"Everybody whose business is based on impulse buying is impacted"

Amit Jatia, Vice Chairman, Westlife Development - the franchise partner for McDonald's in West and South India - talks to Sumant Banerji about the churn in the quick service restaurants (QSR) segment in India and the erratic consumption pattern over the past year. Excerpts:

What has been the growth in the QSR category? Has there been an uptick in consumption pattern?

The consumption story is still very volatile. A couple of months are really good and then the next few months are muted. It's not that the consumer sentiment is very bad; the spend is driven by occasions. So, when there is a good movie, people are consuming more.

What are the reasons for this volatility in demand, considering the buoyancy in the overall economy?

It is very unpredictable. A year ago, the entire industry was down. While it's growing now, it goes up and down every month. Unfortunately, we are not where we were in 2011 or 2012 when the industry was really growing. It is also difficult to figure out whether the problem is more with rural or urban areas. All of us in the industry got our heads together and shared everything with everybody to make sense of what is wrong in the consumption pattern. But none of us could come up with any firm conclusion on the reason for volatility.

How are you coping with this slump in consumption?

We had a phenomenal run until 2013 when the consumer sentiment weakened with the faltering economy. It reduced footfalls in malls and big multiplexes. Everybody whose business is based on impulse buying, like us, is impacted. We do not believe in resorting to deals like our competitors. We relooked at our cost structure and developed more modern stores like McCafe. We brought down the cost of building a restaurant by 25 per cent and the operating cost by 20-25 per cent by increasing localisation and optimisation of equipment, and re-engineering the design. With McCafes, we have acquired a new set of consumers. We got our product - coffee for McCafe - right while keeping our cost low. It has brought in extra footfalls as coffee is consumed between meals, and perfectly complements our other staple menu.