India's not just a trendy destination for the Eat, Pray, Love set -- it's also a popular expansion target for American companies. McDonald's (NYSE: MCD) is the latest business to announce that it's accelerating its growth in that populous country.
According to The Wall Street Journal, McDonald's will open roughly 35 stores in India this year, bring its store count there to 210 by year's end. In addition, the company plans to open 45 more branches next year. Mickey D's is finding that smaller cities are a great place for its Indian outlets, rich in pent-up demand from consumers. For example, more than 10,000 customers per day hit a new McDonald's in Bhopal. That's staggering.
It isn't unheard of for McDonald's to tailor foreign restaurants to local tastes and sensibilities, but Indian adjustments are outside the company's typical focus. Indian McDonald's don't include pork or beef on the menu, and the kitchens will have a separate area for vegetarian food preparation. While a McDonald's without a hamburger seems like a strange concept indeed, that's the only way it'll fly in India.
Major McDonald's rival Yum! Brands (NYSE: YUM), of Pizza Hut, KFC, and Long John Silver's fame, is also aggressively expanding there, hoping to duplicate its success in China. Beyond the fast-food business, Marriott International (NYSE: MAR) recently announced India expansion plans, and Wal-Mart (NYSE: WMT) last year made a big impression on consumers there.
It's no wonder these companies are interested, given India's huge population, economic expansion, and growing middle class. The Indian economy's growth was expected to accelerate to 8.2% in 2010. On the other hand, India's middle class isn't as flush as the American middle class; nearly 60% of middle-class Indians live on the equivalent of about $2 to $4 per day.
Of course, foreign expansion isn't particularly easy for American companies; there are cultural and regulatory differences that shouldn't be underestimated. For McDonald's, a company historically known for hamburgers, leaving both the ham and the burgers behind is just the tip of the iceberg.
Still, shareholders should rejoice to see a smart, well-run company like McDonald's gaining a foothold in the Indian market, a region that could help the fast-food giant drum up additional growth.
