India now has an insatiable appetite for pizzas. The pizza boom is being driven by a surge in consumerism, increase in nuclear families and working women, steady growth in incomes, changing lifestyle and eating patterns and a greater accessibility of QSR outlets. Pizza has been there for a while, and people are familiar with the product. Pizza Hut and Domino’s have been operating in the country for some years now. Their outlets across the country are a familiar sight and people have developed an easy familiarity with pizza. In many ways it is a dish that comes closest to Indian cuisines.
“Pizza can be a snack and a meal as well. People in India are generally vegetarian and Italian food has been true to the vegetarian concept,” opines Akhil Puri, CEO of Jyoti International Foods Pvt. Ltd. – a leading company in food services & supply chain – and also the master franchisee of Sbarro in north and east India. Pizza companies in India have adapted well to people’s preferences and they strike an equal balance of veg and non-veg food on menu to satisfy the tastes of a wide cross-section of people.
According to retail consultancy Technopak Advisors’ Saloni Nangia, pizza has the highest market share among international quick service restaurants in India, and has the widest acceptance across consumer segments.
“Both international and Indian pizza companies have developed the market for pizzas in India over the past two decades. While the market potential is strong, brands entering or reentering the market will need a strong differentiated value proposition to be able to create an impact in the market,” she says.
The organized pizza market in India is dominated by players like Domino’s, Pizza Hut, Papa John’s, and others. The market size is roughly about Rs 3,000-3,500 crore. Clearly, it’s a big pie and there is room for differentiated brands to create their own market. In fact, India can prove a huge platform for Pizza chains to grow as the penetration of pizza consumption is still low. There exists a tremendous growth opportunity for the company in tier II and III cities, where the educated middle class population is becoming more sophisticated with respect to standardised food consumption.
“The pizza market in India is very small with good international pizzas chains accounting for just around 1,500 outlets. But it’s growing very fast and the current number will exceed 3,000 smaller and bigger/international and local outlets,” says Rakesh Nanda, Director, Krsna Foods, the Master Franchise for Eagle Boys in India.
The big challenge before Pizza chains, especially the new entrants, is to execute their business plan effectively. India is a big country with people having different tastes and preferences. So coming up with a product that satisfies the palate of a good number of people is in itself a challenge. Some consumers visiting outlets of international brands don’t want them to Indianise as they come to these outlets to experience the international feel. They want to savour and enjoy the ambiance and the atmosphere as they would when dining out in a QSR in a foreign country. On the other hand, there are taste profiles of our customers who look for some localisation and Indian variation in the menu.
As most of the pizza recipes originated from the US and European countries, the spice levels are not that active as expected by the local customers. Therefore, many pizza players operating in India decide to add spice to the sauce to meet the Indian taste profile. “So, on the whole, there exists a good business opportunity to introduce a differentiated pizza brand,” avers Puri.
As a price sensitive market, the Indian consumer looks for value for money. “Price sensitivity is very high for the youth and our prices are within the comfortable spending range and provide great value to the youth. The youth has a budget and wants to play within it. So our menu has a value meal proposition, which leaves your appetite sated without pinching the pocket,” says Puri.
According to Nanda, “though our pizzas are competitively priced, we were the first to offer 25 per cent discount to students against their IDs to make eating out easier and affordable for them. We also offer 25 per cent discount to corporates,” says Nanda.
Freshness is another criteria that the Indian consumer looks for.” That is why even mass scale pizza companies like Domino’s and Pizza Hut believe in providing customers with better taste, fresh and healthy options. The focus is to offer high quality food from fresh ingredients. There are three critical ingredients in a pizza – dough, cheese and sauce.
“We make our dough fresh everyday, and no frozen material is ever used. Only high quality flour is used. Second comes the sauce – we use hand-crushed tomatoes instead of tomato paste used by most of the brands. So the customers get chunks of tomatoes when eating our pizza. Third is cheese. We use a 100 per cent dairy mozzarella cheese, no synthetics and no blends, which ensures great taste, cheesiness and elasticity in our pizzas, says Puri.
With demand for pizza being no constraint, many format options are being tried out by pizza companies. These include the dine-in and food court options, which typically cover an area of approximately 1,500-2,000 sq.ft. This format is popular for in-mall locations as well as on high streets.
Another model is the delivery format or delco. These will have a store size of 800-1,000 sq.ft. Yet another popular format is the Kiosk / Grab ‘n’ Go format, which are roughly about 250 sq. ft., modular in nature. The format is particularly preferable for installing in high traffic destinations – malls, universities, tech parks, railway stations, and it can help the brands to take them closer to the customer.
The investment ambit for these models could range from Rs. 20 lakh to Rs. 1.5 crore. For example, the food court model requires an investment of Rs. 50-60 lakh, a dine-in standalone outlet will have a capex of Rs. 1-1.25 crore based on the exact size of the outlet, a delivery format can cost Rs. 60 lakh to Rs. 80 lakh, while the cost for a kiosk model could be between Rs 15-20 lakh.
The good thing is that all of these models have their own potential and each business model can place itself in different positions. As a growing economy, India offers lots of potential and pizza players can look forward to achieving exponential growth in the future.