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Consumer Preferences towards Western Origin Fast Foods in Urban India

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Consumer Preferences towards Western Origin Fast Foods in Urban India (Chandigarh City)

INTRODUCTION AND RESEARCH OBJECTIVE
1.1 Introduction:

India is the world’s second largest producer of food next to China, and has the potential of being the biggest with the food and agricultural sector. The total food production in India is likely to double in the next ten years and there is an opportunity for large investments in food and food processing technologies, skills and equipment, especially in areas health food. Health food supplement is another rapidly rising segment of this industry that is gaining vast popularity amongst the health conscious.

The revival of the tourism industry in 2003 resulted in a positive spillover effect into the consumer food service market1 . India is one of the world’s major food producers but accounts for less than 1.5 per cent of international food trade. This indicates vast scope for both investors and exporters. The Indian food industries sales turnover is Rs.140,000 crore (1crore = 10 million) annually as at the start of year 2000. The industry has the highest number of plants approved by the US Food and Drug Administration (FDA) outside the USA.

The most promising sub-sectors include -Soft-drink bottling, Confectionery manufacture, Fishing, Aquaculture, Grain-milling and Grain-based products, Meat and poultry processing, Alcoholic beverages, Milk processing, Tomato paste, Fast food, Ready-to-eat breakfast cereals, Food additives, flavors etc2

The liberalization of the Indian economy and its resulting effects on consumer habits is leading to a higher incidence of eating out among the majority of consumers. This emerging trend is especially prevalent among middle class Indians, as dining out is increasingly perceived as a form of entertainment.

Constant value sales within the FSR sector are registering a slight increase of 7% over the previous year. Major value shares in the market are largely held by Indian Multi-cuisine and south Indian restaurants, which dominate with an 84% share of total FSR value sales in 2003. Independent operators hold more than an almost 90% value share of the Fast food sector in India, offering a variety of menus catering to local tastes. Therefore, value shares held by Fast food sub sectors such as burger and chicken are comparatively low, and penetration is still limited.

The euromonitor forecasts an overall positive performance over the forecast period, with a CAGR (compound annual growth rate) of 11.3% in terms of units, and forecast growth of 82.4% and 57.2% for transactions and constant value sales respectively. During the forecast period, fast food units will experience nearly 60% growth over 20033 .

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The sizable Indian market has prompted many MNCs to set up shops in India. The few who have succeeded had come to understand that the Indian market is different due to its cultural diversity. Gaining local acceptance and blending in to the Indian culture still remains a challenge for many fast food restaurants. Most multinational-chained food service companies adopted the franchising route to set up operations and expanded their market presence, as opposed to direct investment or entering into joint ventures.

Most international brands, such as Pizza Hut and McDonald’s, have revised their Western menus to suit the Indian pallet. This, along with aggressive marketing strategies such as offering discount coupons, has significantly boosted their business and increased sales.

Every company has to adopt the principles of marketing for creating, promoting, pricing and delivering goods. Marketing managers are the key to creating product awareness, stimulating demand and meeting the objectives of the organization.

1.2 Statement of Problem:
Today’s consumer is empowered to choose between many vendors when considering a purchase. This is especially true where the market is limited and competitors fight fiercely for market share.

In order to design effective product, promotion, pricing and distribution strategies, food marketers need to understand the attitudes, perceptions, experiences and behaviors of their consumers. However, currently there is limited information available about the food consumption behavior in urban India. Most of the people, especially the younger generation from villages migrate in lakhs, every year, towards towns in search of good jobs and better living. Unlike, western countries, in India predicting about the buying behavior of consumer’s remains a difficult task, especially because of the urban-rural divide and the constant migration of population from villages towards towns. Indian consumers typically maintain their distinct food habits even after migrating to different parts of the country.

The researcher wishes to study, how consumers in Chandigarh perceive and utilize Western fast food offerings. Chandigarh is a Union Territory and the capital city of two states in North India (Punjab and Haryana).

1.3 Project Scope And Research Objectives:
The scope of the research project is focused on understanding consumer behavior of the residents of Chandigarh in respect of Western fast food offerings. The key research objective is-

  • To understand preferences of consumers in respect of Western Fast food offerings in Chandigarh, and identifying factors to be considered to encourage buying.

The research will focus on how consumers in Chandigarh perceive and utilize Western fast food offerings in general as well as certain categories of it, not to identify how to successfully promote one specific brand.

The results of this study must be as useful to the maker of Brand 1 in country A as they are to the distributors of Brand 2 from country B. The study gains importance from both the producer and consumer’s point of view, as it will identify drawbacks, limitations and constraints existing in the Fast food marketing structure.

1.4 Key Research Questions Addressed in the Study:

  • Who are the consumers of these Western fast food offerings?
  • How do consumers in Chandigarh typically become acquainted with Western fast food offerings?
  • What are consumers looking for in Western fast food offerings?
  • What could be done to encourage purchasing of Western fast food offerings?

1.5 Limitations of the Study:

  • The research project concerns a pilot project on a limited number of individual western fast food offerings only, which may be extended to an envisioned continuous annual research program. After preliminary discussions with the major Western fast food sellers in Chandigarh three product categories have been selected i.e. burgers, pizzas, and
  • The study has the limitation of time, finance and other resource availability associated with a student researcher.
  • Further, because of demographic variations the results of this study are mostly applicable to the regions and to locations with similar conditions.

LITERATURE SURVEY
2.1 Introduction to Literature Review:

In order to provide a framework for the primary data research, first the key concepts about food consumption behavior have been set out. Next to that, information has been gathered on the background and determinants of food consumption behavior of Indians in general and in Chandigarh in particular, followed by an overview of the food market for Western fast food products.

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2.2 Food consumption behavior
The key objective of this research project is to learn more about local consumer preferences in Chandigarh in respect of Western fast food products, especially the way they perceive and utilize these products. In order to understand consumer preferences one needs to understand the elements that drive consumer behavior in the buying process.

The buying process can be summarized as follows4 :
The starting point of each buying decision is that the potential consumer needs to be aware of the products involved i.e. Western fast food products. Once aware, the consumer will decide whether to buy a certain product or not, based on his/her beliefs and attitudes which determine his/her preferences for a certain product. A belief is a descriptive thought that a person holds about something or a perception, which can be based on knowledge, opinion or faith. An attitude describes someone’s enduring favorable or unfavorable cognitive evaluations, emotional feelings, and action tendencies toward some object or idea. Preferences are the selections that people make when all food products are equally and simultaneously available i.e. the final short-list of alternative products the consumer chooses from. Perceptions, attitudes and preferences are all part of food consumption behavior. Awareness is a necessary condition for consumption behavior to occur.

Food consumption behavior is determined by underlying factors that drive this behavior. Literature shows different ways of looking at those driving factors, some of which are discussed below. One view considers the food consumption process to circle around two key elements, being the choice (decision to buy) and the actual purchase (exchange of resources) which are determined by factors as who buys, what to buy, frequency of purchases, types of foods which are eaten, who eats what, the time and occasion during which certain foods are consumed, the symbolic meaning of food, and attitudes toward foods.

Figure 2.1 Consumer buying process:
Figure 2.1 Consumer buying process:

Others suggest that both cognitive and motivational factors must be considered when studying food consumption behavior. Cognitive factors are related to the question of how people think about food including attitudes and preferences, meal patterns (e.g., the food products that comprise a supper) and cultural availability5.

Motivational factors relate to what a person induces to act. Motivational factors include values, physical and social food needs, and obstacles to be overcome in buying and preparing food. For example, tofu has been discussed as a food product that has faced resistance in North America because the cooking skills required for using tofu are relatively time consuming and complicated by North American food preparation standards.

Finally, another way of categorizing driving factors behind food consumption behavior is to distinguish between biological factors (such as age, gender, etc.), sociological factors (such as ethnicity, education, religion, traditions, etc.), household familial factors (such as food sharing behavior, purchasing power, etc.) and cognitive factors (such as body image, healthful foods, etc.).

Recent studies of food consumption behavior of the people of India shows that India’s multiracial society with it’s large expatriate population drawn from all over has led to a diverse and rich variety of food types being available to consumers. Perceived important factors that has influenced the diversity in consumer tastes and preferences are:

  • Traditional Indian (local) culture
  • Religion
  • Newer trading relationships with North America, Japan, China and Europe
  • Urbanization
  • Free access to international media
  • Available local foodstuffs and ingredients
  • The scope of advertising and promotion
  • Government policy and campaigns on food and health related issues
  • Social status of consumers and purchase decision makers

The first two categorizations discussed above have been used in gathering and analyzing information in the primary data research stage. The last categorization of factors discussed above has been used as a basis for gathering and analyzing information in the secondary data research phase. Moreover, when designing the standard questionnaires for the primary data research, specific relevant factors resulting from studies of the Indian food market have been kept in mind.

