MUMBAI May 7 Fast food chain McDonalds Corp
plans to increase prices in India for the second time
this year, responding to rising inflation which, along with an
economic slowdown, it expects to temper demand growth for at
least the next 7 months.
The company said on Tuesday it would raise prices by 5-6
percent. That follows a 5 percent hike after the government
increased the service tax rate in February.
"There is pressure and it's a tough environment, no doubt.
But inflation is at 8-10 percent so we have to hike our prices,"
said Amit Jatia, vice-chairman of Hardcastle Restaurants, which
owns the McDonalds franchise for west and south India.
Consumer spending in India has taken a hit in the past three
quarters as rising food prices, meagre salary increases and the
slowest Indian economic growth in a decade hurt buying appetites
for clothes, cars and eating out.
With its 1.2 billion people and growing middle class, India
is a large market for global chains, though for now most Indians
cannot afford to eat regularly in western-style restaurants.
The burger chain said its same-store sales remained under
pressure and although they would grow, the increase would not be
at the 22 percent achieved in the fiscal year ended March 2012.
McDonalds entered India in 1996 without its signature
hamburger, respecting local religious beliefs which mean many
people avoid eating beef and pork. It has become India's largest
fast food chain operator selling chicken and fish burgers along
with vegetarian items like McAloo Tikki, which has a potato
patty, and the McSpicy Paneer, filled with cottage cheese.
The burger chain plans capital spending of 5 billion-10
billion rupees ($92 million-$184 million) in India over the next
3-5 years, mostly for store expansion, Jatia said, adding
India's long-term consumption growth story remained intact.
McDonalds has 309 stores in the country.
The company plans to add 80-90 restaurants in western and
southern India in the next two years.
Hardcastle is also contemplating an equity fund raising to
fuel McDonalds' expansion in the country in the coming years.
"We are in talks with merchant bankers every day and are
open to it. But we are considering all our options and that
includes debt also. We will be clear with our decision on what
instrument we choose in a month," Jatia said.
In December, Hardcastle Restaurants merged its operations
with listed parent Westlife Development Ltd