THE INDIAN MCDONALDS

In India, though McDonalds has been a runaway success by being very mindful of local sensibilities and tastes. Localization of ingredients, communication, visible company faces and consciously not cultivating an international image have been the strategies adopted by McDonalds in India. Where else in the world will you get McAloo Tikki or a Maharaja Mac? McDonalds is a renowned fat food American chain started by Ray Kroc in 1955. He established a franchising company with brothers Dick and Mac McDonald, who owned the famous McDonalds hamburger stand in California since 1937. Later in 1961, Ray became the sole owner of McDonalds by buying out the stakes of the McDonalds brothers. In India, McDonalds was started in 1996 in a unique way. The company got into a 50:50 joint venture with Delhi-based entrepreneur Vikram Bakshis Connaught Plaza Restaurants to own and operate McDonalds Restaurants in the northern part of the country. On similar lines, Mumbai based Amit Jatia and his Hard castle Restaurant were chosen for to own and operate McDonalds Restaurants in the western parts of India. Interestingly, Bakshi is considering the franchisee model for McDonalds North India operations by 2008 for deeper penetration into the countrys growing food and beverages market. By February 2007, McDonalds has 61 outlets in north India and plans to open another 25 joints in the course of the year and invest Rs 4 billion over the next 3 years. It is also planning to introduce McCafe concept in India by the end of 2007. McDonalds India is planning to increase the number of its restaurants from 105 to 155 all over the country by the end of 2007. In India typically one third of the 150 million tonne production of fruits and vegetables is lost at the post harvest stage. Most of it is attributed to wastage in storage and transportation, mishandling and the cost of intermediaries in the supply chain. McDonalds spend a few years setting up a unique cold chain. The cold chain is necessary to maintain the quality of food products and retain their freshness and nutritional value. A cold chain refers to the procurement, warehousing, transporation, and retailing of food products under controlled temperatures. Setting up the cold chain has involved the transfer of state-of -the-art food processing technology by McDonald and its international suppliers to pioneering Indian entrepreneur, who have now become an integral part of the cold chain. McDonalds has invested staggering Rs 8 billion in setting up its extensive supply chain in India. Efforts to initiate work on its supply chain started way back in 1992, about 4 years ahead of opening its first outlet in 1996. Not only was it difficult to identify the right vendors capable of adhering to McDonalds international standards, but also to train them to product as per its stringent specifications. For example, the peas have to of a particular dimension; otherwise they protrude from the patty (if bigger than standard size) and get burnt. Similarly, the iceberg lettuces (Band Gobi in Hindi) have been of specific weight. All suppliers adhere to Indian Governments regulations for food, health, and hygiene, while continuously maintaining McDonalds recognized standards. As the ingredients move from farms to processing plants to the restaurants, McDonalds quality inspection programme (QIP) carries out quality checks at over 20 different points in the cold chain system. Setting up of cold chain also enabled it to cut down on operational wastage. The companys hazard analysis critical control point(HACCP) is a systematic approach to food safety that emphasizes prevention within McDonalds suppliers facility and restaurants rather than detection through inspection of illness or presence of below quality food. Based on HACCP guidelines, control points and critical control points for the companys major food processing plants and restaurants in India has been identified. The limits have been established for those followed by monitoring, recording, collecting any deviations. The HACCP verification is done at least twice in a year and certified. The relationship between McDonalds and its Indian suppliers is mutually beneficial. As McDonalds expands in India, suppliers get the opportunity to expand their businesses; have access to the latest in food technology and advanced agricultural practices; and the ability to grow or to export. There are many cases of local suppliers operating out of small towns who have benefited from their association with McDonald India.

