'We've been overwhelmed by the response in smaller cities'
J Patrick Doyle, president and chief executive officer of Domino’s Pizza Inc, tells Surajeet Dasgupta and Sharmistha Mukherjee how the company localised the Italian delicacy and transformed the taste profile of consumers in the market here to make the dish a household name. Edited excerpts:
Global food companies commence operations in India with certain perceptions, which they are later forced to align according to the requirements in the market here. What was the learning process like for Domino’s in its 15-year stint in the country?
We opened our first store in 1996. Initially, our pricing was high and the value we offered was not good enough for consumers. Understanding this was crucial. We realised that we had to put our value proposition in place. Second, setting up a supplier base which would conform to our safety and quality standards as laid out globally was challenging. Today, we source all our ingredients locally. But the process to develop an effective supply chain was time-consuming. What we did have to our advantage was that though pizza was a relatively new concept in the country, bread, ketchup and cheese form a part of diets all over the world. We had a local partner who had the relevant insights and we customised our products to suit the taste profile of the market.
Does Domino’s source globally from the suppliers you have developed in India?
Very few of our vendors here supply globally. But a lot of our international suppliers are actively looking at setting up manufacturing facilities in India. This is the largest dairy market in the world. Most companies today source dairy products from Australia, New Zealand and the US. Going ahead, I see a lot of growth happening in the market here.
You have over 400 outlets in India. As you expand your network, you would have to address customers in tier-II and tier-III cities, who may not be accustomed to the cuisine you offer. Does that bother you?
We have been adding 70-80 new outlets year-on-year. As many as half of these sales points are coming up in tier-II and tier-III cities. We do realise that drivers of competition in smaller places are different from those in metros like Delhi and Mumbai.
But the sales volume generated is not dissimilar. By virtue of advertising, the pull of our brand and rising aspiration levels among consumers in India, we have been overwhelmed by the response we have had in smaller towns and cities. Any new outlet we inaugurate provides an opportunity to customers to experience a global brand. The opening response is usually very big.
In metros, Domino’s focuses on on-time delivery. Is your sales format different in smaller towns and cities?
In smaller cities, stepping out of homes is a part of entertainment. So, there is a need to create more visible stores. Over the last four to five years, all outlets we have opened have seating capacity for 15-25 people, depending on real estate available. Delivery still constitutes a lion’s share of our revenues, at about 55-60 per cent, but the share of dine-in business has also improved.
Your business may be growing in line with your network expansion programmes. But has the average spending by consumers increased at Domino’s?
The ability to pay more has only been going up among consumers. What we have consciously done is that after establishing pizza as our core product, we have begun to focus on selling natural accompaniments. We introduced pasta products a couple of years before and have now forayed into desserts. This has resulted in our customers buying more and expanding our sales’ basket.
Would you introduce more value-oriented products to address a larger customer base in India?
In the first few years of operations, we were seen at the higher-end of the market, with operations restricted to major metros. But, we understood that the opportunity was there to grow in the middle of the pyramid. It took us five-seven years to establish pizzas as a wholesome meal. Since then, we have moved on to market value-for-money ‘Fun Meals’. The breakthrough came with ‘Pizza Mania’, in which we offered pizzas for Rs 35 to begin with. These are now retailed for Rs 39 each. It is a testament to our pricing strategy that on a same-store basis, we have grown revenues by 31 per cent in the first half of this year.
There is a growing consciousness among consumers about health foods. Is Domino’s looking at altering or adding on to its product mix to cater to this segment of customers?
We do look at making specific products for health-conscious consumers, depending on market requirements. In America, for instance, the pizzas we supply in schools have low sodium and fat content. In India, there is a growing consciousness towards health food but it is still in a nascent stage. We are not going to create a separate product line for such customers immediately. We have, however, made all our products trans-fat free, we fortify our dough with key nutrients. Besides, pizza in itself is healthy – it is fresh, baked and not fried, has milk content. It’s a healthy replacement meal.