McDonald's and KFC in a fast-food fight to feed India

India Dispatch: Dominant fast-food chains McDonald's and KFC aggressively expand in a battle across the country.

McDonald's has invested 3 billion rupees (Dh240 million) in India this year to add 50 outlets to the 200 operating.Pankaj Nangia / Bloomberg News

For 15 years, McDonald's and KFC have aggressively expanded in India, with their famous symbols - the Golden Arches and Colonel Sanders - becoming ubiquitous across the country.

But the battle for supremacy between the rivals has grown more intense in recent months as both chains rapidly open new restaurants, "Indianising" their menus and engaging in a cut-throat price war over their signature dishes - burgers and fries for McDonald's and fried chicken for KFC.

McDonald's has invested 3 billion rupees (Dh240 million) in India this year to add 50 outlets to the 200 it already operated in the country.

KFC plans to invest 10bn rupees to fund a fivefold expansion by 2015. It currently operates 100 eateries around the country.

Both fast food giants are localising their recipes to cater to a wide cross section of Indian tastes. The spicy vegetarian "McAloo tikki burger" by McDonald's competes with the curry-flavoured and meatless version of KFC's signature "zinger burger".

The turf war reflects how international food and beverage chains are jostling to tap India's growing market for restaurants.

Indians spend an estimated US$11.2bn (Dh41.13bn) on restaurant meals annually, a volume of spending that has lured several international chains, including Pizza Hut, Domino's Pizza, Dunkin' Donuts and Taco Bell, to India in recent years.

The growing business signals rising incomes and fast-changing dietary habits among Indians in a buoyant economy.

Food constitutes the nation's biggest consumption category, with an average middle-class family dedicating more than one-third of its earnings to food purchases.

India's agricultural and food business is expected to double to $280bn by the next decade, says ICICI, the country's largest private bank. India's food retail business, which accounts for 26 per cent of the country's GDP and is worth $70bn, is expected to more than double to $150bn, according to the global audit and advisory firm KPMG.

According to a report entitled Indian Fast Food Market Analysis, released in September last year by the market researcher RNCOS, India's fast-food market is growing at an annual rate of 25 to 30 per cent.

In March, Dunkin' Donuts, a $6bn company based in Massachusetts and owned by the private equity firms Bain Capital, Carlyle Group and Thomas H Lee Partners, announced a franchise deal for an undisclosed sum with the Bombay-Stock Exchange listed Jubilant Foodworks to open 500 Dunkin' Donuts outlets in India in the next 15 years. The first of these is expected to become operational early next year.

The company described the deal as its "largest-ever international store-development commitment". The announcement came barely a month after one its rivals - the Seattle-based Starbucks - unveiled a plan to launch its outlets in India in partnership with the local company Tata Coffee.

However, food inflation - which rose to 9.8 per cent in the week that ended on August 13, from 9.03 per cent in the previous week - and rising property rentals are some of the factors that could impede industry growth, analysts warn.