2.3 Food Traditions in India:
The role of tradition is particularly noteworthy when discussing food consumption behavior and the willingness to try unfamiliar foods, as it is often strongly linked with eating habits.

In the mid 1990’s, a spate of global fast food chains entered India to capture a part of Indian fast food segment. But they found it difficult to establish themselves. Gaining acceptance locally and blending into the Indian culture proved difficult. With regards to their menu, positioning and advertising, MNC fast food chains had to face lot of problems in getting accepted by the Indian consumer. After initial problems they realized that it was important to combine the local tradition and food habits of the consumers, with their products. Although few players were able to form pan-Indian retail supply chains, the retail market is unlikely to be a single entity. For example, food retailing in Chennai, Kolkata and Chandigarh is vastly different in terms of shopping habits and consumer tastes. Many such differences will remain6.

With more than five thousand ethnic communities represented, India has a very diverse population. Each region and sub region in India has distinct food traditions and preferences. Indian consumers typically maintain their distinct food habits even after migrating to different parts of the country. In large cities and metropolitan areas, some restaurants serve only specialty regional foods. Some regional fast foods such as samosa, kababs, chola bhatura, pakoda, aloo-paratha, poori-bhaji, dosa, and sambarvada are popular among Indian consumers and are available in both specialty and multi-cuisine restaurants throughout India.

Most Indians prefer to eat home-cooked foods and take immense pride in the varieties of food cooked at home. For most Indians, home-cooked foods are considered fresh, healthy, and inexpensive. Given the distinct dietary habits and food preference of Indian consumers, it is not surprising that until the early 1990s Western fast food chains had largely ignored Indian markets. As a result, Nirula’s, the only notable Indian fast food chain, has been able to dominate the Indian market in fast food service sales7.

In an interview, Vikram Bakshi, MD, McDonald’s Delhi, said that even though the Indian outfit stuck to its core taste that grew on consumers from ‘bland’ to ‘unique’ in three years, with no change factored in by the fast food chain, McDonald’s menu still was about 75% different from its global menu8.

Similarly, Gautam Advani, Chief of Marketing, Domino’s Pizza, in an interview said, “the Indian palate is very definitive- people are extremely finicky and choosy, not too willing to experiment. Food tastes vary from region to region.”

The Indian cuisine is as diverse as its culture, languages, its racial structure, its geographic regions and its climate. Every major region of India brings its own unique dishes and subtle variations to popular dishes. The skill lies in the subtle blending of a variety of spices to enhance rather than overwhelm the basic flavor of a particular dish. These spices are also used as appetizers and digestives. Use of particular spices such as Coriander, Cumin, Fenugreek, Asafetida, etc., give Indian foods its distinct flavor. The cooking skill lies in the subtle blending of a variety of spices to enhance the basic flavor of a particular dish.

Milk products like ghee (processed butter) and dahi (Yogurt), a variety of dals (Lentils) and regional vegetables are other common ingredients in Indian cooking. Vegetables naturally differ across regions and with seasons. The style of cooking vegetables is dependent upon the main dish with which they are served. For example Sarson ka saag (mustard greens) is a perfect complement for the Makke ki Roti (corn flat bread) eaten in Punjab, while sambhar (lentil soup) goes great with Idlis (steamed rice cakes) eaten in South India.
Most of the Indian cuisine today is a perfect blend of native Hindu foods and unique culinary practices brought by various settlers. Although a number of religions exist in India, the two most influential to Indian cuisine are the Hindu and the Muslim traditions.

The Muslim culinary tradition is most evident in dishes like Mughlai food, kababs, Kormas, koftas (meat-balls), biryani (rice with meats), rogan josh, and preparations from the clay oven or tandoor like tandoori rotis and tandoori chicken.

Chapatis or rotis (unleavened flat bread) or parathas (unleavened layered flat bread), rice and an assortment of accessories like dals, fried vegetables, curries, chutney, and pickles are typical north Indian dishes.

South Indian food is largely non-greasy, roasted and steamed. Rice is the staple diet and forms the basis of every meal. It is usually served with sambhar, rasam (a thin soup), dry and curried vegetables and a curd preparation called pachadi. Coconut is an important ingredient in all South Indian food. The South Indian dosa (rice pancakes), idli (steamed rice cakes) and vada, which are made of fermented rice and dal, are now popular throughout the country. The popular dishes from Kerala are appams (a rice pancake) and thick stews.

Most of the sweetmeats in Indian desserts are from Bengal region e.g. rasagulla, jalebi, sandesh, rasamalai and gulab-jamuns. A majority of sweetmeats are milk preparations usually soaked in syrup. Kheer (rice pudding) and Seviyan (Vermicelli pudding) are other common northern desserts. Desserts from the south include the Mysore pak and the creamy payasum.

North Indian food is generally rich, with abundant use of milk products (e.g. butter, cream, ghee which is processed butter.), spices as compared to other parts of India. As Chandigarh is the capital of two states viz- Punjab and Haryana, food traditions in Chandigarh have greater influence of these two states. 98% of the North Indian diet has traditionally been of plant origin. Mutton, poultry, fish are generally well liked. Wheat in the form of bread, pastries are more common in North India as compared to other parts of India where products made of rice are dominant.

Contrary to popular belief, however, India is not a predominantly vegetarian country. About 20% of India’s population is completely vegetarian. A closer look at state-level food habits in India reveals that food preferences vary widely among the country’s 30 states and six union territories9.

While part of this vegetarianism is economic, a more compelling force is ethical and even religious. Jains avoid meat totally, while many Buddhists in India are vegetarian. Brahmins, ‘Saivite’ non-Brahmins of South India and several ‘Vaishnavite’ sects across the country avoid meat. Interestingly, though, Brahmins of East India, Kashmir, and the ‘Saraswats’ of the southwest eat fish and mutton. But even among meat-eaters, beef is taboo10.

2.4 Fast Food in India:
The concept of fast food isn’t new. Early in the 19th century, at the start of the Industrial Age when people had to work 12 to 14 hours a day, there was scarcely any time for long breaks for eating. The first snack bars and kiosks arose in front of factories. Today, quick meals outside the home have become an essential part of our lifestyle.

2.4.1 Introduction to Fast food:
The term “fast food” means just that. However, the boundary between fast foods and traditional dishes is fluid. In particular, it’s difficult to provide a qualitative distinction. Fast foods can also include salads and fruit in addition to classic offerings such as hamburgers, hot dogs, sandwiches, patties, French-fries, pizzas, chips and so on. The best way to distinguish fast foods is to use formal characteristics:

Time required10a – those who eat fast foods do not want to spend a lot of time selecting and eating, and if necessary will eat standing or walking, on the bus, park bench, or at work. The variety of foods and beverages is usually very limited. Fast food frequently does not come with knives and forks, making it “finger food.” When silverware, cups and plates are necessary, they are disposable.

The characteristics of fast food, therefore, are that they require little time, offer a limited selection, are finger food, and the silverware and plates are disposable. These characteristics readily illustrate the difference from traditional dining culture. Many people equate fast foods with convenience foods. This is incorrect since convenience products are often eaten at home. They require active participation because they must be heated, stirred, baked, thawed, etc., and are supplemented with other foods.

There are three general categories of fast food businesses:
1. Self-service restaurants with a fast-food palette like McDonalds, Wendy’s, Burger King, Pizza Hut, etc.

2. Take-out (or take-away) businesses that sell ready-to-eat foods and beverages.

3.”On the street corner” hot-dog stands and snack stands with counters or a pair of stand-up tables.

2.4.2 Fast food Industry Overview:
Fast food is a food prepared and served quickly at a fast food restaurant or a shop. It is served usually in a carton or bags in order to minimize cost. Fast food outlets often provide take away or take out foods in addition to sit down services. Fast food is a multi billion industry continuing to grow at a rapid pace in coming years.

Fast food is often highly processed and prepared in an industrial fashion i.e., with standard ingredients, methodical cooking and production methods. Logistical planning and outsourcing of ingredients are crucial factors in keeping the cost of operations low.

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2.4.3 The Start of Fast food Culture:
The concept of fast food pops up during 1920s.The 1950s first witnessed their rapid proliferation. Several factors that contributed to this explosive growth in 50’s were:

(1) America’s love affair with the automobiles.
(2) The construction of a major new highway system.
(3) The development of sub-urban communities.
(4) The baby boom subsequent to world war second.