TRIKAYA AGRICULTURE
Implementation of advanced agricultural practices has enabled trikaya to successfully grow speciality crops such as iceberg lettuce, special herbs, and many oriental vegetables. The farms infrastructure features: A specialized nursery with a team of agricultural experts, Drip and sprinkle irrigation in raised farm beds with fertilizer mixing plants, Pre-cooling room and a large cold room for post harvest handling; Refrigerated truck for transportation. McDonalds buys third of its 450 tonne annual requirement from Trikaya. The remains amount is sourced from farms in Ooty (20%), Meena agritech of Delhi (25%), and Ferracon Farms in Dehradun. The association with McDonalds has a share of risks because any damage to the crop is borne by the suppliers. It accepts only good quality material, so suppliers have to minimize rejections. The lettuce crop is highly vulnerable to weather conditions. It can fail if there is excess rainfall, heat or hailstorm. McDonalds vast experience comes into play here. To avoid calamities McDonalds suggested that lettuce seeds be purchased from McDonalds (which imports them) and planted on raised beds or moved to two other non-flood prone locations 8 km and 40 km away during the monsoon. Trikaya also invested in a cooling plant and a refrigerated vehicle to transport the produce. To avoid excess man handling, the head of lettuces, which is cut at the base, is placed directly on the tray which goes into the refrigerated room. It is stored there till next morning when it is sent to the processing plant. The lettuce is harvested everyday at 6 am, packaged and maintained at the temperature of 2 degree celcius in the cooler. It is transported by a truck in a compartment maintained at 4 degree celcius. When it arrives at the processing center, it is processed at 8 to 12 degrees room temperature. The product and water temperature is 1 to 4 degrees and kept for 4 weeks before being dispatched at the distribution center in Thane, a northeastern Mumbai suburb. Lettuce is one of the few products sourced by McDonalds from more than one supplier despite the usual norm of having as few suppliers as possible. According to the company, for a burger in Delhi to taste the same as in Chennai, the number of suppliers should be less. In the case of lettuce, given the fragility of the crop, it is always possible for one of the suppliers to have a washed out crop. Trikaya with its excess capacity fills in to maintain the steady flow of supply. Trikaya sells the surplus produce in the local market for which it gets a better price of Rs 40 to Rs 100 a kg. McDonalds, on the other hand, leverages the economies of scale to buy the vegetables at cheaper prices. Few years back, pests used to devastate the lettuce crops at Trikaya. Today, with McDonalds help Trikaya uses the right pesticides during different times of the pests lifecycle and inhibits their growth. Every Monday, the pest scouting data is passed on to McDonalds office and together they work out a solution. Due to this collaboration, pest related rejections are down to 10 percent.

Vista processed food Pvt. Ltd:

Vista processed food produces a range of frozen chicken and vegetable foods. A world class infrastructure at their plant at Taloja, Maharashtra has: Separate processing lines for chicken and vegetable foods, Capability to produce frozen foods at temperature as low as 35 degree Celsius to retain total freshness; and International standards, procedures and support services. Vista, with its state of art plant, provides 20-30% of McDonalds total purchase of processed food. It deals with 45 suppliers for the products it supplies to McDonalds , ranging from frozen peas and assorted vegetables for vegetable patties to procuring the right quality of birds for the chicken patty. The process of freezing a patty after preparation is quite interesting. A food expert mixes the vegetable as per the recipe. It is then mixed with the rice as the binding agent. Once this is fed into the automated machine, it goes

through the motions of being dipped in the batter and then rolled in bread crumbs and fried and frozen; all this in exactly half an hour. The final outcome is a frozen and packaged patty which then has a shelf life of one year. It is maintained at -18 degree centigrade. The chicken used in chicken McGrill is supplied by Coimbatore-based Suguna poultry. It provides the frozen deboned meat to Vista. In fact, by the time the meat comes to Vista, it has travelled quite a bit. The eggs are laid in Bangalore. The hatching and contract farming is done out of Pune. The bird is processed at Pune before it is deboned and sent to Vista. The egg hatching and bird killing cycle takes 45 days and another 5 days are used for processing. Vista picks up 70,000 birds a month from Suguna, which is 20 per cent of its output. In order to contain costs, Vista strives to minimize rejections. After every batch of patties, a quality assurance expert fries a patty to test it for colour, appearance, internal texture, and flavor. If it passes the test on all the parameters, it is ready to be sent to the distribution centre. If it falls short on even a single parameter, the entire batch is rejected. By constant trial and error, the rejections are down from the early 8-10% to current 2%. The major concerns of vista in this process are related to temperature controls.

Dynamix Dairy
Dynamix has brought immense benefits to farmers in Baramati, Maharashtra by setting up a network of milk collection centers equipped with bulk coolers. Easy accessibility has enabled farmers to augment their income by finding a new market for surplus milk. The factory has: Fully automatic international standard processing facility; Capability to convert milk into cheese, butter/ghee, skimmed milk powder, lactose, casein and whey protein, and baby food; and Stringent quality control measures and continuous R &D Cheese comes in both shredded form and as singles. While the singles go directly to McDonalds two distribution centers, the shredded cheese comes to Vista to be used in a range of concoctions. While Modern dairy and Amul provide the paneer, the cheese is made by Dynamix, which has set up a separate line for McDonalds. For McDonalds, Dynamix produces sheets of cheese that are then cut into 8 slices each. It also churns out cheese singles for biscuit-maker Britannia that are marketed under the brand name Milkman.

