Speed is their strength. So when growth slowdown is bogging them down, quick service restaurant (QSR) chains are moving fast to turn the tables, and serve in places where they have never been before.
In the first quarter of the ongoing financial year, that is 2024-25, Westlife Foodworld — which operates McDonald’s outlets in south and west — reported a sharp 88 per cent drop in net profit.
While the net sales remained flat, its same store sales growth (SSSG) fell by 6.7 per cent. The reason? Firm attributed it to “subdued in-store business”. Though the off-premise segment saw positive same-store sales, the company said.
Another giant, Sapphire Foods India, which operates KFC and Pizza Hut outlets, too reported a steep 68 per cent drop in net profit in Q1 of FY25. SSSG for KFC and Pizza Hut declined 6 per cent and 7 per cent year-on-year respectively.
Costlier platter, cautious consumer
While high levels of food inflation continue to impact raw material prices, lingering effects of inflation are making consumers pull back on discretionary spends, lending to the sector’s slowdown.
Taking the slowdown head on
From value offerings and expanded menus to increasing store counts, QSRs are approaching the broader weak demand sentiment in creative manners.
In June this year, Pizza chain Dominos said it plans to open 180-200 new stores every year to reach 4,000 outlets in the next four years.
“We see massive headroom in the Indian market. Very few people still eat pizza outside. As the frequency of eating out will grow, on the back of a younger, more affluent population, pizza consumption will also grow,” Sameer Batra, chief business officer and president, Domino’s India had told Business Standard.
Going forward, Batra said the next focus area for the chain will be to grow its dine-in business.
“Growing dine-in business is a massive area of focus. We are re-modelling as many 70-100 old stores every year in addition to building new stores to elevate the customer experience,” he said.
Jubilant Foodworks, which operates Dominos in India along with Popeye and Dunkin Donuts, is expected to release its first quarter results in the coming week.
According to the India Food Services Report 2024 brought out by the National Restaurant Association of India, the Indian food services market is estimated at Rs 5.7 trillion, of which the organised QSR chains are currently valued at Rs 67,560 crore. The market is estimated to grow 8.1 per cent annually to reach Rs 7.8 trillion by 2028.
Spoilt for choice
This growth signals the increasing choices in front of Indian consumers. In such a scenario, necessity seems to be the mother of innovation, as QSR chains have started expanding menu offerings.
“We saw negative same store sales growth and an impact in consumption in the last few quarters. With new restaurants and mom-and-pop stores growing, consumers continue to be spoilt for choice. So, it is imperative for establishments to reinvent themselves and offer them new things,” said Sagar Daryani, chief executive officer at Wow! Momo.
Earlier this year, the QSR chain launched Wow! Kulfi, and is innovating with the Indian dessert in the form of thick shakes and sundaes.
“We believe in converting roadside cuisine into a brand. After a pilot in east India, we are looking to expand Wow! Kulfi in the coming months,” he said.
With sales touching Rs 1 crore in the first month, the chain hopes to clock in monthly revenues of Rs 4-5 crore from this vertical by the end of FY25. Additionally, the chain aims to achieve a 40 per cent growth this financial year.
McDonald’s India-North and East is pushing the accelerator on value offerings, while also tapping into new growth areas.
“We are focused on offering value-driven options to our customers to navigate the evolving landscape and reignite growth. Our McDeal platform offers 3-piece meal options at just Rs 99, giving great value for money to customers,” said Rajeev Ranjan, managing director, McDonald’s India – North and East.
“We continue to refresh our menu choices with new launches that include local flavours, ensuring our offerings remain relevant and enticing. We are always looking at opportunities to expand our product lines to add variety,” he further said.
The chain is also tapping into the growing coffee culture in India with McCafe.
“We recently opened our 50th McCafe in May, continuing our expansion in the competitive café segment to meet the growing demand for premium yet affordable coffee. Our expansion plans aim to increase revenue and satisfy the growing demand for coffee by leveraging McDonalds’ existing infrastructure. In 2024, we aim to broaden our reach by achieving about 120 McCafe,” Ranjan added.
Wow! Momo
· Launches Wow! Kulfi
· Aims for 40% growth in FY25
McDoanld’s north & east-
· Value offerings
· Tapping into growing coffee culture with McCafe
· Aims 120 McCafe in 2024
Dominos
· Shifting focus to dine-in
· Aims for 180-200 new stores every year
· Reach 4,000 stores in four years
First Published: Aug 01 2024 | 6:11 PM IST