The post-Covid spike in global food inflation is dissipating, but climate change increases vulnerability to shocks. The pandemic has driven a wider wedge in income distribution that affects the growth of global fast-food chains. The premium segment is outpacing the mass market, as in other consumption categories. Downtrading is pushing investor interest towards disruptors across consumer goods as market leaders seek revenue growth through premiumisation. Some of the segment shifts will be reversible when discretionary consumption revives. Other changes may be permanently baked into the business plans of fast-food chains.
In India, the premiumisation of consumption is being driven by global brands. McDonald’s is the latest to join other businesses that are betting on a shift in consumer preferences from price sensitivity to value consciousness. The mass market in India begins at a lower price point, and fast-food chains may find it easier to swivel into the premium segment. Food inflation in the country has been less pliant to policy measures, another contributory factor in premiumisation. Finally, India’s limited social security may cause a longer delay in the revival of discretionary consumption. There should be interesting findings for the Indian restaurant industry in McDonald’s experiment with its menu.
