How companies can learn from
Burger King’s market entry into India.
th
Burger King opened its doors for the first time in India on Sunday 9 Nov. The first day's trading
results were outstanding. In a span of just 8 trading hours, 3,500 customers passed through the
doors at Select City Mall in Saket, New Delhi. By 7.00pm, the queues traversed two retail floors
with wait times in excess of an hour. The atmosphere was euphoric. 'This is amazing, it's the first
Burger King in Delhi and the first one in India,' announced an excited customer.
With an average unit value of INR 245, that's a healthy revenue stream from day one for the US
company based in Miami, Florida.
Yet, India, whilst rich in opportunity, often proves a difficult market for foreign companies.
Sannam S4 - your market
activation partner in India.
www.sannams4.com
Sannam S4 - your market
activation partner in India.
So, what can we learn from Burger King's entry into India?
1. Be in it for the long haul.
Burger King, with over 13,000 outlets worldwide,
realised India was a long play potential. It had
dabbled in India for years. In fact, it first registered
the Burger King trademark in India as far back as
1979.
However, India is tricky and companies who are
looking to enter this market need to be in it for the
long haul. Even for an iconic brand like Burger King
it's still not easy.
The fast food giant is currently in dispute with a local
company, amid claims that the latter has
'surreptitiously' registered as Burger King India Ltd in
direct competition to the international brand. In
India, this means that one of two outcomes are likely;
either both companies get to keep their trademark
because they are considered to be honest,
concurrent users or the local company will be asked
to remove its trademark based on India recognising
the trans-border reputation of the latter. The
argument continues in the high court.
The solution for companies irrespective of size is to
exercise patience, seek advice on intellectual
property rights and look for a route to market with
reduced risk.
2. Be proactive in internationalisation,
don't be led.
With a stagnant domestic market, it's easy to see
why India held such allure - a growing population of
1.2bn, increased consumer spending power and an
investment infrastructure poised to open up. Burger
King saw huge potential.
Even so, for a number of years India seemed a missed
opportunity. After a number of false starts, Burger
King is now a relatively late entrant into the market.
McDonald's, for instance, has operated in India since
1996. It now has over 300 outlets with a revenue
compounded annual growth rate of around 28%.
www.sannams4.com
3. Choose your local partners, suppliers,
distributors and agents carefully.
Over the years, Burger King held discussions with
various potential partners in India but had failed to
strike a deal.
It eventually entered into a joint venture with the
Indian private equity firm Everstone Capital. Both
parties have brought $100 million to the table and
are set to launch 12 stores in the next 3 years.
If that seems a hefty investment, think again.
McDonald's spent this amount in 1995 alone just
for the initial set up.
The partner 'fit' seems strong, Everstone already has
exposure in the Indian restaurant business with a
string of international restaurant brands, although the
Burger King investment is its biggest yet.
Burger King is now set to roll out its franchisee-run
outlets across the country. To gain further
penetration, the joint venture may opt to appoint
sub-franchisees to launch additional stores.
The key message is: whatever the size of your
company, do the due diligence on potential agents,
suppliers, distributors and partners. That's often
difficult to do from a home country base. Engaging
the right local organisation in India to support you in
company set up and selecting the right distribution
network can increase your speed to market at
reduced cost.
4. Understand the Indian market.
Together with the local partner, the Burger King
research team spent months understanding the
Indian consumer, their tastes and the need to
introduce local Indian flavours. It was key to
recognise consumer differences that exist across
India's 29 states.
Sannam S4 - your market
activation partner in India.
5. Deliver the right product and work on
the positioning.
The flame-grilled beef patty, a traditional symbol of
the brand, was never going to work in a market
which rejects beef and pork for religious reasons.
Burger King researched and exhaustively tested
different menus with over 5,000 customers across a
number of cities. The result is a menu of mutton,
chicken and veggie Whoppers®, as well as the paneer
melt sandwich, using a fresh cheese popular in Indian
cooking.
For India, the strategy may have changed but Burger
King the brand remains true to its core values of
taste, fresh ingredients and local sourcing.
In emerging markets, and India is no exception where
the average wage is only INR 200 a day, retailing the
Whopper® at INR 199 indicates that Burger King is
positioned as a premium restaurant experience to
the growing middle class.
6. Get the communications channels right.
Burger King took full advantage of promoting the
brand through burgeoning ecommerce channels
including ebay, where advance orders could be
placed, resulting in 1,200 Whoppers® being sold in
36 hours.
The brand has engaged with the Indian love of
celebrity culture, engaging key TV celebrities in its
promotions.
Clearly, understanding the effective communication
channels in India is key.
www.sannams4.com
7. Finally, don't underestimate the
bureaucracy; get help.
Burger King relied heavily on its local partner to
negotiate the bureaucracy of set up. Like other
industries, obtaining the required licences can be a
major obstacle. For Burger King health and food
safety licences were required, police licences and
no objection certification. The process is not
centralized as yet and requires filing applications
with individual stakeholders, which involves a lot of
paperwork and is a time-consuming activity. The
same can be said for many industry sectors.
Burger King would have found the Indian restaurant
industry burdened with multiple taxes like VAT,
excise, and service tax, besides different state taxes,
which add up to 20-25% of the bill value. An adviser
who understands the local tax complexities is
essential for any business setting up in India.
Nonetheless, the Organised Quick Service
Restaurant (QSR) market is expected to hit $6.5
billion by 2018 ( source: Technopak). Spurred on by
urban growth, the trend towards nuclear families,
more working women and increased affluence in the
tier two and tier three towns, this represents a
massive potential market for Burger King and other
international companies, currently beating the path
into India.
ABOUT SANNAM S4
Sannam S4 is a specialist, single window service provider of market
entry and business development services in India. Sannam S4
delivers an end-to-end service by providing reliable, on-the-ground
support in country as well as HQ home based expertise.
Sannam S4's international and Indian teams have a long track record
of establishing successful businesses in India.
The teams comprise of dedicated local specialists covering
marketing research, tax, accounting and inward investment advisory,
payroll, HR advisory, recruitment experts as well as distributor
sourcing / validation and business development expertise.
In India, Sannam S4 has offices in New Delhi, Mumbai, Chennai, Pune
and Bangalore.
Sannam S4 also operates in Brazil and China.
www.sannams4.com
LONDON
Tel: +44 (0) 203 3030025
LOS ANGELES
Tel: +1 (888) 860 2195
NEW DELHI
Tel: +91 (0) 11 4212 4100
E. [email protected]
@sannam_s4
Sannam S4 - your market
activation partner in India.
www.sannams4.com