“Fast-food chains initially catered to automobile owners in suburbia. The notion of “fast” food reflected American culture in which speed and efficiency are highly prized 11.”

2.5 India – Emerging Market for Global Players:
Organized food retailing industry is still at infancy stage with share less than 1% of food retail market size in India (See Appendix-IV, pg- 115; Comparison of Organized and Unorganized fast food Outlets). The percentage share held by food service of total consumer expenditure on food has increased from a very low base to stand at 2.6% in 2001. Eating at home remains very much ingrained in Indian culture and changes in eating habits are very slow moving with barriers to eating out entrenched in certain sectors of Indian society.

Traditionally, eating out was looked down upon in Indian society. The growth in nuclear families, particularly in urban India, exposure to global media and Western cuisine, and an increasing number of women joining the workforce have had an impact on eating out trends. Increasingly, eating out is becoming synonymous with entertainment. And very often, it is preferred as a time saving option to cooking. Not surprisingly, takeaways are becoming increasingly popular. India is among the top three countries globally having highest number of people in the spending capacities in the age group of 25-49 yrs.

India is placed at the second rank in the 2004 global retail development index; an annual ranking of retail investment attractiveness among 30 emerging markets. The lack of consolidation and model retail concepts in India presents better opportunity to global players. Over 400 shopping malls, multiplexes, fast food giants, restaurants etc. are in planning or construction stage across the country12.

2.5.1 Market Size & Major Players:
Fast food is one of the worlds largest growing food type. India’s fast food industry is growing by 40% a year and is expected to generate a billion dollars in sales by 2005. The multinational segment of Indian fast food industry is up to Rs.6 bn, a figure expected to zoom to Rs.70 bn by 2006. By 2006, the value of Indian dairy products is expected to be Rs.1, 00,000 million. In last 6 years, foreign investment in this sector stood at Rs. 3600 million, which is about one-fourth of total investment made in this sector. Because of the availability of raw material for fast food, Global chains are flooding into the country13.

There are approximately 22,000 registered restaurants in India. In addition, there are more than 100,000 dhabas (small roadside food stalls) that sell a variety of foods in cities and on highways. By 1998, there were approximately 1,568 registered hotels in India, half of which have their own restaurants14. In addition, large to medium-range canteens serve the food needs of various institutions such as hospitals, prisons, defense establishments, schools, colleges and universities, railways, airlines, government establishments, and private companies. Since 1994, India’s food imports have been growing more than 37% per year. Half of India’s food imports are agricultural items such as cereals, vegetables, fruits, wheat, and nuts. One of the significant problems of the Indian food industry is an inefficient food chain between farmers and consumers.

About 20% of India’s food production is wasted because of too many intermediaries, poor infrastructure, and poor transportation facilities. Considerable inefficiency in the food distribution system cuts farmers’ income while raising consumer food prices. Although India is the world’s third largest food producer, its processing industry is very small compared to other countries in Asia, Europe, and the United States. Despite the lack of a well-developed food processing industry, India’s imports of processed consumer foods have traditionally remained low. Since the early 1990s, India’s food service sales have significantly increased. India’s processed and fast food markets have shown considerable potential for growth15

Dominated by McDonalds having as many as 75 outlets. Domino’s pizza is present in around 100 locations. Pizza hut is also catching up and it has planned to establish 125 outlets at the end of 2006. Subways have established around 40 outlets. Nirula’s is established in North India only. However, it claims to cater 50,000 guests everyday.

Major players in fast food are:

  • McDonalds
  • Nirula’s
  • Pizza hut
  • Dominos pizza
  • Pizza corner
  • KFC
  • Subway

Multinational fast food companies have given domestic competition a run for its money. While McDonalds sells more than Nirula’s, Pizza Hut and Dominos are doing more business than Pizza Corner. Within nine years of their existence in India since 1996, the multinationals have grown at a faster pace than their Indian counterparts. According to industry estimates, in 2001, while McDonald’s clocked a turnover of about Rs 125 crore (Rs 1.25 billion), the home-grown Nirula’s, which has been present in the country since 1934, could only garner Rs 100 crore (Rs 1 billion) turnover. Also, both Domino’s Pizza Hut and Dominos clocked a turnover of about Rs 60 crore (Rs 600 million) but Pizza Corner lagged behind with a turnover of Rs. 25-30 crore (Rs. 250- 300 million).

The main reason behind the success of the multinational chains is their expertise in product development, sourcing practices, quality standards, service levels and standardized operating procedures in their restaurants, a strength that they have developed over years of experience around the world. The homegrown chains have in the past few years of competition with the MNC’s, learnt a few things but there is still a lot of scope for improvement. We have applied our learning experience from other countries in all the processes including consistency, marketing, distribution and training to the local market conditions. It’s now that the domestic chains have realized the importance of such practices. Nirula’s is thus beefing up its organizational structure. Another key reason behind the success of multinationals is the ability to attract youngsters. While McDonalds has been able to attract people below 30, Dominos is targeting the ‘convenience-seeker.’

Nirula’s, on the other hand, is known to appeal more to the 30-plus consumers. Small wonder, Nirula’s has launched its ’21’ range if ice cream cafes to attract the younger lot. The challenge for the homegrown chains is also to reinvent themselves to appeal to the younger consumers. However, the domestic chains are at an advantage since they understand the Indian consumer behavior and eating habits and their product offerings have been tailored accordingly. Multinational chains like McDonalds and Pizza Hut are still on a learning curve trying to customize their menu to the Indian taste and food preferences. Pizza Hut, for example, launched its ‘masala’ range of pizzas and also opened the world’s first 100 percent vegetarian outlet in India. Domino, on the other hand, has launched its ‘peppy paneer pizza’ keeping in mind the Indian taste buds. The food service market in India is estimated to be around Rs.36, 000 crore (Rs. 360 billion), of which the urban fast food quick service restaurants is around Rs. 1, 000 crore (Rs10 billion)16. This segment is witnessing high growth of around 25-30 per cent per annum so the market has a lot of potential to grow.

The Global Agriculture Information Report for the HRI food service sector by the US Embassy (2005) states that there are approximately 500, 000 restaurants in the organized sector (restaurants with more than twenty seats and restaurant menu), mostly serving ethnic cuisines; this number is expected to grow at about 7-8 percent annually for next few years because of increasing urbanization and increasing disposable incomes.

After a slow start, Western-style fast food restaurants have grown impressively at 12-15 percent annually over recent years. Most foreign chains (McDonald’s, Dominos, Pizza Hut, Subway, KFC, and TGIF) and local chains (Nirula’s and Pizza Corner) are doing well in major cities, and are expanding into smaller cities. Most of these fast food chains have developed a range of Indian-styled products to suit local preferences (such as the Maharaja chicken burger, veggie burger, etc.). Although these chains procure most of their products locally, several products such as French fries, specialty cheese, some meats/seafood, flavors, condiments, and other ingredients are often imported.

Table 2.1: Profile of Restaurant Chains in India:

NAME OF THE CHAIN CURRENT NO. OF UNITS TYPE OWNERSHIP TYPE PURCHASING AGENT
McDonalds 68 Fastfood Two regional franchisees Direct Imports and Importers
Pizza Hut 100 Fastfood A master franchisee operating outlets through sub-franchisees Direct Imports, Consolidators, and Importers
Pizza Corner 30 Fastfood Indian company operating through sub-franchisees Importers and Distributors
Dominos Pizza Approx 96 Fastfood A master franchisee operating outlets through sub-franchisees Information not available
Subway 42 Fastfood Franchisee operating outlets through sub-franchisees Importers and Distributors
KFC 7 Fastfood Franchisee operating outlets through sub-franchisees Consolidators and Importers
TGI Friday’s 5 Casual Dining All-India franchisee Consolidators and Importers
Nirulas 63 Fastfood/Casual Dining Indian company with few franchisees Importers and Distributors
Barista Coffee 105 Coffee Shop (serves baked goods and sandwiches, too) Indian company owned Importers and Distributors
Café Coffee Day 230 Coffee Shop Indian company owned Importers and Distributors
Kwality Group 14 Quick service/ casual Dining Family owned Importers and Distributors

Source- GAIN report no IN5066; Global Agriculture Information Report, HRI food service sector; Annual 2005; US Embassy 2005.

