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Jubilant FoodWorks unable to replicate the Domino’s effect

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India’s largest food service player Jubilant FoodWorks wants to replicate the roaring success of its pizza brand Domino’s in other food categories like chicken and Indian Chinese. A look at what’s cooking in the company’s strategy kitchen

New Delhi: In 2009, Domino’s Pizza India Ltd. changed its name to Jubilant FoodWorks Ltd. (JFL) in a bid to project the company as a full-fledged food services company rather than just a franchisee of the US pizza giant.

“We believe that the food service industry has potential for significant further growth and we plan to leverage our market position and experience in the food services industry… The name change is also in sync with this ambition of ours,” Ajay Kaul who was the CEO of the company at the time had said.

However, according to market watchers and analysts, even after 14 years since the rebranding the Noida-based company still dominantly relies on Domino’s for its growth as the company operates around 1,900 stores of the brand. According to sources, the pizza chain accounts for more than 90% of JFL’s revenues and number of stores. The company declined to comment on the numbers but said Domino’s accounts for a dominant share of the company’s sales.

“Jubilant obviously is a play on the pizza category at present as their plans to expand into other categories did not work out for them,” said Aliasgar Shakir, Vice President at Motilal Oswal Financial Services. Shakir, the lead analyst for telecom and retail at the brokerage firm, tracks JFL as part of his coverage.

The Misses

JFL has so far failed to concoct a winning formula for Dunkin’, its other US brand franchisee and has changed the model several times. The company initially planned to find a winning recipe for the brand by running stores in Delhi before embarking on expansion into other cities.

JFL shuttered dozens of Dunkin’ Donuts and More stores over the years and rebranded it as Dunkin’—after the brand’s acquisition in the US by Inspire Brands—positioning it as a coffee chain with an attractive pricing strategy.

JFL currently operates 21 Dunkin stores across seven cities in India. In December 2020, JFL ventured into the biryani business but it has shut down the venture.

The FMCG venture under the ChefBoss brand selling eight different products across two cuisines (Indian and Chinese) also folded within three years of its inception.

It is due to this reason that many analysts currently view JFL as a one-horse race—Domino’s. That is exactly what JFL is planning to change in the long term. JFL is seeking to cut its reliance on Domino’s for growth and is planning to expand other brands including US fried chicken brand Popeyes and JFL’s own Chinese restaurant chain Hong’s Kitchen.

Popeyes Play

JFL holds the India master franchisee of Popeyes Louisiana Kitchen Inc. to open and operate Popeyes-branded restaurants in India, Bangladesh, Nepal and Bhutan. Founded in 1972 in Louisiana, Popeyes is popular for its fried chicken and chicken sandwiches. The chain’s passion for its Louisiana heritage and flavourful authentic food has allowed Popeyes to become one of the world’s largest chicken quick service restaurants with over 3,600 restaurants in the U.S. and around the world. It competes with KFC in many of the international markets.

JFL is bullish on Popeyes, a brand that it launched in 2022 and currently, it operates 22 stores across the country. It plans to open  a total of 50 Popeyes outlets by the end of this financial year. The company expects Popeyes to become the fastest brand to clock Rs1,000 crore in revenue in the coming years— much faster than even its poster boy Domino’s.

“Pizza is around $0.9 billion annual market followed by chicken QSR market which is around $0.7 billion. In both, we have very strong play with rights of popular US brands. Domino’s is the world’s largest pizza brand and Popeyes just recently overtook KFC in the US as the second-largest brand in terms of system sales,” a JFL spokesperson said.

Bullish on the QSR Story

JFL has also invested heavily in the food supply chain in various commissaries and food tech parks, that will not only service the company’s brands but also other F&B players outside of the company. JFL believes the whole QSR segment is set to explode when India attains more than $2,500 of GDP per capita.

“India currently has a per capita income level of $2,400. This is the per capita level that was there in China in 2005 where the QSR exploded in the coming years,” the spokesperson said. “We have reached the tipping point here and any incremental gain in per capita will directly now flow into people either dining out or ordering in or ordering more of the discretionary spends which are small-ticket in size,” the spokesperson added.

Another factor that is working in favour of India is its young population and that gives QSR players like Domino’s and Popeyes a larger legroom to grow. JFL said the average age of Indian QSR customers at present is 28.7 years and per capita consumption through QSR chains has a larger runway to operate.

For example, the average frequency for Domino’s India customers is three in a year giving a strong multi-decadal growth opportunity.

Domino’s will Continue to Dominate

Domino’s is by far the largest QSR chain in the country where other foreign food and beverage brands including KFC, Pizza Hut, McDonald’s, Burger King, Starbucks, Tim Hortons, and Subway among other chains operate. Domino’s is currently present in about 400 Indian cities and towns.

JFL said it will continue to grow Domino’s and the company expects to roll out around 200-250 stores of Domino’s every year to reach a total of about 3,000 restaurants in the medium term. JFL said Domino’s stores generally achieve a break- even in about 2.5 years. To achieve its target of superior payback period, JFL now follows a rigorous multi-layered store site selection process and new store opening is based on the online data it generates from millions of its customers who have the Domino’s app.

Popeyes as the Second Winning Horse

JFL is bullish on the Popeyes business and hopes it to be the second biggest winning brand after Domino’s. It expects to open hundreds of Popeyes outlets in India in the coming years. JFL has opened 22 Popeyes outlets in India so far and the food services company plans to ramp up expansion in the coming months. “We want to reach close to 50 stores by the end of this financial year,” said Gaurav Pande, Business Head for Popeyes at JFL.

He said store expansion will accelerate further in the next fiscal year as the company creates the required supply chain in many other cities. “The rate will only increase post this,” he said in an interview at the JFL headquarters in Noida. “This is just the beginning for us.”

QSRising Indian Chinese

The company is also trying a new model for Hong’s Kitchen. Earlier the restaurant chain would rely on the in-house chef in the restaurants to do most of the cooking. Now, the company has set up a central kitchen or a large industrialised kitchen in Greater Noida that will ship almost-cooked food to the stores that need minimum cooking.

It would only require some mixing and warming. This will ensure quality and consistency in taste across all of its Hong’s Kitchen outlets. The company is calling this process QSRisation of Chinese foods.

The company has brought a lot of in-store processes to the commissary. The biggest benefit is sharp improvement in consistency and customer ratings of its food products. With Hong’s Kitchen, the company is trying to create its own brand in Indian Chinese cuisine, which is an even bigger category than pizza and is currently dominated by the unorganised segment. A source said JFL has “cracked the code” to ensure higher repeat rates of customers to Hong’s Kitchen through the model. “Customer feedback on Hong’s Kitchen on any aggregator or Google have undergone a massive change. The company’s investment in the central kitchen is also playing to its ability to ensure that taste remains consistent across stores because it is no longer highly chef-dependent like earlier,” the person said asking not to be quoted.

Domino’s is popular for its consistent taste and similar service levels anywhere from Kashmir to Kanyakumari. “The company is trying to replicate that in Hong’s Kitchen by first going ahead in North and then probably scaling it up differently across regions. JFL is trying to QSRize the Indo-chinese brand,” the source said.

First published in the magazine Images Retail December 2023 issue

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