Even before Burger King opened the doors to its first store in New Delhi's Select Citywalk Mall on 9th November, 1,200 Indians had pre-ordered its signature 'Whopper' burger on e-Bay. On Sunday, hundreds more braved long queues to check in at India's newest American fast food chain which will open a dozen more outlets in the country in the next three months.
Such enthusiasm bodes well for the Miami based company which is aiming at growth without a "ceiling" in India, a country which it reckons, could become one of its largest markets globally.
It isn't a lofty goal. American fast food chains like McDonalds, Subway, Dominos Pizza and Yum Brands already enjoy a monopoly over India's near $1 billion organized QSR (quick service restaurant) segment, holding 63% of the aggregate market share as per a 2013 CRISIL research report. And this market is swelling, expecting to hit the $8 billion mark by 2020 according to Technopak, as demand for pizzas, burgers and sandwiches from affluent middle class Indian consumers in tier two and tier three towns sees exponential growth. This will provide America's fast food giants with a much needed antidote to slowing sales back home.
No more a fast food nation?
In America itself, the high-fat fast food industry is on a decline. More and more Americans are rejecting junk food, a fact that's reflected in slumping sales at chains like McDonalds which reported its worst profit decline in years this quarter. The company has admitted that it needs to fundamentally relook at how it does business and is even considering offering organic food in some markets according to the Wall Street Journal.
With health conscious Americans gradually shifting away from burgers & fries, the iconic burger giant has also had to increasingly lean on its international operations to drive sales. McDonalds earned only a third of its revenues last year from the US as compared to half in 1994 according to Businessweek which quoted analysts as saying that growth for such quick service joints had peaked in the US. Yum Brands too saw half its sales come not from the US, but from China.
Apart from increased options for healthier variants, regulation in the United States is increasingly clamping down on the growth of fast food as the obesity epidemic reaches alarming proportions in the country. Reports MSNBC: "State and local officials have attempted a range of counter-strategies, from taxing sugary beverages to requiring chain restaurants to post calorie counts, and the federal government is slowly catching up. The Obama administration is going national with the calorie-posting initiative that New York City pioneered—and the nation’s new farm bill, while slashing food assistance to low-income people, doubles the value of food stamps redeemed for fresh produce at farmers’ markets". (Read here)
Tighter regulation needed
It is no surprise then, that in such a scenario global chains are only too eager to chase growth in emerging economies such as India. Which does beg the question however on whether the government should really be allowing foreign food corporations to peddle their globally discredited products on Indian menus.
It is time for the government to seriously look at means to enforce stricter laws to ensure that this country doesn't become a dumping ground for American food MNCs. It is also time to do a radical rethink on the kind of foreign investment we wish to attract given the billions of dollars cola companies for instance have committed for expansion in India.
Health experts are worried because obesity in India has reached epidemic proportions, with the country likely to surpass the US on the number of obese people it houses in the next 5 years. India's growing fad for junk food is a large contributor to this problem, which they believe can only be overcome by effective policy and regulation.
Researchers at the World Health Organization published a study early this year which showed an inextricable link between fast food and obesity, calling for much tighter economic regulation.
"Governments could slow – and even reverse – the growing epidemic of obesity by taking measures to counter fast food consumption" said the report which sought economic incentives from governments in both developing and developed countries for healthy foods. It also stressed upon the need for disincentives for industries selling fast and ultra processed foods and drinks, zoning policies to control number of food outlets, trade regulations, price controls and more effective labeling systems.
Several emerging market economies have already woken up to these ideas. Mexico recently passed a junk food tax despite critics warning that the measure could hurt its ailing economy. Bolivia got rid of its last McDonalds outlet despite being enclosed by other junk food crazed South American nations. It is perhaps time for India to smell the coffee, because the economic costs of obesity may well begin outweighing the fiscal benefits these MNCs currently bring to the table.
(Nikhil Inamdar is a Contributing Writer for Business Standard)