2.7. Factors Affecting the Fast Food Industry in India:
Income distribution: The long-term growth trend in India is improving. The past three decades have seen a steady acceleration. Average annual growth in GDP per head climbed from 1.2% in the 1970s to 3% in the 1980s and 4% in the 1990s. From 1972 to 1982, GDP growth averaged 3.5% a year—the so-called “Hindu rate of growth.” As a result of India’s decade-long liberalization of economic policies, the growth rate climbed to 6% from 1992-2002 and is likely to reach 7% by 201022. If this rate is maintained, GDP per person will double in only 18 years. However, high GDP growth is confined to only the few states with coastal access and high levels of urbanization. The fastest-growing Indian states in 1991-2001 were Delhi, Maharashtra, Karnataka, West Bengal, and Gujrat. These states enjoyed annual average economic growth of 6-8%, which is comparable to East Asian economies during the same period. But the economies of poor states like Bihar, Uttar Pradesh, Madhya Pradesh, Orissa, and Assam grew by a dismal annual average of 2% over the same period23.

Not surprisingly, income distribution is highly skewed in India. Just 20% of the richest Indians share more than 40% of the national income. According to a study by National Applied Economic Research (2004) 22, the number of households with an annual income over Indian Rupees (Rs.) 1 crore (US $228,351) has grown by 26% since 1995-96 to 20, 000 in 2001-02. By 2009-10, it will increase more than seven times to 1,40,000 households. In the Rs. 50 lakh (US $114,180) to Rs. 1 crore (US $228, 351) bracket, the number of households is expected to increase from 40,000 in 2001-02 to over 250,000 in 2009-10. In the 11 years following 1989-90, the total number of households increased by 32%, although the average size of Indian households has declined from 5.9 people per household in 1990 to 5.2 in 2001. What is important is that the number of low-income urban households has been approximately halved, from 14.9 million households in 1989-90 to 7.6 million in 2001-02.

The number of low-income rural households has also declined from 69 million in 1989-90 to 58 million in 2001-02. The growth in incomes in the top band has been experienced by both urban and rural households, both of which have roughly doubled as a share of the total population over the 1990s24. The members of these households have higher disposable income and have shown greater propensity to spend on fast foods. There is continuous increase in the per capita income of the Indian citizens. More income in hand results into more spending in comforts and entertainment and thus results into more and more spending on fast and ready to serve kind of foods.

Economic liberalization: With economic liberalization of 1991, more foreign and private industries entered the Indian market that result into income generation of the Indian residents. More income resulted into more savings, more savings resulted into more investment, and more investment resulted into the overall growth of the economy.

Large Population Growth and Urbanization: According to the 2001 census, India’s population grew at a rate of around 2% a year during the previous decade. This was a marked decline from earlier decades of population growth of around 3% annually. Nevertheless, India added 181 million people between 1990-2001, more than the total population of Brazil25.

According to the forecast of Goldman Sachs (an American investment bank), the reason why India is expected to outperform Brazil, Russia, and China, as well as the “rich world” (i.e., United States, Canada, France, Germany, United Kingdom), is that it is the only country where the population will continue to grow for the next 50 years and where the proportion of working-age people will increase well into the 2020s26. The percentage of urban population in India has increased from 21% in 1975 to more than 28% in 2004. It is likely to increase to 36% in 202527.

Most high-income Indians prefer to live in urban areas. Over 70% of affluent urban Indian consumers live in the ten most populated and cosmopolitan cities in India: Mumbai, Delhi, Kolkata, Pune, Chennai, Hyderabad, Bangalore, Ahmedabad, Ludhiana, and Nagpur. The number of dual income households, where both husband and wife work, is slowly increasing in urban areas. Like their husbands, full-time working-women spend most of their time away from home. As a result, there has been a dramatic change in the way Indian working wives shop and organize family meals. Packaged rice, prepared yoghurt, packets of flour, frozen chickens, and marinated mutton (goat or lamb meat) are fast replacing curdling, grinding, and handling of market-bought fowls and haunches of mutton. Not surprisingly, even some Indian consumers have started opting for meals away from home on working days.

The growing popularity of Delhi’s Waiters on Wheels (WOW), a supply agency delivering meals to people’s doorsteps from 30 different restaurants at the same price as one would pay in the restaurants, is an example of India’s changing food service landscape28. High income and growing urbanization have also contributed to a shift in the traditional Indian food habits. High-income urban dwellers are seeking variety in their choice of foods and are willing to spend more on international cuisine, including fast foods. Consequently, a growing number of domestic fast food outlets, home delivery, take-away restaurants, and American restaurant chains, such as Kentucky Fried Chicken (KFC), TGI Friday’s, Domino’s Pizza, Pizza Hut, McDonald’s, and Baskin Robbins, have opened in the last few years. India being a second largest country in terms of population possesses large potential market for all the products/services. This results into entry of large number of fast food players in the country.

Relaxation in rules and regulations: With the economic liberalization of 1991, most of the tariff and non-tariff barriers from the Indian boundaries are either removed or minimized. This helped significantly the MNC’s to enter in the country.

Growth in number of women’s in the work force: There is increase in the number of women work force in the recent years because of the improvement in the literacy rate and also because of the large number of jobs now available because of the entry of foreign and private players in the Indian market.

Menu diversification: Increase in consumption of pizzas, burgers, sandwiches and other type of fast foods.

2.8 Problems of Fast Food Industry in India:
Environmental friendly products cost high: Government is legislating laws in order to keep check on the fast food industry and it is emphasizing more on the usage of biodegradable and environment friendly products. But associated with this issue is the problem that fast food player faces, which is the cost, associated with the environment friendly product. They cost much higher then the normal products that companies use for packaging or wrapping their products.

Balance between societal expectation and company’s economic objectives: It becomes important to balance a society’s expectation regarding environment with the economic burden of protecting the environment. Thus, one can see that one side pushes for higher standards and other side tries to beat the standard back, thereby making it an arm wrestling and mind-boggling exercise.
Health related issues (obesity): Studies have shown that a typical fast food has very high density and food with high density causes people to eat more than they usually need. Changes in diet coupled with stress-filled lives and more sedentary modern existences are beginning to take their toll on the consumers’ health. Basic nutrition is simple, yet there is mass confusion about what to eat and what effects a particular food has, and the reason for all of this misinformation is that it benefits food producers to have an innocent flock of customers who are left uncertain of how to judge what is healthy and what is not.

A recent article29states that India is becoming a nation of obese, increasingly exposed to various food hazards, largely thanks to the lies and evil ways of large corporations that will stop at nothing to increase their profits. There is an excessive consumption of pizzas, noodles, ice-creams, beef/ham/cheese burgers, which constitute the universally available fast food. These constitute junk food having empty calories, which means this kind of food contains the calories that are not particularly helpful to one’s body. These days there is an emphasis on taste rather than nutrition. Convenience foods are manufactured commercially and on a large scale, and consequently are low in nutrition. The result is that 25 per cent of males and 36 per cent females above the age of 20 years are overweight.

Obesity was earlier the problem of the developed countries, but now even the developing countries are facing the threat. Technology has made it easy to follow sedentary life styles, which must be avoided at any cost.

Green Sensitivity: In India, there is a vocal group of environmental and animal activists who oppose the entry of fast-food chains like KFC and McDonald’s. Maneka Gandhi, former environment minister in the central government, and Dr. Vandana Shiva, Director of the Research Foundation for Science, Technology and Ecology, are the prominent leaders of this group. According to this group’s campaign, junk food chains like McDonald’s and KFC destroy ecological balance and cause severe behavioral disorders because of their fatty and unhealthy foods, which have excessive levels of monosodium glutamate (MSG). Besides, they also campaign that these food chains are anti-poor and cater only to the rich segment of the Indian society.

2.9 Conclusion:
Multinationals in India often wonder why their marketing plans often come unstuck. The answer usually given is: “India is different’. Serious inquiry begins when we ask how Indian consumers are different. It is observed the success of fast foods arose from the changes in our living conditions:

  • Many women or both parents now work
  • There are increased numbers of single-parent households
  • Long distances to school and work are common
  • Usually, lunch times are short

There’s often not enough time or opportunity to shop carefully for groceries, or to cook and eat with one’s family. Especially on weekdays, fast food outside the home is the only solution. Today, only 40% of young college-age people eat lunch at home. Mostly teenagers and young adults use fast food facilities when there is shortage of time. According to studies, 66% of young men and 33% of women in Switzerland eat one to two hamburgers a week, and half the teenagers eat French-fries once a week. The large chains have pulled out all the stops of modern marketing, targeting primarily young consumers. They entice their potential customers with TV spots, children’s parties, gifts for small children, and an ambiance that is generally child- and teenager friendly. Large distributors, bakers and butchers, snack bars, and so on, also exploit the fast food trend and offer more take-out products.

It’s obvious that these campaigns are at the expense of traditional home dining culture. Experts have coined the term “McDonaldization” to describe this phenomenon.

