India’s fast food chains laid low by inflation; Chicken items still in vogue

Mumbai: The fast food industry in India is seeing little growth amidst rising inflation, based on commentary from three of the major quick service restaurant chains at Kotak Institutional Equities’ Consumer Forum 2023 held on Monday and Tuesday.

The companies’ feedback suggested that the sector has been struggling or has remained largely stagnant for the past few months, although there has been progress in certain categories such as fried chicken, burgers and coffee.

One area where fast food companies like Sapphire Foods and Devyani International Ltd agree is on the lack of growth in demand, which has remained stagnant during the ongoing quarter. Sapphire operates franchisees of Pizza Hut, KFC etc. while Devyani operates chains such as KFC, Vaango, Costa Coffee in India.

The companies attributed this to seasonal factors such as festivities and an increase in “vegetarian days”, noted the forum. More worryingly, demand is expected to fall further due to the inflationary environment in the country.

The third major player in the fast food industry, Westlife Foodworld — which operates McDonalds, and McCafe in India — indicated that innovative measures such as focusing on meals surrounding chicken, burgers and coffee have helped to arrest some of the decline. It has also focussed on consumer convenience by prioritising both dine-in and delivery services.

Chickening Out

Coming to the categories of food items, fried chicken category has shown some resilience, with KFC, Mc Spicy, MC McDonald etc. showing modest growth in the first and second quarter of the financial year.

“…Chicken is now one of the key pillars of its menu (particularly crucial in the South) and it is adding new products like chicken wings to augment the portfolio,” said Kotak Institutional Equities, quoting the management of Westlife Foodworld.

The largest fast food franchisee in India, Devayani International Ltd, also pointed to KFC, and fried chicken in general, as its key growth drivers.

KFC remains one of the top performers among fried chicken suppliers in India for the first and second quarters of the financial year.

One of the main reasons for the progress made by KFC, noted by the management of Devyani International, is that it customizes the products and other factors to cater to consumers from different regions.

“KFC product range and price point offerings evolve with time and recipes differ by region as it becomes very important to customize the offerings based on the region they are operating.”

Another factor that makes KFC stand out is its fresh chicken offering as compared to the frozen format offerings by brands such as McDonald’s, Popeyes etc.