One of the qualities investors look for when evaluating companies is the presence of brand equity. Does a business sell products that can command a premium due to actual or perceived quality or through social factors like peer pressure or the desire to maintain a certain image? For companies that have such products, are they limited to one market or do they have global appeal?
The Wall Street Journal reports that Yum Brands has successfully opened its first Taco Bell location in India (click here for company press release). The Bangalore restaurant opened on March 16 and has attracted 2,000 to 2,500 customers per day. Other American fast food brands have been successful in India in the past. McDonalds has over 170 outlets and KFC, Domino’s, and Pizza Hut also have many locations. Expansion of fast food options in India seems to mirror earlier expansion in China.
In Superfusion, Zachary Karabell writes about KFC’s expansion in China and the adjustments that had to be made to appeal to local tastes (click on this link for a review of Superfusion). In China, western style fast food is considered a premium product and customers often consider a night out at KFC to be a special occasion and a place to be seen. It appears that a similar attitude exists in India and is being driven by younger affluent customers who can afford to pay a premium over typical street food. With prices starting at 18 rupees, or 40 cents, Taco Bell is appealing to a fairly large customer base.
Adjusting Brands to Local Tastes
One interesting aspect of Chinese and Indian expansion is that fast food brands have had to significantly adjust menus to appeal to the local market. Some of the products, such as the paneer and potato taco in India, have no resemblance to products sold in the United States. In fact, no beef based products are sold in the Indian market at all. However, the power of Taco Bell’s brand allows such products to sell well despite the fact that they are not the same products sold in the United States. Customers are buying the perceived qualities of the brand rather than the specific product.
In the video below, a Taco Bell executive talks about building brand equity in India and the vegetarian menu items that had to be introduced to appeal to the market.
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