 Hello and welcome to eForum Talk Show. Our guest today is Arvind Arpi, director of marketing at McDonald's India, West and South. Welcome to the show Arvind and happy new year to you. Happy new year to you too Kanchan. Thank you for having me here. And I suppose you are speaking to us, you know, from Middle East. So how is the weather there and which city you are in at present? I'm currently at Doha in Qatar. Unfortunately, the World Cup is over. So this is post World Cup. But surprisingly cool, very, very pleasant weather. One has heard a lot about the city and the development that has happened for the World Cup. And one is like flabbergasted to see the infrastructure here. So yeah, I'm loving it. I think new year is starting on a good note for you and also for McDonald's because you are launching the Big Mac for the very first time in India. So I would like to know what is the objective behind it and which consumer segment you are targeting at. Sure, sure Kanchan. Chicken Big Mac for us is one of the biggest launches over the past few years. Like you know, there are a large number of fans for the brand and especially for our Mac. More than a decade back, we launched the Maharaja Mac in both veg and chicken for the Indian market, conceptualized for the Indian market. And since then it has developed its own franchise and fan following. Chicken Big Mac is conceptualized as a revitalization of the Mac platform to give the consumers of Maharaja Mac chicken some new news and something different, something new. As you know, Big Mac is a very big icon globally. And it also kind of lands on our strategy so very well. Our strategy is all about growing burger leadership, chicken leadership, and of course coffee leadership. So this initiative is in line with that strategy. And yes, I mean, we are ready to launch this new iconic burger and I'm sure the fans of the brand would love it. So you have got I think within the Sehwag as your brand investor. So how does Sehwag connect to McDonald's as a brand and also the youth of India? Right. So when sometime back when we were kind of, you know, ideating on the launch idea for Chicken Big Mac, we kind of settled on a key theme. The theme being chicken Big Mac is so iconic that that was a whole theme behind the Chicken Big Mac and who better than within the Sehwag, right? An icon in his own right. But more importantly, a very witty, quirky character very much in line with what the brand is. McDonald's is all about fun and where Sehwag kind of brings it to a live in his own quirky way. So that that was the brand fit. And since he's an icon, big icon in his own right, we said what who better than kind of to bring this idea to live. So this is of course a multimedia across such point kind of a campaign. And and as you can see from the commercials, Sehwag really does well to bring this idea to life. 2023 is very different, you know, in terms of, you know, marketing because things have opened up, you know, compared to last two years, when almost two and a half years when, you know, there were a lot of lockdowns and a lot of constraints. So I would like to know what are your biggest marketing challenges and opportunities in 2023? And also, how are you planning to realign your marketing strategy now, you know, in the current situation? Yes, absolutely, you're right. It's been a challenging environment for some time. So I think the number one challenging, you know, challenge for marketers and especially in the QSR is the softening demand environment. And in this softening demand environment, coupled with high inflation, how can we keep growing the business rapidly, and also build the market share leadership? So I think that's the number one challenge. And, and we have, you know, we have a very strong strategy to kind of tackle the situation, which has paid us a lot of dividends in the last few quarters. So we are very confident going forward in 2023, that despite the challenging demand environment and inflation, we would be able to deliver good growth rates as well as grow a market share. From a brand perspective, I would say the idea is to double down on brand building. And I think this is something that we have been doing for some time and we have seen a lot of dividends. And there are a lot of brand initiatives that we have been working on. So the whole team is doubling down on feel good marketing, as we call it, and do a lot of fun stuff, do a lot of stuff that that kind of things and rebuild the happy memories in consumer minds about the brand and models. And third is, I would say, from a perspective of marketing effectiveness. A lot of analytics that goes behind our decisions on which media to invest, right, which campaign to go behind from, let's say, ROI of marketing perspective. I think we have put a lot of thought behind that. And we are having a very strong playbook. And that's very important in this challenging environment, when every marketing dollar spent needs to give adequate returns. That is a great from a business perspective. I think I would say one challenge and two big opportunities going forward. So I think I think you are going to increase your advertising expense, I mean, what I gather from your response. So in terms of percentage, if you can guide us, what could be your advertising expense in FY24? Consent being a listed company and the quarterly results are due, I won't be able to share exact numbers. But it's very much in line with I would say the category benchmarks and global benchmarks for us. Spending on brand is a global imperative and an Indian imperative from a Westlife football perspective. And we have seen it deliver outstanding results, which gives the business a lot of confidence to double down on marketing spend. While I'm not able to share exact numbers, but it's as per the QSR category benchmarks. In terms of percentage, you can give us a hint whether it is going to be up. Considering a lot of constraints and inflation, but markets are also open up. And we have just seen the result yesterday. It's a good news for the market. Absolutely. I think once you have a winning formula and once you have a strong strategy, then it's all about, I would say, strong execution. I think that's the mantra for continued performance and Westlife football over the past few quarters has delivered outstanding results. And we see that momentum going forward also. So can you share your current media mix and also which platform has been able to deliver you the highest ROI? Sure. So I'll give you one context, pre-pandemic and post-pandemic. Pre-pandemic, I would say, the delivery business was about 20 to 25% of our business. Fast forward now, in the past few quarters, you would see delivery business that close to 40% of our business. So it has assumed high levels of significance