McCain Foods:
McDonalds had a troublesome learning experience in sourcing the right kind of potatoes for its French fries in India. One of its suppliers, Lamb Weston, invested heavily in setting up production lines to process Indian potatoes in the early 90s. However, with the quality of potatoes crop not up to the McDonalds specifications, the project had to be abandoned. Having burnt its fingers, McDonalds did not want to take any chances. It has continued to import 1200 tonnes of potatoes every year for French fries from New Zealand. Now, it has partnered with its main global supplier, McCain Foods, the worlds largest French fries Company. Together, they are helping Indian farmers grow the right kind of potatoes. The Indian potato crop was not as good because farmers used seeds from the preceding crop. As a result, not only did they have only one variety of the crop, but the quality was poor. McDonalds specifications are clear and unbending- a certain length, high content, and low moisture. Indian potatoes typically have 15-19 % solid matter compared to the global standard of 18-26%. Hence, McCain, a leader in Agronomy, zeroed in one Deesa and Kheda, two Gujarat towns. It has been helping farmers in these places with better agronomy techniques, including irrigation, sowing seed treatment, planting methods, fertilizer application, and storage. The crop is improving in 21% solid content and McDonalds is now sourcing 350 tonnes of potato from Gujarat for its wedges. It will take a good 3 or 4 years before the right quality of potatoes (with 24% solid content) are grown for French fries.

Radhakrishna Foodland:
An integral part of Radhakrishna group, Foodland specializes in handling large volumes, providing the entire range of services including procurement, quality inspection, storage, inventory management, deliveries, data collection, recording and reporting. The salient strengths of this company are A one stop shop for all distribution management services; Dry and cold storage facility to store and transport perishables products at temperature up to -22 degree Celsius; and Effective process control for minimum distribution cost. Once processed, all the products have a minimum of 60 days shelf life, except for buns, which remains fresh for 5 days and lettuce, which remains fresh for 3 days. To transport around 800 tonnes of varying quantities of some 250 ingredients from 50 suppliers at varying temperatures, a wider assortment of trucks than Radhakrishna Foodlands Ltd (RFKL) currently has is needed. However, their design contributes to lower McDonalds supply chain cost. Each truck has three level of variable refrigeration, and the size of each refrigerated compartment can be varied according to need. The use of multi temperature trucks has reduced the number of daily deliveries to McDonalds outlets, which maintain an inventory of 2.5-3 days requirement. If on a particular day, lettuce is needed more than ice cream, the compartment with the relevant temperature can be expanded to take in more lettuce. This flexibility is the key to cost control in a situation where some perishables such as tomatoes, have to be dispatched daily, while products such as cheese and buns replenishment every 2 or 3 days, depending on demand and shelf life. RKFL has invested 24 multi-temperature trucks which offer three different temperatures- ambient, chilled and frozen. This has no doubt saved on transportation time and helped RKFL reschedule deliveries based on orders from various outlets. Earlier, transportation productivity was 6 to 7 cases per man-hour. This has gone up to 16 to 17 cases. Moreover, every case was earlier moved manually from the truck to the restaurant. Today, trolleys transport four cases at a time. Even the boxes, which used to be placed haphazardly as in any go down, are well-aligned now. The supply chain is common for both North and West India managed by Vikram Bakshi and Amit Jatia respectively. The processed food is taken to RKFLs two distribution centers at Thane near Mumbai and Noida near Delhi. The Noida centre also doubles up a s a processing unit. McDonalds always treats its suppliers as partners and strives to help them in every possible way. During its early association with RKFL, it introduced the supplier to Australias F. J. Walker to develop the distribution system. In 1996, RKFLs distribution centre had inventories of 35-36 days. Now with more sales and efficiencies, it is down to around 10 days about 175 stock keeping units. Dry goods account for 60% of inventories compared to 20% each of frozen and chilled stuff. This includes both inbound (those picked up and brought to the distribution centre) and outbound (which are taken from distribution centers to the outlets). There are also systems in place for tracking demand and supply. Every fortnight, RKFL sends rolling projections to the suppliers for the next three fortnights as every purchase order is placed 3 weeks in advance. The objective is to minimize the conversion of the raw materials into finished products. This helps suppliers to control their inventory as well. A big hurdle was the accurate forecast of product movement. Earlier product movement was tacked manually from each of the restaurants. Today with volume increasing, it is track through the product mix. Outlets are able to gauge their best sellers. The distribution business works on stocks turnarounds as fixed cost such as storage are distributed over larger volumes. Therefore, RKFL has three turnarounds a month compared to just one when it began operations. The planning behind McDonalds supply chain is so intense that if a new product hits the market today, its journey is sure to have begun a good two years before that. The competition is way behind for McDonalds in India. Its fellow American food giant Kentuchy Fried Chicken (KFC) entered the Indian market around the same time, but is yet to catch up with it. The truly Indian fast food chain Nirulas of Delhi is trying hard to make its presence felt in Delhis adjoining state with a snails pace. The gusto to take on the international giants such as McDonalds is missing among Indian fast food pioneers. Only time will tell, if they would ever be able to give competition to the likes of McDonalds.