A generation ago,three-quarters of the money used to buy food in United States was spent to prepare meals
at home. Today about half of the money used to buy food is spent at restaurants. Americansnow spend more money on fast food than on higher education, personal computers,computer software, or new cars. Their expenditure on fast food is far higher than what theyspend on movies, books, magazines, newspapers, videos. ii. IndiaUpto the year 1995 Indian food market was predominantly dominated by the traditionaldhabas, potential restaurants in the customer’s colony and some restaurants in a five starhotel. Having fast food i.e., burgers, pizzas etc., was considered to be an option for eatingout. It was not synonymous with the American concept of fast food as a quick takeaway biteor a substitute for lunch. Apart from fast food being available at the local colony restaurantsand at some five star restaurants, Nirulas was the only fast food chain existing in the countrywith its restaurants expanding with every passing year since its inception. Nirula’s was thefirst one to bring fast food to India in the 1950’s and since then it has evolved into acommon hangout for all age groups.The Indian fast food market is growing at around 30-35 percent per annum and generatesover 4800 Crores in sales. Fast Food Market in India is anticipated to reach around INR 146Billion by 2014, growing at a CAGR of around 34% during 2011-2014 Fast-food restaurantsseem to be big business in India, and so a many foreign chains have made an entry into themarket to joint the early movers like McDonalds or KFC. According to “Indian Fast FoodMarket Analysis”, although the market has witnessed a robust growth in the past couple ofyears, it remains largely under penetrated and concentrated into metropolitan cities. India isthe world’s second largest producer of food next to china, and has the potential of being thebiggest with the food and agricultural sector. The total food production in India is likely todouble in next ten years. The foreign players look to dominate the Indian fast food industryand have large plans for expansion. For instance, Dominos plans to open 60-65 outletsevery year for the next three years. With greater plans to explore the Indian market, YumBrands plans to open 1000 fast food outlets by 2015. McDonalds has set an invest goal ofnearly $35 Million to double its store count to nearly 350 in India. Multinational chains likeMcDonalds, Pizza Hut, KFC or home grown ones like Sagar Ratna, Yo! China, Haldirams,Bikanervala or Nirulas, they are all racing to open new restaurants. McDonalds, which had
20 outlets in India till 2002, has 187 today. It plans to open 200 more over five years with aninvestment of Rs 500 crore. Yum! Restaurants, owner of the KFC and Pizza Hut brands, plansto add 15 and 20 outlets respectively.The eating out market is on an upswing. The rising number of working women and nuclearhouseholds, and an increase in general affluence have led to higher discretionary spendingon food. According to the Food Franchising Report 2009, 30 per cent of working singles eatout at least once a month, with a majority spending at least Rs 101-150 per outing. UrbanIndians now have a repast outdoor six times a month compared to 2.7 times in 2003. Retailconsultancy Tech-nopak Advisors says the expenditure on eating out at 11 per cent issecond only to groceries for Indian households. Growth isnt the only change in the foodbusiness. The shift from unorganised or street food towards a cleaner, more hygienicenvironment is one, even as the proliferation of stalls selling steamed corn, doughnuts andeven sushi across malls, along with the success of South Indian cuisine in Delhi and butterchicken in the South shows that Indians are willing to experiment.Each of the foreign food joints that have come into the country has their own strategy linedup to differ from the rest. Each of these studied the Indian tastes and style and therebytargeted the Indian customer. An average Indian restaurant goer is no convenience eater,unlike the Americans.Growth Drivers of India’s food IndustryThe growth of the food industry is driven by: Higher disposable incomes Change in spending pattern Increasing organised food retailing Increasing export opportunities
