» Business » McSealed & McDelivered: A tough task

McSealed & McDelivered: A tough task

By Byravee Iyer in New Delhi
June 05, 2008 12:24 IST
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A nice slice of patty wedged in a bun dipped in oodles of mayonnaise and scrumptious cheese. While the recipe might sound simple, burger-selling is serious business.

Things were simpler in the 1940s when brothers Dick and Mac McDonald were seen fervently selling burgers in California. A few years later Ray Kroc purchased the duo's equity in the company and since then there has been no looking back.

Today, as things stand, burger giant McDonald's serves almost 54 million people every day across 120 countries. A figure that is considerably higher than the population of countries like South Africa, South Korea, Spain and Canada, to name a few.

In India, the latest chapter unfolded in March this year, when the company rolled out a campaign to promote doorstep delivery. The TVC, developed and created by Leo Burnett, used an old Hindi saying, "Pet mein chuhe daud rahe hain" (rats are running about in the stomach, an adage that refers to hunger pangs) to bring home the convenience of a McDonald's meal being only a call away. The animation ad begins with a horde of rats running a race in slow motion.

As they inch towards the finishing line, the camera pans out to freeze on the belly of a youngster longing for a burger. This campaign also subtly integrates the brand's association with the upcoming Beijing Olympics as an official restaurant partner.

So what's the noise all about? As a concept, McDelivery is not new in India. In fact, it was first launched in Mumbai in 2004. Moreover, within the home-delivery space it has yet to make its mark, not to mention the fact that it has to compete with more meal-based brands like Dominos and Pizza Hut. For the record, Domino's is the largest player in the food delivery arena, selling around 41,000 pizzas per day, while McDonald's delivers a meagre 5,000 orders.

First, the delivery model is a complete departure from its philosophy, given the fact that the fast food chain relies heavily on the restaurant-experience. Moreover, even though McDonald's is geographically diversified, the food delivery service is present only in the markets of South East Asia, Egypt, and Turkey. But then, who wouldn't welcome a new avenue of growth?

Another reason is market potential. Socio-cultural trends have been changing in favour of fast food giants. As the number of employed working women increase, there is a marked shift in the decision-making pattern with most of them choosing to order out.

Also, many working single people have moved away from their parents' home, and naturally home delivery becomes the clear choice for a dinner meal.

"This is a nascent market. There is a population of about 30 million people in India who will be our target audience and these do not include non-users," says Dev Amritesh, vice president marketing, Domino's Pizza India.

Then there is the problem of real estate. The soaring rates of commercial properties and limited store space available in urban centres make the home delivery concept a winner.

For McDonald's, delivery in Mumbai was merely an experiment. The company then put in three years to study and

work out the potential of other cities as delivery hubs. Once it expanded the delivery service to Pune, Hyderabad, Ahmedabad, Delhi, Gurgaon, and Noida, it went on to promote the delivery utility enthusiastically. Thus, McDonald's launched its first McDelivery ad in March last year. Two other campaigns quickly followed suit in

August 2007 and March 2008, respectively. On the three year delayed promotion of McDelivery, Amit Jatia, managing director of McDonald's (western region) says, "Every business is built block by block."

It is this absence of promotion that perhaps explains why McDelivery accounts for a small portion of the company's revenue stream. Currently, while McDonald's serves as many as 250,000 orders per day, only 5,000 of those come from deliveries. Jatia hopes that the new delivery campaign will boost this figure by 20 per cent by the end of the year.

It's accepted wisdom that anything that is convenient will be accepted by consumers. Doorstep delivery is certainly one such service. But how do they remain cost-efficient and preserve margins, especially considering that a meal at

McDonald's is much cheaper than, say, a Pizza? What's worse, the burger giant has put no minimum order cap in place for deliveries.

For that, the company conducts a detailed feasibility study to find out if a restaurant can become a delivery hub. Every restaurant is given a population targetĀ -- only if and when it can serve a sizable population does it become a delivery hub. Moreover, the delivery grid is modeled in such a way that the drive time cannot exceed seven minutes. Further, McDonald's also charges Rs 20 as delivery fee.

The burger giant can now cater to a larger audience, while saving, to an extent, on real estate costs. Still, since time immemorial, the burger purveyor has been primarily a restaurant-based operator.

In India, even though McDelivery is a brand extension, it has become integral to the company's vision. So then wouldn't aggressively endorsing the delivery utility affect in-house restaurant sales?

"No. The key to our business is convenience. If people can't come to us we go to people," says Jatia. He adds, "It's a win-win situation. The more people use our brand in whichever form, the more visible we are."

Marketing experts agree. "Unlike other countries where people walk in any time, in India restaurants are typically crowded between 5 and 9 in the evening. Sometimes outlets are even forced to send people back. Naturally, in such a context, home delivery will work well," says Shripad Nadkarni, the head of Market Gate Consulting.

"That said, companies should ensure they deliver the same restaurant experience to their home delivery customers," he adds.

Agreed, all the potential sounds great. But the rivals are many. If India-based Nirula's has launched its own version of an affordable menu, global-giant Domino's can't wait to open its targeted 190-200 stores this year alone, outdoing McDonald's target of 50. Even on the orders' front, Domino's claims to have sold 15 million pizzas this year, much ahead of McDonald's 250,000. So while McDonald's is on the right path, it still has a long way go, in India, at least.

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Byravee Iyer in New Delhi
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