Some noticeable facts about fast food industry are: Fast food had experienced fast growth in past decade. Changing lifestyles, breakdown of joint family system, increasing number of working women’s and western influence in urban areas are fuelling the demand for fast food.

India already has the entire requirement for a head start in Fast food industry. Basic materials such as food, vegetables and meat can be sourced locally or easily imported if local availability is not adequate.

Food outlets are just beginning to appear in India’s big cities and this is a time for international chains to set a foothold. There will be increase in competition in the near future. Studies indicate that the highest percentage increase in units can be expected in the unorganized street stalls/kiosks sector. The one who will better understand and get closer to its target customer will win the game.

RESEARCH METHODOLOGY
3.1 Introduction to Research Methodology:

The present research is based on both secondary and primary data collection. Since the topic encourages facile projections and speculations for the future, the study has attempted to quote hard data in order to support viewpoints. In case where qualitative data and opinions have been used the researcher has made sure to present differing perspectives before coming to a conclusion.

3.2 Sources of Data:
The project work has been carried out in two phases:

  • First phase involved the process of secondary data collection that was done by studying issue related books, journals, articles and company reports.
  • Based on the results of the first stage the second stage involved the process of primary data collection through the questionnaire method. The standard questionnaire covered the awareness, attitude and behavior towards western fast food products in general and three selected product categories in particular.

3.3 Data Gathering, Processing and Analysis:
3.3.1 Secondary Data:
Secondary data has been collected from company reports, websites, and literature and company statistics. A full list of sources has been included in the Annexure. An in-depth analysis of a number of case studies and reports has been carried out based on the secondary data available from these sources

3.3.2 Primary data:
Primary data was collected from a selected sample of respondents following the Simple Random Method. Responses were scaled according various variables and clusters were formed to come to the findings, discussion and conclusion of the research. The sample comprises of 115 consumers, selected at random. In this stage consumers were interviewed near fast food restaurants and information was gathered about their awareness, attitudes and preferences towards western fast food offerings.

To make sure that the sample represented the entire Western fast food consuming population in the city of Chandigarh, the sample has been selected on ‘sector’ wise basis. The city is divided according to ‘sectors’ and fast food outlets were selected such that the sample represented the entire population of Chandigarh. A full list of the fast food outlets has been given in the Appendix to this research.
The interpretation and analysis, which comprises of both quantitative and qualitative nature, is based on both the secondary and primary data, and may therefore be considered to be of a more subjective nature.

The variables selected for consideration in the analysis are based on various factors of the consumers in the town such as demographic factors like age, household income, occupation, psychographic factors such as attitudes and beliefs of the consumers towards Western fast food offerings, behavioral factors such as brand loyalty, price sensitivity, frequency of purchase and so on.

Once the initial variable list was developed, an analysis of the percentage response for each variable was undertaken to find out the differences in each variable in the responses from the consumers.

3.4 Location of the Study: Chandigarh
Chandigarh is a very modern town, in the northern part of India that is considered as one of the beautiful cities in Asia. It is designed for 50 ‘sectors’ with the exception of the unlucky number 13! Each sector is a self-complete block about a Kilometer in length by 0.8Km width.

The Map shows the location of Chandigarh in India.
the location of Chandigarh

LOCATION OF STUDY: Map of Chandigarh
LOCATION OF STUDY - Map of Chandigarh

3.5 Trends in the Indian Market:

Marketing to children’s: Fast food outlets in India target children’s as their major customers. They introduce varieties of things that will attract the children’s attention and by targeting children’s they automatically target their parents because their parents always accompany children’s.

Low level customer commitment: Because of the large number of food retail outlets and also because of the tendency of customers to switch from one product to other (as food is one area, where customer wants to try everything new that comes to the market), this industry faces low level customer commitment.

Value added technology services: There is continuous improvement in the technology as far as fast food market in India is considered. The reason behind that is food is a perishable item and in order to ensure that it remains fresh for a longer period of time, there is a need for continuous up gradation in technology. Earlier, Indian people preferred eating at home but now with the change in trend there is also need for improvement and up gradation of technology in food sector.

Attracting different segments of the market: Fast food outlets are introducing varieties of products in order to cater the demands of each and every segment of the market. They are introducing all categories of product so that people of all age, sex, class, income group etc can come and become a customer of their food line.

3.6 Challenges for the Fast Food Industry in India:
Social and cultural implications of Indians switching to western breakfast food: Generally, Hindus avoid all foods that are believed to inhibit physical and spiritual development. Eating meat is not explicitly prohibited, but many Hindus are vegetarian because they adhere to the concept of ahimsa. Those seeking spiritual unity may avoid garlic and onions. The concept of purity influences Hindu food practices. Products from cows (e.g., milk, yogurt, ghee-clarified butter) are considered pure. Pure foods can improve the purity of impure foods when they are prepared together. Some foods, such as beef or alcohol, are innately polluted and can never be made pure. But now, Indians are switching to fast food that contain all those things that are considered impure or against there beliefs. Some traditional and fundamentalist are against this transformation of food habit and number of times they provoke their counterparts to revolt against such foods. And that is what happened when McDonald’s decided to enter the complexity of Indian business landscape, counting only on its “fast food global formula”, without any apparent previous cultural training29.

Positioning for the selected segments: Positioning is an integral part of strategy for a new service provider. Once the target segment or market is clear, the service marketer has to position itself appropriately for its target segment. Even in case of a mature business, a service marketer needs to reaffirm its positioning in the minds of target customers. At times, a subtle shift in positioning may also be necessary to keep up with the changing consumer preferences or to cope with the challenges from the competitors.

Briefly, the positioning is a mental image or picture that a service provider would like to have about itself in the consumers mind. It is a deliberate attempt at building an identity of a certain kind for the service. For example, McDonald’s in India has a slightly up market image than in the US, where it is viewed as cheap American fast food. Since a hamburger is an everyday item of American food, it made sense for McDonald’s to develop the positioning. In India that slot is already occupied by a variety of Indian alternatives. For example, the idli-dosa corner food joints in the south, the parantha serving stalls in the north, or the tea and samosa corners of Kolkata. Therefore the mind space that most of the organized fast food restaurants had tried to occupy is of two types- One, the affluent westernized teenager and, Second, the modern, upscale family which is possibly driven by children who enjoy the feeling of eating outside their household. Positioning has lot to do with the target segment to which we chose to market, and has elements like price, packaging, communication and ambience, which reinforces the positioning, attempted by a company.

Emphasis on the usage of biodegradable products: Glasses, silverware, plates and cloth napkins are never provided with fast food. Instead, paper plates and napkins, polyurethane containers, plastic cups and tableware, drinking cartons or PET (polyethylene terephthalate) bottles are used, and these are all disposable. Many of these items are tossed in the garbage instead of being recycled, or even worse, merely thrown on the ground. This burdens nature unnecessarily and squanders raw materials. In order to reduce soil and water pollution, government now emphasizes more on the usage of biodegradable products.

Retrenchment of employees: Most of new industries will be capital intensive and may drive local competitors, which have more workers, out of business.

Profit repatriation: Repatriation of profits is another area of concern for Indian economy. As when multinational enters any country, people and government hope that it will increase the employment rate and result in economic growth. However, with the multinational operation, host country experiences these benefits for a short time period. In long run neither employment increases (because of capital intensive nature of MNC’s) nor it increases the GDP or GNP because whatever MNC’s earn they repatriate that profit back to their home country.

DATA ANALYSIS
4. Consumer Analysis:
Based on the results of the secondary data collection 115 interviews were carried out to quantify the awareness, attitudes and behavior towards western fast food products in the city of Chandigarh on the basis of a questionnaire. The questionnaire included questions on western fast food in general and three selected product categories in particular.

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4.6 Key Findings:
4.6.1 Factors influencing product choice:

In this section the main factors that influence choice (decision to buy) and purchase (exchange of resources) of Western food products are described based on the results of the response from the consumers.

Who buys:
Most selected buyers have the influence of commercial and personal sources as to how they became acquainted with Western food products. Housewives and elderly buyers tend to be more price sensitive as they have limited budget and time to make a purchase. Participants with children tend to spend more money on fast foods, and they perceive the products are convenient/easy to eat, less time consuming, fresh, suitable when socializing, having nicer and strong packaging, and are competitively priced compared to local products.

Most of the participants preferred to shop at organized fast food restaurants rather than in street stalls for the following reasons:

  • Shop premises is spacious and clean
  • Good sales service
  • Near to their work place
  • A wide selection of food choices
  • Safe to eat
  • Fresh ingredients used

But, they also find the Western fast food offerings more expensive as compared to local fast food offerings. Older consumers prefer local fast food restaurants as compared to Western fast food restaurants. The most important reason being that Western fast food restaurants are often crowded with youngsters, and they prefer visiting restaurants where there is no self-service.

