McD in India 2020

Reality Judgement: MacDonald's is household name in most of the world. And largest hamburger fast food chain. In the current scenario it is followed by Burger King Holdings, Wendy's and Kentucky Fried Chicken. But what may hit McDonald's is it's over dependence on US and Europe. Even till date more than 60% of the revenue creation is from those 2 markets. (Source : Wikinvest.com)

"Everyone thinks of changing the world, but no one thinks of changing himself."

- Leo Tolstoy

Now, if I am the market leader with the lion's share you hardly sit back and take a balcony view. And by balcony view I mean, a perspective of your own performance from outside. What McDonald's has yet to release (or if realised then change their strategy) is that the growing population in India & China and the swelling middle class in India will make or break the future market leaders. Ref Annex 1.

Now if analyse specifically the Indian market, there are certain demographics which shout in our face. For example the current middle class population in India is 270 million, which is approximately 90% of the total USA population. And according to United Nations this number will be 580 million by 2025. Which means, the Indian middle class population itself would be larger than most of the countries in the world. Along with this report, United Nations also states that the urban population in India would increase from 30% (current) to 40% by 2030.

Value Judgement : The increase in urbanisation leads to many major shifts in the Indian households. According to the documentary "The other side of outsourcing" (http://www.youtube.com/watch?v=8quDb3FIUuo) by Thomas L Friedman, the social-economic shifts being seen in India are drastic. The youth now has money and freedom and desire to life the American Life, which transients into exponential growth of American brands.

If we look at annexure 2, we clearly see that the growth in service industry is fuelled by the shrinking agriculture in India. That along with the above stated data of increased urbanisation clearly depicts the move in the cultural strata. The other key observation is the increased level of female population getting involved in the active workforce of the country. The literacy rate amongst female population has jumped from slightly above 30% in 1991 to around 65% in 2011. An increase of 100% in these 20 years. Also if we see the female fertility rate in India, we see a clear decrease which will substantially increase the active female participation in work force. Refer to Annexure 3a and 3b. What that means is not only does the household income improve substantially but also that the meals cooked at home would reduce. Both the factors show a significant growth potential of fast food chains in India in the next decade.

Within this domain the last critical thing to focus on is the ration of Working is to Non-working population. And that domain to clearly shows the trend in India, in the next decade. Refer to Annexure 4.

Now, if everything is so clearly in advantage of Fast Food Industry, why should McDonald's worry? That's a billion dollar question!!!! Yum Foods targets to get a revenue of $1Bn from India in next 4 years. Shocking!!!! No. If we take a deeper look into their books we see a clear dependence on a single market China. They are too heavy on China, where currently they are the market leader with 40% market