For McDonald's, tax-inclusive prices have worked well: Seema Arora Nambiar

Seema Arora Nambiar, senior vice president – strategy, innovation and capability, McDonald’s India (West & South), in conversation with Ashish K Tiwari speaks about the company's new initiatives for strengthening brand McDonald's connect with its customers, market response for their all-inclusive pricing strategy and so on.

What was the reason for adding new items to the menu?

The additions were a part of our new campaign called 'flavours without borders'. It's quite an achievement because we have taken it across products, people, brand and all the way up to our vendor network to ensure that this campaign comes together. It's probably for the first time in our 21 years of existence that we have launched 12 new products in one shot. The task was quite challenging considering we have a very processes-driven kitchen. We were not only able to create new products that have got a differentiation in the consumer's mind but also trained the restaurants and the enthusiasm to deliver those products and the experience that the customers enjoy. From a sourcing and supply chain point of view, these are all local products but with global flavours.

Tell us more about the 12 new items that have been added.

We have six main entrees wherein we have Indian vegetarian and non-vegetarian products and then we have Italian and American sandwiches in both vegetarian and non-vegetarian options. Driven with local flavours and the festive season ahead, we have launched a dessert – Phirni McFlurry, which will be available for the next three to six months, a lemon-based beverage, fries which are American and three McCafe beverages that are in line with the cuisines on offer. These 12 products were derived from consumer feedback and preferences. We'd done Lebanese and Mexican last year and found that Lebanese still doesn't have that exposure compared to Mexican, Italian or for that matter American. The new range on offer is priced starting at Rs 49 going up to Rs 140.

The new offerings are available in all your outlets?

The new items are available across our 250 restaurants in West and South. However, the city of Bengaluru has a separate menu in addition to these offerings. There we are doing the 'tiffin treats'; that's because we found that their need for spice and sharing was very high. So, we have an entire collection of sides menu comprising chicken strips, potato wedges, different types of sauces, etc.

How are you going about communicating the same to your customers?

We are working on a very aggressive digital plan. In fact, this is one of the first campaigns to take the digital first route for reaching out to our patrons. This will be followed by a television campaign for the above the line media. There is an integrated plan through radio and outdoors. Over the coming months, you will see a multiple of these coming out and more so on weeks with big days like the Children's Day, Retail Employees' Day, the Diwali festival and so on.

What kind of an uptick in business are you expecting from the introductions?

We are definitely expecting incremental transactions to come from this considering it's a wide enough range providing a variety and Indianness in the food. It will be very hard to give a number to the projected increase in business.

How many new products have you introduced in this fiscal so far?

Around 20, including the 12 new products that we introduced recently. The new offerings will be on the menu for the next quarter or in the following quarter we will look at items that need to be replaced form the current set of offerings. Core products typically will stay on the menu while there can be changes in the limited-time offers that can stay anywhere between three and six months.

How is the tax-inclusive pricing strategy post the implementation of goods and services tax (GST) working for your restaurants?

Consumers' response has been very encouraging and they are liking the fact that they are paying the same price that is showing on the menu. It was a brave move and we were debating whether to do it or not. We took the risk of implementing tax-inclusive prices versus competition that is still charging taxes extra. The strategy has definitely worked well for the brand.

Have you expanded the NexGen restaurants out of Mumbai?

We are setting up NexGen restaurants in Bengaluru. We currently have five in Mumbai and there are plans to open five such restaurants in Bengaluru. Currently, we are testing the format to see what works and what doesn't. Post that, we will start to scale up there. Ultimately, it's an iterative process and till we are not sure that everything has received a thumbs up from the consumer, we don't normally scale up. That's what we did with McCafe too. We started with five and once we saw that the product and model were signed off, it was viable for us to ramp up. We opened McCafe in 2014, tested it till about mid-2015 and then we scaled it up. We now have 130 McCafes as we speak.

How many transactions are happening on the kiosks versus over-the-counter sales?

Roughly we are doing about 35%-odd transactions on the kiosks. We were given lower numbers and were quite surprised when we crossed that number. I think some people still have the comfort of coming to the counter and placing an order. A lot of it is a habit; for instance, in the UK market, a majority of the business still happens on the counter. People want to place the order, pick up their food and eat it at the table. They don't want to wait for the food which is the case with table service. The same phenomenon is visible in our restaurants in India too.

The drive-through restaurants were supposed to be a major focus area for the company. What's the progress with those outlets?

We've got almost 30% of our stores as drive-throughs. The car and highway penetration have not gone as per plans. These outlets are doing decently well and we are opening more consistently. Our view is that highway drive-throughs do much better as compared to those within the city limits. You will find a lot of these outlets on the Gujarat, Maharashtra and southern region highways as well.

Has the GST roll-out started showing any impact on raw material costs?

Not as yet. Being more cumbersome, it's still in the process. The consumer-facing points have changed immediately but the vendor base has had some problems with the GST site itself going down a few weeks ago. For suppliers, it was certainly very difficult to get into the system then. It's a mammoth task and will take time I think.