Yum! tweaks sales disclosure norms

For the March 2016 quarter, the restaurant chain reported a 6% decline in same-store sales growth for Pizza Hut in India and 1% fall for KFC

Yum! Brands, the quick service restaurant (QSR) chain, has ceased disclosing same-store sales (SSS) growth for its India business after the split of its domestic operations earlier this year.

The restructuring came after it reported a ninth consecutive quarter of a sales decline for the three months ended December 2015. The new structure saw the position of India head abolished and division heads of Pizza Hut, KFC and Taco Bell, the three restaurant brands operating in India, reporting directly to US headquarters.

Consequently, the reporting format for SSS growth from Yum! will be on the lines of the three verticals that operate in the country. For the March 2016 quarter, Yum! reported a six per cent decline (in SSS) for Pizza Hut in India and a one per cent decline for KFC. Taco Bell’s numbers were not disclosed. Of the 800 stores Yum! operates in India, the bulk are under Pizza Hut and KFC.

In a just-issued report, Abneesh Roy, associate director, research (institutional equities), at brokerage Edelweiss, the financial services group, says the decline in SSS for its two key brands point at a possible 10th consecutive quarter of sales decline  for Yum! as a whole in India. “This reflects challenges faced not only by Yum! but all QSR players in general,” he said.  

Listed entities such as Jubilant FoodWorks (master franchisee of Domino’s and Dunkin Donuts) and Westlife Development (operates McDonald’s in the west and south here) have seen their SSS growth for the December 2015 quarter at two per cent and 3.1 per cent, respectively, from the double-digit growth of a few years earlier.

The March quarter, say analysts, is expected to be no different as consumers cut on discretionary spending. Roy notes in his report, “In our view, delayed recovery in SSS growth (of QSR players) over the medium term seems not only cyclical but structural. Revival remains challenging for the entire QSR space, though our long-term view remains positive.”

To fuel growth, most QSR majors have either dropped prices or increased promotions significantly.  Wendy, the world’s third-largest burger chain, which set up base in India last year, recently dropped prices of both its vegetarian and non-veg offerings to levels of Rs 39 and Rs 49 per unit. Prior to this, Wendy’s veg burgers were available for a starting price of Rs 59, while non-veg burgers came at Rs 100 and above.

“It is not only about price but the quality you offer. What we are giving is table service, crockery, food that is made to order at Rs 39 and Rs 49 through the day,” said Jasper Reid, director, Sierra Nevada Restaurants, master franchisee of Wendy’s in India.

Jubilant Foodworks’ chief executive Ajay Kaul said promotional offers had increased from once a month earlier to twice a month, to beat the slowdown. With additional discounts for value-seeking customers.

Westlife Development’s vice-chairman, Amit Jatia, said they continued to invest on its menu mix and brand extensions to tide over the softness in the market.