What to buy:
Half of the participants are most likely to purchase products, which can be consumed as a snack. Fresh offerings are mentioned as items that participants are likely to purchase because these food products are perceived as clean and hygienic. Beverages are most often mentioned in combination with Western fast food items. Most of the participants are likely to purchase products that can be consumed as snack every day, which is having fewer fats. Frozen pizzas are not bought because people rather preferred fresh pizzas at Western restaurants such as Pizza Hut.

Consumers like fast food offerings with a light sauce such as tomato sauce or with a special sauce (chutney) made from fresh vegetables for a healthier variant. Consumers are least likely to purchase alcoholic (beer, etc.) items because they don’t find it suitable with Western fast foods. Frozen offerings (frozen pizzas) also seem as least likely buy. All the participants prefer beverages with the Western fast food offerings. Participants did not like too oily products and salads are also mentioned by most of the buyers as a good combination with the offerings.

Time and occasion:
Most of the participants consume western fast foods frequently. On an average, they consume Western fast foods 3 to 4 times a week at restaurants, mostly at breakfast or at lunchtime, but some of them consume Western fast food up to 8 times a week. Participants opt for western cuisine at fast food restaurants such as McDonalds, Kentucky Fried Chicken, Pizza Hut and local organized fast food restaurants as these are the places that they recognized from their childhood onwards and are perceived to provide clean, quick, and reasonably priced food. If eating at home most of them prefer ordering the offerings by ‘Home delivery’ service.

Having food with peers, family is preferred by most of the respondents. Therefore, they would purchase the best quality food provided that the food is fresh, not expensive, has traditional flavors that satisfies their simple eating habits. Those who liked Western fast food as meal perceived it as cleaner and more hygienic, time saving, better quality and less expensive because of in-store promotions, and above all other family members, especially children liked the offerings.

4.6.2 General attitudes towards Western fast food products:
Most of the participants preferred Western fast food products above local fast food products for the following reasons (see also previous paragraph):

  • Food is fresher
  • Food has better quality
  • Food is clean and hygienic
  • Food is convenient/easy to eat
  • Food has better nutritional value
  • Food has better/durable packaging
  • Food is recommended by family members, friends or colleagues at work

4.5.3 Motivational factors behind buying behavior:
In order to obtain a better understanding of consumer motivations behind their buying behavior most of the questions were kept open ended along with most often occurring motives as understood from the secondary data. Participants ranked their most important motives to try a Western fast food product for the first time in order of importance as follows:

Motivation mentioned:

  • Word of mouth recommendation from friends/relatives
  • Free sample at a promotional counter
  • Advertising outside the store (e.g. commercial ad on TV or print ad from magazines, food magazines particularly)
  • Natural curiosity
  • Food wrapped in a nice packaging
  • Special in-store promotional display
  • Price cuts in the offerings
  • Economic offerings for large groups (e.g. Happy price menus from McDonald’s and Combo meals from Pizza hut)

Other less important motivations mentioned by consumers include food freshness directly seen from the packaging, country of origin, detail information about the ingredients, and detail information on the production process.

Factors that have the greatest influence on their eating and food buying practices are family members, closed related friends, health issues, product information, in-store promotions and advertising.
Most of the consumers agreed that Western fast food products are hygienic/safe to eat, easily available, time saving, convenient/easy to eat, ideal for social gatherings, enjoyable, give value for money and is today’s trend in Chandigarh.

Salient beliefs mentioned by respondents include cleanliness, safe to eat, time saving, convenience, is a trend in Chandigarh, good quality standard, eating habit, better nutritional value and freshness.
Half of the participants agreed that a brand was important when choosing Western fast food products because of the following factors:

  • The general image of the company; if the company has a good reputation, this was perceived as a guarantee for high quality products
  • Standard guarantee in respect of safety and hygiene; well-known brands are perceived as more reliable than less well-known brands.

The most important criteria for participants to pick up certain Western food products include taste, store cleanliness, freshness, nutritional benefits, food quality, price, country of origin, packaging and brand name. All participants are aware that the price of Western fast food products is higher than the prices for local food products. However, they are willing to pay more for a Western food product over a similar local food product because of the following reasons: (1) convenient/easy to eat, (2) variety in offerings, (3) food quality is more important than price. They have better confidence in the quality of Western fast foods.

On the basis of sensory food characteristics, products having traditional Indian flavors are generally preferred over all others. Depending on one’s demographic traits, preference may be based on money-saving or timesaving characteristics. Consumers also have a general preference for variety in the diet, related to the willingness of most of the participants to try new foods. Consumers also have a preference for freshness. As most of the participants spend most of their time outside their home, food shopping tends to be done daily. Because generally fast food products are consumed right away there is no need for storage or preservation, therefore, products are always purchased extremely fresh. When eating alone or in small groups, there is a tendency to eat Western fast foods, many of which are perceived as requiring less time and effort. Eating in restaurants and/or eating Indian-style foods seem to be preferred in situations involving larger groups (during lunch/dinner).

There are two reasons for this: cooking at home for large groups requires too much time and effort; and Indian style meals involve the sharing of many dishes among everyone at the table. The variety that results from this practice is greater with larger groups of people. The adoption of Western fast foods is related to the influence of significant others, such as family members, the education system (hygienic/unhygienic), mass media and co-workers. Social influences may encourage or discourage the adoption of Western fast foods.

Seniors are generally less likely to adopt Western fast food consumption behaviors (home cooked food is generally preferred by elderly people). The role of mass media in the adoption of Western fast foods is primarily to create awareness of the existence of various food products, and to provide information. In-store samples of products are useful in providing the trial of novel foods. However, attitudes towards Western foods are formed more through word-of-mouth and to some extent through personal experience and messages of the media.

Several factors were found to motivate the retention of Western fast foods. Perhaps the strongest factor affecting the use of Western fast foods is Indian traditions. Foods whose qualities conflict with the sensory characteristics of traditional Indian foods are generally tried more reluctantly. Western foods are perceived to be having ingredients made from beef and pork (tallow) by some of the consumers. In India cow is sacred to the Hindus and Pork to the Muslims. Price is also an important consideration when making consumption decisions. Low prices may induce the trial of some Western fast foods and may allow a Western product to be chosen over a similar Indian product.

However, the people’s love for fast food is reflected in the overwhelming number of fast food outlets, whether they are western fast food restaurants, local fast food restaurants, snack shops or street stalls/kiosks.

CONCLUSION AND RECOMMENDATIONS
5.1 Introduction to Conclusion:

In the course of carrying out the research study, very important aspects have emerged. Despite being the city having highest per capita income and competing in every aspect with a well-developed western town, the results show an astounding difference between the consumption behavior of the western consumers and urban Indian consumers. Below listed are the preferences of consumers in Chandigarh for Western fast food offerings:

5.1.1 General:
The food market in Chandigarh is a large market, which offers opportunities for overseas suppliers and producers as a significant number of fast food products are in big demand. Chandigarh has a population of 6.5 million, comprising mostly of domestic households.

Shopping and eating habits of domestic households generally reflect Indian customs and local circumstances. But, at the same time people love to associate themselves with the western culture. Gender roles are now changing. Females have started working outside. So, they have no time for their home, especially for cooking food. Fast food is an easy way out because these are easily available and are convenient/easy to eat. Larger families often dine out at dinnertime, and most working people dine out at lunchtime.

Awareness of Western fast food products among Hong Kong consumers is high. On average shoppers mention 3.8 Western fast food products (un-prompted), when asked. Fresh pizzas, burgers, hot-dogs, French fries and sandwiches are mentioned most.

Local fast food restaurants are the main outlets for fresh food products, especially among elderly grocery shoppers. However, as younger generations tend to adopt a more Western lifestyle, Western fast food outlets are enjoying an increasing share of the market.

The market for western fast food products is a highly competitive market in Chandigarh, due to its free and open nature. Fast food chains are originating from all over the world, but the dominant fast food chains are from the U.S. Due to the ambience and better service conditions, local fast food outlets are preferred by the elderly consumers.

5.1.2 Who are the Consumers of Western fast food products:
Western food products are mostly bought by consumers in the younger age group or are bought on behalf of them by family members/older relatives in the same household. The maximum number of consumers of Western fast food products are from the age group of 15-25 years, and from the household income perspective, most of the consumers are from the average income group (Rs.15, 000 to Rs.25, 000; 34%). Consumers are relatively open to try out new products and tastes. Differences in age and income are important determinants of attitudes and preferences towards Western fast food products.

