Litigation is never good for any business: Vikram Bakshi

McDonald's is in the middle of a legal quagmire with Vikram Bakshi, the former Managing Director of Connaught Plaza Restaurants Private Limited (CPRL), the joint venture company of McDonald's, responsible for north and east India. The dispute was sparked by McDonald's decision not to reappoint Bakshi as managing director in August 2013. It has slowed down the company's growth - McDonald's opened 27 restaurants in 2012 in north and east India. That slid to 13 in 2013, nine in 2014, and only two thus far in 2015. Bakshi, in an interview to Business Today, reflects on the burger market from his experience, not as a spokesperson for the company.

Q.How the QSR market in India evolved since you first started?

Bakshi: Nobody realised was how fast we could grow. In 1995, we thought Delhi could absorb five restaurants. Today, Delhi has about 50 McDonald's. NCR today can absorb 500 QSRs. There were questions about how do we compete against the samosas, the pakoras. Would a consumer pay a higher price for a product like this? I believe we are just starting out, because of the demographics India provides. It is the best age group in terms of consumption anywhere in the world. In 1996, the wallets didn't have money. The question was how do you change people's habits? Eating out as a habit was weak - it used to be an average of twice a month in the metros. Today, it is eight times a month. The consumer was saying my taste, your form. Tastes take a long time to change and we didn't want to change that. We wanted to fit in. The 'Aloo tikki burger' - the reason we called it 'aloo tikki' and not any other fancier name was clearly to make a person understand. What a success it has been! This single product outsells every other product 3:1; even today.

Is there a segmentation between volume and value now?

Bakshi: If you see the success of F&B restaurants across the world, they all start off being a part of your wallet share. Then over a period, segmentation starts. With so many (brands) coming in, and everybody believing they can not only survive but thrive, it does tell you that segmentation is taking off. Are we already a matured market? No we are not.

In coffee, there is mass market and a premium segment. Is this where the burger market is headed?

Bakshi: Already happened. New players are coming in on the premium product basis. Carl's Jr. is one of them. They are working well on fresher products, premium products. It is very important to know how the consumer is changing because a consumer starts with something and over a period, as he has more money, moves up the ladder. There will be mass players who will largely be there because of price; there will be those  where the experience becomes  important. Then there will be the specialist players at the top - where the product and the ingredients in the product, its freshness, and its premium nature will drive consumers.

How does this segmentation affect McDonald's?

Bakshi: This is my personal view. I believe with the sheer size of the population, anyone who is worried about surviving in the changed environment will waste his time. For the next 15 years, one doesn't need to worry about it at all. One needs to think about penetrating the market, being available to the customer in every possible way.  

So the demographics that a Carl's Jr. will drive is different and, therefore, there is no cannibalisation of the customer?

Bakshi: I do not say that there will not be a certain amount of cannibalisation. We have mass and premium products. But what will be important in the future is the number of visits (of the consumer). As the number of visits improve - a consumer may go for one visit to the newer player. But he will also improve your business simply because he is now eating out eight times.

How has the legal tussle impacted growth in north and east India?

Bakshi: It is understood that the present situation is causing a lot of harm to the brand. Growth is petering out. There is no doubt that it gives added advantage to other QSRs, especially in the north and east. Litigation is never good for any business.