Low-Cost Meals Drive Growth in Quick Service Restaurant Industry Amid Weak Urban Demand

Value Meals Become Survival Tool for Indian Fast Food Chains

In a bid to capture a larger share of the urban consumer's wallet, fast food chains in India have made value meals a permanent fixture on their menus. Sapphire Foods India, one of the largest franchisees of Yum! Brands Inc, and Westlife Foodworld, the operator of McDonald's in India, are aggressively pushing value meals as a strategy to drive dine-in traffic and combat the impact of high inflation on discretionary spending.

The pivot towards value meals began in 2023, when Restaurant Brands Asia, the operator of Burger King, introduced its first value meal at Rs 99. This move came after a decline in dine-in footfalls across the country, as consumers reduced their frequency of eating out at restaurants due to high inflation.

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According to post-earnings calls, Sapphire Foods India has seen a healthy performance in its dine-in and takeaway channels, backed by its value campaigns. The company initiated its value meals in approximately 150-odd stores in November and December, and has since expanded the rollout to roughly 200 stores, except for those in Tamil Nadu.

In Tamil Nadu, Sapphire Foods India offers "abundant and disruptive value" through BOGO (Buy One Get One) deals, increasing the average bill value per customer. The company's KFC Rs 99 Chicken Krisper Meal offers a budget-friendly combo featuring a Chicken Krisper burger, regular fries, and a regular Pepsi.

Westlife Foodworld, the operator of McDonald's in India, has also seen positive footfalls growth across all three months of the quarter, with similar momentum continuing into April. The company's CEO, Akash Jatia, attributed the growth to its focus on everyday value, including its Rs 99 everyday value meal.

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Both companies are affording their value meal strategies through a combination of supply chain efficiencies, vendor partner support, and operating leverage driven by high volumes. Sapphire Foods India has held on to its gross margin despite the introduction of the value meal, thanks to support from its vendor partners. Westlife Foodworld has also maintained its margin guidance for the year, thanks to its supply chain operating largely through annual contracts, which provides cost stability despite market volatility.