Q: How is the world’s largest pizza brand responding to high inflation in the world’s most populous country? A: With the cheapest Domino’s pizza in the world.
The 49-rupee ($0.60) pizza in India, Domino’s No. 1 market outside the United States, is the tip of the spear in its fight against runaway inflation that is squeezing profits and losing revenue. many customers, according to the CEO of his franchisee there.
The company wants to “own that price,” said Sameer Khetarpal, confirming that the stripped-back seven-inch cheese pizza with basil and parsley “sauce” is Domino’s cheapest.
“You come to the store or open the app because there is a call for 49 rupees,” he said, adding that Domino’s global team were behind the plans. “Customers are going to eat less in restaurants because prices are higher everywhere – our current consumers shouldn’t be looking to the competition.”
In Shanghai, by comparison, Domino’s cheapest savory pizza is around $3.80 and in San Francisco around $12, according to online menu prices. Domino’s World Headquarters referred questions about India to its local franchisee.
Reuters interviews with six executives and 12 store managers revealed how Domino’s and other global fast-food giants like Pizza Hut and Burger King are being forced to change tack to deal with runaway inflation in the market for 1.4 billion people.
The companies are scrambling to retain market share gained over three decades of rapid growth in a country critical to their future – and where it’s hard to compete with a street food culture and sizzling samosa for so little only 10 rupees.
Khetarpal, whose Jubilant FoodWorks manages Domino’s 1,816 outlets nationwide, says he holds a first-hour staff meeting every Monday to brainstorm new ways to manage costs and fight ” historic high inflation” that contributed to its earnings plummeting by 70% in the first three months of 2023.
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He gave new details about Domino’s Indian kingpin and his financial gains; his company removed the lids from all pizza boxes sold in stores from December, saving 0.6 cents each time. He said this equates to a significant saving in packaging costs, as 37% of Domino’s Indian business is in restaurants.
Jubilant — whose Domino business accounted for the bulk of its $635 million in revenue last year — is also aiming to get rent discounts from some store owners by offering upfront payments, Khetarpal said, declining to elaborate on the cost benefits.
Customers empty their pockets
Domino’s isn’t alone in focusing on pricing in India, a highly price-sensitive market that currently faces higher inflation than many other markets, including the United States. The hope is that the low-cost deals will attract people to stores and apps that could order more add-ons or upgrade, executives said.
Pizza Hut is aggressively promoting pizzas from 79 rupees ($0.96) which it launched last year and its Indian franchisee, Sapphire Foods, said it was the lowest price in the brand in the world.
Merrill Pereyra, managing director of Pizza Hut in the Indian subcontinent, said the chain was developing products that “make the brand relevant and easy to access” for price-conscious consumers in India, adding that its economy pizzas were a hit with young people.
McDonald’s launched half-price meals in June. They will be the focus of promotional efforts in the coming weeks, according to Akshay Jatia, executive director of Westlife Foodworld, which operates 357 outlets in western and southern India. He said the meals would attract more customers and increase sales and margins.
Budget products are indeed accompanied by a blitz of digital and physical marketing across the country – with stores and even a swanky mall in New Delhi covered in banners, according to Reuters visits to stores in four Indian states.
Domino’s flagship anti-inflation pizza is the Rs 49 Pizza, which was launched in February. Khetarpal said he had been “reorganized” by reducing the price – and the tomatoes – of his previous cheapest offer of 59 rupees.
The Jubilant franchisee said in May that it had witnessed a 40% price spike in cheese in 2022-23 and a 30% increase in chicken and paper boxes. There have been more shocks in recent weeks, with tomato prices rising more than 400% to record highs and households toiling under rising rates of everything from milk to grains and spices, the data shows. official.
Industry players described the story of two consumers in a country with gaping gaps between rich and poor.
Many low- and middle-income earners who saw dining at foreign chains as a lifestyle upgrade when the economy was booming are tightening their belts as inflation bites, while the wealthier continue to spend for products like more expensive smartphones and SUV cars whose sales are reaching new heights.
When Khetarpal visited Domino’s stores in Chennai and other cities, he said he saw customers emptying their pockets and only being able to raise Rs 49. By contrast, he added, Domino’s new gourmet pizzas priced as high as $14 had seen sales jump in some affluent areas.
“A little layer of cheese”
It’s been a bad year for Domino’s, India’s leading fast-food restaurant with a market share of around 12.5%, and for other companies.
Pizza Hut’s Sapphire Foods pretax profit more than halved in the March quarter. Burger King’s Indian franchisee, Restaurant Brands Asia, saw its net loss increase by 9%.
It’s not all pessimistic, however. Euromonitor International estimates India’s nearly $5 billion market for quick service restaurants serving fast food is a fraction of the US’s $341 billion and China’s $137 billion.
The narrower market for pizza, burger and chicken restaurants, dominated by Western chains and worth $2.1 billion in India, will grow, but at a slower pace. Its estimated growth rate is around 15% per year until 2027, according to Euromonitor forecasts. This compares to growth of 21% in 2022 and 43% in 2021, largely due to a post-COVID consumption spike.
Pizza Hut owner Yum Brands sounded bullish in June, comparing its 17,000 outlets in the United States to its more than 2,000 in India, where it sees a “tremendous opportunity for growth”.
There are still major short-term challenges.
“For a population that eats by the roadside, in the current environment where inflation is hurting their pockets, (new offers) are always higher,” said Devanshu Bansal, consumer analyst at Emkay Global Financial. Services in India.
And many pizza lovers like Kiran Raj will never consider budget deals. The 26-year-old bank clerk said he was willing to pay a little more for a cheese-laden product as he devoured slices at Pizza Lounge, a local restaurant in Chennai.
“I avoid buying pizzas under Rs 100 from stores operated by big chains as they usually have less toppings and a small layer of cheese,” he added. “It’s just a rough crust.”