Hamburgers:
Purchase frequency of hamburgers is higher in younger consumers (15-25 years) and it keeps decreasing with the increase in age. Higher income people (Rs.45, 000 & above) less often consume hamburgers (15%), instead they buy for their children. However, 22% of the average income (Rs. 15-25, 000) people eat them 3-4 times a week, while most other people buy them only once or twice a month. On an average there is no much difference in the consumption of hamburgers for male and female consumers.

Pizzas:
For the consumption of pizzas the level of income and sex ratio has a major impact on the purchase penetration rate. Purchase frequency of pizzas is higher in the income group of Rs.15, 000-25, 000. Higher income consumers (Rs.45, 000 & above) less often buy pizzas (27%). The penetration is much higher under the younger buyers than under older buyers. Female consumers are more health conscious and therefore, their purchase penetration is lower than male consumers.

Sandwiches:
There is no significant difference for the purchase frequency of sandwiches when considering the age factor of the consumers, and the frequency of buying the sandwiches is higher both in males as well as females. Purchase frequency of sandwiches is higher in the income group of Rs.10,000-15,000; 89%. However it is noted that higher income people (Rs.40, 000 & above) less often buy sandwiches (11%) instead they buy for their children.

5.1.3 How consumers become acquainted with Western fast food products:
The influence of western culture through media or recommendation from relatives or close friends is an important factor of how people get acquainted with Western fast food products. Another important way for consumers to learn about Western fast foods is dining out in one of the many Western restaurants. Especially fast food chains as McDonalds and Pizza Hut are well known by consumers. Other important direct triggers are advertising, in-store promotions in fast food outlets such as Happy meals, free gifts for kids and so on.

Hamburgers:
Consumers became acquainted with hamburgers by:
-Commercial sources, such as, advertising, in-store promotions, restaurants (56%)
– Personal sources, such as family, friends, neighbors, acquaintances (19%).
-15% learned by their experience to try hamburgers out of curiosity.

Pizzas:
Consumers became acquainted with pizzas by:
– Personal sources, such as, family, friends, neighbors, acquaintances (42%)
– Commercial sources, such as advertising, in-store promotions, restaurants (38 %)
Sandwiches:
Shoppers became acquainted with sandwiches by:
-Personal sources (39%), such as, family, friends, neighbors, acquaintances and 26 % learned by their experience to try sandwiches out of curiosity.
– Advertising, in-store promotions (20%)

5.1.4 What are consumers looking for in Western fast food products:

  • Generally, Western fast food products are preferred above local fast food products for the following reasons:
    – Freshness – Better/durable packaging
    – Better quality – Easy and quick to consume
    – Clean and hygienic – Variety in offerings
    – Better sales service – Better nutritional value
  • Consumers think that the price of Western fast food products is higher than the price of local foods, but they are willing to pay more for quality and service. Average and higher income shoppers are more aware of the price differences, because they buy it more often. However, 49% of the respondents mention that Western food products are too expensive. Younger people mention more often than older people that price is a limiting factor when buying Western food products, because they buy them more often.
  • Taste appears to be strength and a weakness for different products. 49% of all respondents, regardless of gender, age or income; rate taste as the most important factor why they like Western fast food products. However, when inquiring the dislikes towards Western food products, price and ‘unhealthy to eat’ are rated by most of the participants as the main ‘dislike’. Younger people like Western fast food products more because of its taste, convenience (easy to eat) and quality. Higher income shoppers like Western fast food products more because of its taste, quality, its appearance and packaging. However, most of the female consumers dislike the offerings because of its higher price.
  • Purchasing a branded product is considered important when choosing Western fast food products. Consumers associate these with the general image of the company as a guarantee for the quality, safety and hygiene of the product sold by that company. Well-known brands are perceived as more reliable than less well-known brands; whether it is a foreign brand or a local brand, doesn’t makes a big difference to the consumers.
  • Hamburgers:

  • Western hamburgers are mainly bought in Western fast food outlets. Convenient/easy to eat, ‘children like it’ and taste are the most important reasons for buying hamburgers. Female and older buyers rate taste and freshness as the most important motive for buying hamburgers. The other most important reason to buy hamburger is that hamburgers are considered as a snack food, which is rated high by both the younger and higher income buyers.
  • Generally, brands are not important when buying hamburgers. Younger people find brand name even less important than the average consumer. However, 55% of the hamburger buyers find it important to have some visual cues on the packaging, especially female and higher income hamburger buyers. The country of origin is important to most consumers.
  • Most hamburger buyers consume hamburgers right away and eat them as a snack; especially younger hamburger buyers. Lower income hamburger buyers tend to eat them as part of their meal. The most important products preferred in combination with the hamburgers are beverages, ketchup, and salads. When hamburgers are not available, some buyers would buy any kind of fast food product, whether western or local, as an alternative, while others would end up not buying anything at all.
  • The number of people who intend to buy less or same number of hamburgers this year is larger than the number of consumers who intend to buy more. If intend to buy less, reasons to buy less are that buyers feel the hamburgers are: (1) expensive, (2) lack in nutritional benefits, (3) freshness. If intend to buy more, reasons to buy more are that buyers like the (1) taste, (2) quality, (3) children like it and (4) convenient (easy to eat).

Pizzas:

  • 53% of the consumers buy pizzas 1-2 times per week and purchase frequency of pizzas is higher in the income group of Rs.15, 000-25, 000. Pizzas are mainly bought in Western fast food outlets. Taste is the most important reason for buying pizzas. Taste and having too much caloric value are also the most important reasons people less often buy pizzas. The second most important reason to buy pizzas is convenient/easy to eat, which is rated by younger buyers as the most important reason.
  • Most of the pizza buyers find the brand name neither important/nor unimportant, whereas female buyers rate brand name as important. About 42% of all pizza buyers find it important to see visual cues on the packaging, but they are not interested in the country of origin.
  • Most pizza buyers eat pizzas as a snack. This can be attributed to the fact that most of the population in the city of Chandigarh spends most of their time outside their home. Most of the lower income buyers (Rs.10, 000 to Rs.15, 000; 89%) eat pizza as a meal. 75% of male buyers eat pizza as a snack while 83% of female buyers prefer pizzas as a meal. However, female consumers like to share the pizzas with others and maximum number of them buy for children. Most of the younger consumers like to eat the pizzas right away.
  • Most buyers would not buy another substitute in case of unavailability of a pizza, although 79% of the younger buyers (15yrs. to 25yrs.) would prefer any kind of Western fast food as an alternative to pizzas. The most important products preferred in combination with the pizzas are beverages, ketchup, dip sauce and salads.
  • For the next year, the number of consumers who intend to buy fewer pizzas is larger than the number of consumers who intend to buy more. If intend to buy less the most important reason are: (1) not healthy, (2) expensive. The most important reasons to buy more are: (1) Convenient/easy to eat, (2) as a snack, (3) children like it (4) freshness. The number of female buyers who intend to buy fewer pizzas next year is larger than the number of male buyers. This can again be attributed to the health consciousness among females.

Sandwiches:

  • Purchase frequency of sandwiches is higher in the income group of Rs.10, 000-15,000; 89%, and they are mainly bought in snack shops. The most important reasons for buying are (1) as a snack, (2) convenient/easy to eat. The second most important reason to buy sandwiches is freshness, which is rated by most of the female buyers and older consumers as the most important reason. ‘Lack of freshness’ is also the most important reason people never buy sandwiches (41%) followed by not very tasty (18%).
  • Almost half of the buyers find the brand name neither important, nor unimportant; whereas higher income (Rs.40, 000 & above; 89%), female buyers of sandwiches find brand name as important. The most important reason being the use of fresh and quality ingredients. However, most buyers (39%) find packaging important. Younger sandwich buyers mention packaging of sandwiches neither important, nor unimportant.
  • If sandwiches would not be available, most buyers would replace them by local fast foods. For the next year the number of people who intend to buy same/more sandwiches is higher than the number of consumers who intend to buy less. If intend to buy more the most important reasons are: (1) less caloric/healthy, (2) cheaper as compared to the products in the same category, (3) Convenient/easy to eat, (4) As a snack, (5) Freshness.

5.2 Introduction to Recommendations:
The Fast food industry in India is poised for significant growth over the next few decades, particularly in urban India. Gaining local acceptance and blending in to the Indian culture still remains a challenge for many fast food restaurants. The study was undertaken with an objective to understand the preferences of consumers in Chandigarh on Western fast food offerings and based on the results of the study the main objective was to identify factors to be considered to encourage buying of western fast food offerings.
Following are some of the recommendations that can be adopted by various brands to encourage the buying of Western fast food products.