Porter’s 5 force modelPotential Entry Bargaining Buyer Bargaining Industry Rivalry Threats of•Relatively high initial Power of Power of Buyers •Low pricing power substitutes capital outlay Customers •Regional franchises •Low margins •High product•Growing industry exhibit market power •Market consolidation differentiation (e.g. •Fragmented consolidation •Many substitute meal solutions) customer base•Economies of scale suppliers •Many local industry •Relatively low•Logistics learning average purchase •Low operator brand players curve loyalty (e.g., independent •Rising segment of•Low switching costs •Low switching costs caterers) discerning consumers for customers (e.g. distribution •Few global industry channels) players (e.g., KFC, McDonalds etc.). •Low switching costs for customers SWOT Analysis Strengths 1. Quick Service: - one of the biggest strengths of fast food is that it provides quick service. The biggest advantage of this is that it saves a lot of time. And in this modern world time is money hence quick service is the biggest strength 2. Affordable: - Usually fast food is priced at a very affordable rate which starts from rupees 2. Though the prices are low in the fast food industry, the quantity is more and hence value for money. 3. Attraction: - The advertisements of fast food are very flashy and appealing especially to the youth and the younger generation. One of the most important
people in the buying decision is the kids who are influenced by ads on TV who in turn influence their parents. Hence it boosts the sales.Weakness 1. Different Preferences: - India is a land of diversity. People in India have different preferences and taste. The fast food industry cannot cater to all the tastes and preferences of people. For e.g. some people eat Non – Veg and some don’t eat non – veg, thus creating a problem. Such problems have risen at KFC and McDonalds. Another difference in preference can be seen in the choice of the type of food. Some people prefer South Indian while some prefer North Indian. So a south Indian joint selling masala dosa cannot start selling chole bature as per customers’ preference. 2. Lack of customization: - Fast food is usually pre-made and pre-packed and not fresh from the oven. So once the dish is made it cannot be altered according to the customer’s choice or preference. For e.g. a McDonalds burger is prepared much before the customer purchases it and he has to buy it as it is. Even if the customer wants the burger without onion or cheese still he has to purchase it due to lack of customization. 3. Unhygienic and unhealthy: - Most of the times though being tasty the oil content in fast food is very high. Hence people are now moving away from fast food. The fast food prepared is also unhygienic especially at the road side joints. Hence these are considered weaknesses to the fast food industry.Opportunities 1. Growing nuclear families: - Nowadays it is said to be the age of the fast food. Parents and kids especially prefer fast food due to its quick service and for its satisfying appetite at affordable prices. This is a growing opportunity for the industry because families nowadays prefer eating out, rather than cooking at home.
2. Growing urban lifestyle: - The growth story of India is not limited to metro cities. Now it has also found its way into some rural areas and some semi– urban cities. Fast food joints are not a thing of big cities now. People in cities and towns are now having additional incomes in their pockets. Eating out now is a normal thing for the homely people in the semi urban areas.Threats 1. Oppositions from various organizations: - Due to the various preferences in the food some opposition is received by the fast food industry. As reported in the papers organizations like PETA are opposing the use of beef fat in the items of McDonalds. There was also a huge hullabaloo when Kentucky Fried Chicken (KFC) was being introduced to India. This is a major threat to the fast food industry. 2. Location: - One of the major threats in India is from the location point of view. Fast food joints can’t be opened in certain locations even though there might be evidence of major consumer demand in the area. For e.g. a Hindu dominated area might pose a threat to joints serving beef related products since the cow is considered sacred to them. 3. Ready- to-eat: - Nowadays ready to eat products are more in demand in the market owing to the fact that consumers have to take minimum trouble in preparation out of which the results are healthy food, rich nutritional value, easy on pockets and higher value for money as compared to the foods available in a fast food joint. 4. Health Concerns: - Due to the low quality ingredients used in the majority of local fast food joints, the sanitation and the hygiene factors which are mostly not maintained, have given cause to various medical and other health related organizations and certain NGO’s who have taken it up to voice these issues and bring it to the attention of the general public. Thus directing the attention of the public to change the tastes to foods that are more hygienic and safe. Here canned foodstuffs stand to gain advantage.
