McDonald’s to expand operations with McCafe outlets in India

Fast-food giant McDonald's is replicating its international model in India where it will tie up with McCafe to offer gourmet coffee along with its staple burgers, seeking to capitalise on the growth of coffee outlets in India.

Hardcastle Restaurants, the company's franchisee for the South and West, will launch the first store in south Mumbai within its existing McDonald's outlet. Hardcastle is a subsidiary of Westlife Development.

Globally, there are over 10,000 McCafes located inside McDonald's outlets with a dedicated space and manpower (baristas) offering a more relaxed seating and ambience. Typically, seating arrangements and menus are different from those of McDonald's.

Cappuccino prices at McCafes would start at Rs90, while a frappe would cost Rs110. While higher than customary McDonald's rates, the price for a cappuccino would be lower than rival Starbucks, which charges upwards of Rs110.

''McCafe is about affordable luxury, where we offer a premium product at a reasonable price,'' said Hardcastle vice chairman Amit Jatia. ''It will act as an extension to the core McDonald's offering, with consumers now having the option to enjoy an assortment of food and beverages at an outlet.

''Our plan is to have McCafes in 75-150 McDonald's stores in the next three to five years,'' he added.

Like Starbucks, McDonald's would source its coffee locally -from Chikmagalur in Karnataka. Coca-Cola would supply coffee beans to the company.

Coffee would be the third line extension for McDonald's in India. In the last two years, it had added breakfast and dessert items.

Jatia declined to share the break-up of revenues from McDonald's line extensions in the South and West. However, it is expected coffee would become a significant vertical for the company.

So far, McDonald's outlets had only carbonated soft drinks such as Coke. While Coca-Cola's Georgia Coffee was available, its pick-up wasn't very high, experts said.

It is likely McCafes at McDonald's stores in the North and East of India would be launched later, as the company is entangled in a legal battle with Vikram Bakshi, its joint venture partner for the two regions; the matter is before the Company Law Board.

Bakshi has accused McDonald's of colluding with Jatia to force him to exit the joint venture - Connaught Plaza Restaurants - at a cheap price.

''I can only speak for the western and southern regions. But I would imagine McDonald's would take the McCafe brand across the country,'' Jain said.

Despite the fact that McCafe is a late entrant in India, Jatia believes that they still have the advantage to grow as their ability to expand is better, considering that they have a larger footprint now.