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McDonald's India is upbeat on growth

The world's largest restaurant chain expects business to surge over the next decade as it adds new restaurants.

india Updated: Aug 22, 2006 15:41 IST

The Indian unit of McDonald's Corp, the world's largest restaurant chain, expects sales and profit to surge over the next decade as it adds new restaurants and a culture of eating out spreads.

"Between 40-50 restaurants are likely to be added in 2007," Vikram Bakshi, managing director at McDonald's India, told Reuters in an interview on Friday.

"I see ourselves as doubling our turnover every three years for at least a decade, and profit growth should be better than sales growth."

Oak Brook, Illinois-based McDonald's operates in India through two joint ventures in which it owns 50 per cent. The two firm have built up a network of 92 self-owned restaurants in the ten years since Indian operations began.

Some 350,000 customers are served every day across the country.

Bakshi says growth is likely to accelerate as the brand enjoys wide recognition in Asia's fourth-largest economy. Sales are forecast to rise about 40 per cent annually on the back of expansion, which will see 25-30 restaurants being added in 2006.

Bakshi declined to give actual numbers and McDonald's does not break up India sales individually, but its total revenue in the Asia-Pacific region, Middle East and Africa rose 8.5 percent in the second quarter ending in June, to $740.2 million.

India was already among the top 10 markets for McDonald's in terms of number of daily transactions as discretionary spending rises among the country's 300 million strong middle-class, he said.

McDonald's said it was still selling drinks made by Coca-Cola -- as part of a global contract -- despite a growing movement in India to ban the company's drinks, and those of rival Pepsi, following a report they contained traces of pesticide.

Indians consider a trip to McDonald's as aspirational, unlike in the West where it is primarily for convenience, Bakshi said.

McDonald's has tweaked its menu and prices to suit Indian tastes and pockets. Unlike in most western markets, the chain does not serve beef and pork in mostly vegetarian India.

Its vegetarian burgers start at 20 rupees (43 U.S. cents) and are amongst the cheapest company-produced fast foods available in India.

Bakshi said the two Indian joint ventures had invested between them nearly 9 billion rupees in setting up restaurants, cold chains and supply networks.

"We have broken even at the net level, still investment is going to be substantial and cash flows and internal accruals will help."

McDonald's competes mainly with Domino's, Pizza Hut, owned by Yum! Brands, Inc, Pizza Corner and local brands such as Nirulas, Haldiram, Sarvana Bhavan in the organised food and beverage retail sector.

This industry is estimated at 11 billion rupees, and growing at around 25-30 percent annually.

First Published: Aug 11, 2006 16:56 IST