b. Current Playersi. Global Year 2010 Rs per Month Rs per sqft per Month Global McDonalds Yum McDonalds YumAverage sqft size of a store 3000.00 3000.00Net Sales 2665394.53 1098243.24 888.46 366.08Gross Margin 0.77 0.72 0.77 0.72RGM 2058597.66 793885.14 686.20 264.63OPEX 1256917.97 632736.49 418.97 210.91EBITDA 801679.69 161148.65 267.23 53.72ii. India Jubiliant Food works Limited(JFL)No of stores across india 378Average store size in sqft 2000 For a store Rs/month in Rs per sqft Rupees 2011 per MonthTotal income 6783300000Total expenditure 5581600000EBITDA 1201700000 264925.0441 220.7708701(Source: http://www.dominos.co.in/admin/en/filestore/9c2b2ac601ce0307f2c48b469b107711.pdf )* Please refer to the attached excel for further details.c. Market size in India:i. CurrentIndias fast food market is worth US$9.33 billion, registering year-on-year growth of 9% in2010. The market is stipulated to reach US$12.25 billion, with CAGR of 7% in the next 3-5years (2010-2014).The moderate growth is primarily attributed to higher regional and localpenetration of fast food outlets in Tier II and Tier III cities along with improved householddisposable income. Demographic segments aged between 25-35 years are the largestconsumers of fast food, with approximately 35% eating out once a month in cosmopolitan
cities such as Bangalore, Hyderabad, Mumbai, Delhi, Kolkata, etc. The fast food marketvolume sales stood at 455.9 billion transactions, with year-on-year growth of 9.1% in 2010.ii. Look up in 5, 10 and 15 years and CAGR Year 2011 2016 2021 2026 Market Size(in 9.33 40.30934 174.1525 752.4084 billion $) CAGR 34% 34% 34% 34%According to our new research report, “Indian Fast Food Market Analysis”, the Indian FastFood Industry is anticipated to grow at a CAGR of around 34% during 2011-2014.Anticipating the future growth, many big international players are entering into the marketby making deals with the domestic players. And those already present in the Indian marketare expanding their presence in different provinces of the country. This trend will emergemore strongly during our forecast period, providing opportunities to local players to widentheir product portfolios.Key Drivers and Key Challenges -High cost of real estate Key -Health related issues: obesity Drivers -Lack of skilled manpower -Increased Competition -Growing disposable income -Favourable demographics -Changing lifestyles and preferences Key -Increasing proportion of take Challenge away food s -Increasing number of working women
d. Key Drivers Growing disposable income – emergence of double income group leads to increase in disposable income. Now people have more disposable income so they can spend easily in fast food and other activities. Favourable demographics- Target market of fast food is normally considered within the age of 15 to 50.The percentage of this age group is increasing very rapidly. So, fast food players change their policies and products to attract this so much large sector of population. When population increases, there is also an increase in references because of large personality differences. Changing lifestyles and preferences- Change in the lifestyle of demographics is very important forces which become the cause of change in fast food industry near in future. Fast food in developing countries is considered as junk but in some it is considered as a status symbol. So, companies set their rices and other marketing mix tools accordingly but now the lifestyle of developing countries is changing. So, fast food chains in these places are changing their ways of doing business. Increasing proportion of take away food- Nowadays it is said to be the age of fast food. Parents and kids especially refer fast food due to its quick service and for its satisfying appetite at an affordable price. This has resulted in an increasing demand for take away food. Increasing number of working women- working women have no time for cooking, and if they have then also they don’t want to cook. Because they want to come out of the traditionally defined gender roles. They do not want to confine themselves to household work and upbringing of children’s.
e. Key Challenges High cost of real estate- with the growing economy, land value is appreciating continuously. Getting a land in a main area would cost a huge sum which would have a direct impact on the investments. Health related issues: a) Obesity: Studies have shown that a typical fast food has very high density and food with high density causes people to eat more then they usually need. b) Low calories food: Emphasis is now more on low calorie food. In this line McDonald has a plan to introduce all white meat chicken Mc Nugget with less fat and fewer calories. Lack of skilled manpower- To maintain a proper decorum and serving hygienic, is not possible without skilled labour. Getting skilled labour in the budget would be a challenge for the business. Increased competition- While the fastfood sector has long been regarded as competitive, the level of rivalry only intensifies. Numerous chains are expanding: multi-unit development deals are being inked left, right, and centre. Brands like Subway, Krispy Kreme, Camilles Sidewalk Café, Cosi Inc, Whata burger, Papa Murphys, Moes Southwest Grills and Bobs Big Boy are all on the expansion trail. Meanwhile, a number of incumbent chains and/or their franchisees are struggling to return positive results on existing operations. One well-known example is Burger King where one high profile multi-unit franchisee went bankrupt, and improved sales and profits are vital in turning other franchisees and the franchiser operation around. -----End of Text------