Inflationary pressures to continue in short-medium term: Jubilant Foods

Jubilant Foodworks is rebranding Domino’s and now has a new tagline, “It happens only with pizza” as it looks to tap the younger audience. In a video interview, Sameer Khetarpal, managing director (MD) & chief executive officer (CEO), Jubilant FoodWorks, and Sameer Batra, president & chief business officer, Domino’s India, speak to Sharleen D’Souza about demand pressures as well as outlook on margins. Edited excerpts:

Why have you rebranded Domino’s?

Khetarpal: This is in continuation of our branding strategy that we have picked up. The thought behind this is, it is a $50 billion quick-service restaurant (QSR), a $50 billion food services category and pizza is only $1 billion of this. The job for the brand is to win the share gain with most-loved cuisines in India like samosa and idli sambar, among others. Out of 1,000 meals, pizza is eaten three times in a year. So, we believe that this platform and campaign will get closer to the younger generation.

Has competition caused you to rebrand?

The job over here is to win the share of occasions. There are three meals in a year, which are pizzas and the other 997 meals are non-pizza meals. We are making five changes — one is this massive communication, second is opening new stores, third is the new boxes, fourth is the outfit of our delivery riders and fifth the bikes.

Is this the highest spend from Domino’s in the country when it comes to rebranding?

Hopefully, we'll get to a new high every year. So, this is not a flash in the pan. We are here to create a category for the long run. Over the years, we realised consumers are seeking more connectedness with the brand, high quality food nutrition and very safe packaging.

Will there be a change in your pricing strategy and how do you see your market share move from here?

Batra: We are not contemplating any pricing change. In fact, one of the strategic pillars for us is that we want to offer the highest value and affordability to our customers. Value is a combination of many things like pricing, consistency, experience and no delivery fee. And, we will continue to focus on value. I think, as a leading QSR in the country, our job is to expand from making customers have pizza from three meals in a year to many more. As the category expands as the number one leader in the space, we believe that there will be natural gains. As the category of pizza eating in this country expands, we will be the natural gainers on a go-forward basis.

How many stores do you plan to open for Domino’s India?

We believe that getting to 200 new restaurants every year is a good run rate for us. And, we continue to stick to that guidance. So it's fair to assume that you will see 200 new restaurants coming in from us. We are present in 400 cities and there is no reason to believe that another 400 can get added in time. But we can always debate if it will happen over three, five or 10 years. But it's fair to assume that the opportunity to go and take pizza to as many people as possible has significant headroom for growth. We are also renovating about 100 new Domino’s restaurants this year, at existing locations.

When do you expect a revival in demand and what will be the triggers for demand to start picking up again?

In the short-to-medium term, we believe that some inflationary pressures will continue but we are very optimistic about the long term opportunity of out-of-home eating experiences. I think we are already seeing three-four macro trends play out. I think first and foremost, big days are getting bigger, which means festivals like Diwali and World Cup finals are getting bigger.

Consumers are using some of these occasions to eat out a lot more. The second thing is obviously the consumers, given some of the inflationary pressures are getting more discrete and people are getting more thoughtful about what to buy. And therefore, to that extent, we've also seen some downgrading happening, and which is why there has been some pressure on the average ticket size per order. The good news for us is that the items per order have not reduced. From a long-term perspective, we continue to remain optimistic about the opportunity as the leading QSR across our portfolio brands as well.

Khetarpal: We do expect softness to continue in the next quarter or two. But more importantly, we believe instead of -1 per cent like-for-like growth, plus 2 per cent is our rightful like-for-like growth through better execution.

How do you expect margins to play out for Jubilant Foodworks?

Our gross margins have improved on sharper discount management, reduction of food cost and other initiatives like localisation of a few ingredients. Now, we'll continue to invest in Domino's and continue to invest in Popeyes. These are two big investments that we have and if our like-for-like growth comes at 2-3 per cent, we should expand our margins by up to 200 basis points.

What is your store expansion plan for Popeyes?

It will be India's fastest QSR to get to Rs 1,000 crore. Typically, it has taken 11 to 12 years for QSR companies to get to Rs 1,000 crore and this team should do it in a fraction of that timeframe. We are sticking to our guidance of 200 to 250 stores.