today. And that is on the back of our omnichannel strategy, which we have put into place during the pandemic, recognizing the fact that the consumers value convenience, consumers value safety. So we have to be anytime anywhere brand, not just a dining brand. So in light of that structural change in our business, digital obviously then assumes significant, need significant investment. So pre-COVID, I would say roughly 30-35% of my consumer facing spend is digital. And now it's close to 55-60% of the consumer facing spend being digital. And digital is being spent both for brand building and performance marketing. So it is through the funnel, as we say. And of course, a lot also goes behind the CRM and analytics. And within digital if I ask, because a lot of new things have come up over the past few years, right, from OTT to... Sure. Absolutely, absolutely. OTT was hardly there a few years back. And now it's a very significant part of our mix in specific geographies. That's for sure. Programmatic takes a lion's share of the spend. And that's the best practice in the digital industry. And like I said, a lot of personalization, CRM and analytics also goes behind customer management, as we call it, growing frequency, growing retention across all of our touch points. We have our own channel, MacDelivery. We invest significantly behind MacDelivery. And we are soon launching a new app also. And the whole idea is to take not only the store experience, but the digital experience to the next level, recognizing the fact that the importance of digital touch points today. So what are your objectives behind launching the app? So we have an app for more than 15 years. Yes, we have this MacDelivery app for more than 15 years now. It's a very important part of our delivery business. Of course, every app needs, I would say revamp of UI and UX from time to time. And that's what I was referring to. So we will see an introduction of a new app very soon that will take the consumer experience to the next level. So that the previous app would be deleted. Yeah, so you will see the MacDelivery app in a new avatar very soon. Okay, that's really great. So how do you plan to expand your footprint in South and West? We have an aggressive plan to kind of improve our footprint. We recently announced 250 to 300 stores over the next five years. And that's a very, very aggressive plan that we have. And there are two or three dimensions to this plan. First is from a geography perspective. We are very strong in markets like Mumbai, Pune. And we want to ensure geographic dispersion. And you will see us working a lot on South, for example, a lot of new stores coming up in South. The other dimension being smaller cities post pandemic, especially we have seen the smaller cities do very well, like an indoor, like a Coimbatore. And you'll see us doubling down on the smaller city agenda. And the third dimension is drive-throughs. McDonald's is known for its drive-throughs globally. We have the largest number of drive-throughs in India. And that's something that you will see more from McDonald's in the next few years. This is very interesting that you said a lot of demands is coming from smaller cities. So can you please elaborate more on the share of smaller cities in your entire portfolio? Sure, sure. As the unlock happened post pandemic, one of the first geographies where we saw the bounce back of demand was our drive-throughs in smaller cities. And that remained consistent right? You know, one would have thought that it's a pent up demand and it might or may not last. But the fact is right from the time the unlock happened to right now, smaller cities have been growing faster than the bigger cities. And also there's a huge market there, be it smaller markets, like I said, indoor or a Coimbatore or a Coimbatore and so on so forth. And while a significant amount of our business comes from smaller cities today, that share will only go up over time as we add new stores in those smaller cities. And what we realize is the brand is so strong that when we open a new store in a small city, consumers know the brand, consumers floss to the brand and the business really takes off. So that I think also reflects the strength of the brand that we have built over the past 25 years. That even in smaller cities that we're talking about, the brand really does well. And that gives us encouragement to add more stores in the smaller cities. And last question, how are you dealing with inflationary pressures? I think tackling inflation needs three or four dimensions. Of course, one of the realities of food inflation is one needs to pass on the inflation to the consumers in a calibrated fashion. But then the whole thing comes, how do you do it? I've invested a lot of time and effort in doing a lot of research to understand how to pass on this price increase to consumers. And we have gotten better over time. And a lot of analytics goes behind deciding what products need to see what price increase in what geographies in what channels. And we're happy to say that over the past few price increases, we have seen the whole idea of passing on, of doing a price increase is not to impact growth. And we have been relatively successful in that. And that's something you'll see more from us going forward calibrated price increase based on a lot of consumer research. The second is a doubling down on what you call as what we call as value. While price increase is one thing what ultimately the consumer buys value from us. And we provide outstanding value and one of the dimensions of value is menu innovation consumption. We have seen over the past few quarters, our menu innovations like gourmet burgers, mixed spicy fried chicken in South, and now chicken Big Mac. So these menu innovations really help in giving new news. And while the inflation is a reality, consumers have something new, you're always giving something new to kind of make sure the growth rate is sustained. And the other dimension of value is attractive pricing, making sure that the key products are attractive. And from a tactical perspective, we our app McDonald's app offers a lot there are fantastic offers for consumers. And we kind of personalized offers at a consumer level. And that's a big driver of business today. So one has to work on multiple dimensions like this. And last but not the least is our feel good marketing. The last thing one should do in an inflationary environment when one is passing on prices to cut back on brand building, because brand building over time reduces price sensitivity. We are a big believer in that. And while we do all of this, we can make sure that we reinvest on brand building and our feel good marketing. Very interesting points you made. Thank you so much for talking with us. Thank you. Thanks a lot.