India’s fast food industry is growing by 40% a year and is expected to generate a billion dollars in sales by 2006. Marketing of fast food and getting a foothold in India is going to be highly competitive in the near future because of the high potential of the Indian processed food sector. On an average, each household spends about 50% of income on food and beverages. Following factors should be considered to encourage purchasing of Western fast food products:

  • Price appears to be a critical factor in the choice making process of consumers, especially younger people. A typical Indian is price sensitive because of his modest disposable income and he has comparable options in local food. Globally fast food chains only succeed when they bring their prices down to the same level as the street food. The trick can be to make the offerings better than the local food, and price them competitively. Most of the times this becomes impossible, so this can be counterbalanced by concentrating more on data base marketing and below-the-line activities and special offers.
  • Increasingly, eating out is becoming synonymous with entertainment. A clean and well-organized store atmosphere appears to be an attractive feature. The trend towards takeaways is also fast gaining popularity among Indian consumers. Most of the consumers of fast food products are from the younger age group; therefore the potential consumers should be enticed with TV spots, children parties, gifts for kids, and an ambience that is child and teenager friendly. Older consumers prefer to visit local fast food restaurants instead of self-service Western style restaurants; hence addressing such need can be an added feature. In India, social and cultural values have a very strong hold on the people. The fast food culture has imposed greatly on the views of youngsters and the desire for a large family meal. The marketers should focus more on positioning themselves as family restaurants highlighting their Indian menus.
  • Curiosity and an overall willingness to try new food and the value placed on variety in the diet indicate that Western origin fast foods are relatively likely to be tried and eventually accepted into the diets of consumers. The marketers should gauge to what extent preferences converge between the west and India with respect to product category. Fast food outlets should introduce varieties of products in order to cater the demands of each and every segment of the market. Fusion of Indian flavors with western products can be offered to counter competition from local products, and also strike a good hybrid culture, which will be highly acceptable to the western friendly youth in India. All categories of products should be introduced so that people of all age, sex, class, and income group can become a customer of manufacturer’s food line. Products should be developed and marketed to be compatible with Indian flavor principles and cooking methods, taking into consideration Indian culture and religious sentiments. An ethical sensitivity regarding the social legitimacy of consumer influence should be there.
  • Visual cues on packaging and clear labels (i.e. name of food, list of ingredients, logos) in stores are important. Most consumers prefer products with nutritional and caloric value printed on the packaging of the products. Nutritional information should be posted in prominent locations and online. Apart from salads, vegetarian offerings should be given high priority catering to the demand of the potential consumers.
  • The time and effort required to shop for and convenience/ease of eating food becomes more important in the decision-making process. An increased popularity of easy-to-eat products may therefore be anticipated. More take-out products can be added to the present variety of offerings. A brand should invest more and concentrate on having a more efficient distribution system in par with existing global standards. It needs to expand in India in parallel to the new trend in fast food chains, setting out tiny outlets such as express, takeaway, delivery and small dine-ins by fuel stations, in multiplexes and other highly frequently visited locations.

5.3 Implications for Future Research:
The following issues are suggested for future research to fill the existing research gaps:

  • The research project concerned a pilot project on a limited number of individual Western fast food offerings only, which may be extended to an envisioned continuous annual research programme. The scope and content of the study could be widened if similar research is conducted with more different product categories in the market having similar conditions.
  • The study was conducted in the city of Chandigarh, where it is estimated that consumers spend most of their time outside their homes. Therefore, the consumers were interviewed at various fast food outlets in the city. The trend towards takeaways and ‘home delivery’ is also fast gaining popularity among Indian consumers. Therefore, the scope of the study can be extended if questionnaires are put forward to consumers at their residences, offices, etc. Such a study would be very useful in understanding the preferences of consumers for the various offerings, and services (e.g. home-delivery service, etc.). It will give a deep insight about liking and buying behavior of consumers towards Western fast food offerings.
  • More intensive and time bound location specific research efforts are needed to get a foothold in a highly competitive fast food market like India.

A Model Of Consumer Decision making Process34:
A Model Of Consumer Decision making Process

According to Dr. Thompson, to arrive at a process of decision making, a customer normally follows the above process. When stimuli, often information from companies, reach an intended customer the decision and evaluation process begins. By a complex interaction between the individual and environment factors and the marketing mix the individual evaluates the stimuli. On completing the process, the consumer reaches a decision on the product or service. Even if the decision is positive it does not necessarily mean that consumer will make a purchase. Attitudes formed directly are proved to be much more stable and foreseeable than indirect formed attitudes like questionnaires. It is intention that determines what behavior will the consumer choose35.

References
1 Consumer Food Service in India, http://www.euromonitor.com/
(Accessed- October 2, 2005)
2 http://www.indianfoodindustry.net/ (Accessed- October- 2, 2005)
See, ‘A bite of the Indian bazaar’, The Times of India, Editorial, Pune Edition, May 31, 2005.
3 http://www.euromonitor.com/: Consumer Food Service in India
(Accessed- October 2, 2005)
4 Axelson M.L. and Brinberg D; A Social-Psychological Perspective on Food-Related behavior;
New York: Spinger Verlag, 1989, pg-49.
Also See Appendix- II, pg 100, for A Model Of Consumer Behavior Process by Dr. Thompson
5 Cultural availability deals with what food products are thought of as edible materials by a given culture, e.g. Westerners do not understand the Chinese, who bury ducks’ eggs in the ground, so that they start to ferment, just as the Chinese cannot understand Westerners, when they eat cheese, which they regard as bad milk. Similarly, majority of Indians don’t eat beef products because cow is considered sacred in Hindu culture.
6 http://www.indiainbusiness.nic.in/india-profile/ser-retail.htm
(Accessed- September 24, 2005)
7 Professor Kishore Dash; “McDonald’s in India”, Case Study; 2005 Thunderbird, The Garvin School of
International Management.
8 Vivek Gupta, “McDonald’s- Fast Food Fables”, Marketing Management, Vol-1, pg 121-127
Publisher ICFAI books.
9 See Appendix- V, pg- 115: Percentage of vegetarians as per the states in India,
10 D. Balasubramanian, “Changes in the Indian Menu over the Ages,” The Hindu, October 21, 2004
10 Lane Kelsey, Fast food, Southern India style, Embarcadero publishing company
www.my-voice.com (Accessed July 18, 2005).
11 Khurshid Anwar Warsi & Syeedun Nisa, Food Retailing: fast food industry,
Publisher-Social Service Research Network.
12 Debashish Ganguly, The Market for consumer Food services in India (Dec 2002). Euro monitor publications. Publisher- just-food.com
13 http://www.euromonitor.com/: Consumer Food Service in India
(Accessed- October 2, 2005)
14 USDA Foreign Agricultural Services, GAIN report#IN9082, U.S. Embassy, New Delhi; Annual 1999, Pg-2-3
15 Professor Kishore Dash; “McDonald’s in India”, Case Study; 2005 Thunderbird, The Garvin School of
International Management.
16 GAIN report no IN5066; Global Agriculture Information Report, HRI food service sector; Annual 2005; US Embassy 2005.
22 Dani Rodrik and Arvind Subramanian, ‘Why India Can Grow at 7 Percent a Year or More: Projections
and Reflections’; IMF Working Paper, July 2004.
23 EIU, Business India Intelligence, January 26, 2005, Vol. 12, No. 2, pg- 5.
24 NCAER (National Council of Applied Economic Research) survey report, March 9, 2004.
25 “Looking on the Bright Side: India’s Economy Is Revving Up,” The Economist, February 21,
2004, pg.- 13.
26 Goldman Sachs, Global Economic Paper No 99: Dreaming with
BRICs: The Path to 2050, October 2003, http://www.gs.com/insight/research/reports/report6.html.
Also see the follow-up report by Goldman Sachs, Global Economic Paper No 112: The G8: Time for
Change, June 2004; http://www.gs.com/insight/research/reports/report15.html.
27 Tim Dyson, Robert Cassen, and Leela Visaria, Twnety-First Century India: Population, Economy,
Human Development and the Environment; Oxford University Press, 2004.
28 Adirupa Sengupta, “Living Up to the Choices Offered by the Free Market,” India Abroad, August 29
29 Dr C.S. Gautam and Dr H.M. Swami, “Obesity: a nightmare of the future”, Tribune News Service,
Chandigarh; April 1, 2004
34 Dr. Thompson Kenneth N, A Model of Consumer Behavior Process.
35 Smith R, Psychology; Pg 579

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