Pizza Hut, KFC back on growth path

KFC's sales rose 13 per cent, while Pizza Hut's numbers grew 6 per cent for the July-September quarter

After eleven consecutive quarters of decline in sales growth, fast-food chains KFC and Pizza Hut, both part of US-based Yum! Brands had reason to cheer in the July-September period. Earnings for the quarter show Pizza Hut and KFC reported a six per cent and 13 per cent sales growth respectively in India.

Analysts are interpreting this as early signs of the emergence of green shoots in domestic quick-service restaurants (QSRs), given Yum! Brands are the first to report its results every quarter. The company is not listed on Indian stock exchanges.

Arvind Singhal, chairman, Technopak, said that in the last few months, QSRs have been focusing hard on driving footfalls by pushing offers, discounts and innovations. Yum!, in particular, has been pushing Buy One Get One Free (BOGO) offers on its pizzas, marketing longer chicken burgers and KFC duo buckets aggressively in the past few months. Price points have also dropped to as low as Rs 30 for a burger at KFC, said an Edelweiss report, lower compared with McDonald's (Rs 32), Burger King (Rs 35) and Wendy's (Rs 39).

Rahul Shinde, managing director, KFC India, said, "Over the past twelve months, our focus has been to restructure the business, decode core consumer proposition and reset strategies utilising our strengths. We are optimistic about leveraging the opportunity India offers."

Besides the aggressive product and promotion push, Edelweiss analysts Abneesh Roy and Rajiv Berlia said in a report on Thursday that the presence of Ramadan in the base quarter also aided (Yum's) performance.

Industry sources said, the Indian unit of Pizza Hut might consider launching global innovations such as chatbot, allowing consumers to place 'conversational orders' using Twitter and Facebook.

Launched in the US in August, it is a step-up to online ordering common across markets including India. Essentially, consumers can add the Pizza Hut chatbot as a friend within their social media accounts and then place their orders accordingly.

Rival Jubilant Foodworks, the master franchisee of Domino's in India, is expected to follow suit, given the contribution of online ordering (OLO) to delivery sales has been growing over the past three years.

It now contributes 44 per cent to delivery sales compared with 18 per cent in the September quarter of FY14.

Like Yum!, analysts estimate that Jubilant is expected to recover in the September quarter of FY17 with same-store sales growing around four per cent against a decline of 3.2 per cent in the June quarter.

Westlife Development, which runs McDonald's restaurants in the west and south of India, is expected to post strong numbers on the back of improved consumer sentiment.

In the June quarter, Westlife had reported same-store sales growth of 3.4 per cent.