According to the CEO of Domino’s franchisee there, the Rs 49 pizza is the tip of the spear in the company’s fight against rapid inflation that is pinching profitability and pricing out many customers. India is Domino’s No. 1 market outside of America.
Asserting that the basic, seven-inch cheese pizza with a “sprinkle” of basil and parsley is Domino’s cheapest offering everywhere, Sameer Khetarpal said the company wants to “own that price point”.
He added that the ideas were endorsed by Domino’s international team. “You are coming to the store or opening the app because there is a 49-rupee callout,” he said. Prices are rising everywhere, therefore customers will eat out less. Existing customers shouldn’t visit a rival restaurant.
According to internet menu prices, Domino’s cheapest savoury pizza costs roughly $3.80 in Shanghai and $12 in San Francisco. To contact a local franchisee in India, contact Domino’s worldwide headquarters.
Six CEOs and 12 shop managers were interviewed by Reuters to see how Domino’s and other international fast-food giants like Pizza Hut and Burger King are being compelled to alter their business strategies in order to combat excessive inflation in the market of 1.4 billion people.
The businesses are vying for market share in a country that is crucial to their futures, where sizzling samosas can be had for as cheap as 10 rupees, and where it is challenging to compete with a street food culture.
Domino’s 1,816 locations are managed by Khetarpal’s Jubilant FoodWorks, and he says he has a staff meeting the first thing on Mondays to come up with new cost-control measures and combat the “historic high inflation” that caused the company’s profits to decline 70% in the first three months of 2023.
He provided updated information on Domino’s India pivot and its financial benefits, including the removal of lids from all pizza boxes that were sold in stores beginning in December in order to save 0.6 cents each time. Given that 37% of Domino’s Indian business is dine-in, he claimed that this translates into a sizable reduction in packing costs.
Jubilant, whose Domino’s company generated the majority of its $635 million in revenues last year, also hopes to obtain rent rebates from some store landlords by making upfront payments, according to Khetarpal, who declined to provide more information on the advantages.
EMPTY POCKETS OF CUSTOMERS
Domino’s is not the only company focusing on India’s prices, a market with a high sensitivity to price and one that is now experiencing higher inflation than many other markets, including the United States. According to the CEOs, reduced prices are intended to entice customers to shops and mobile applications where they might upgrade or acquire further add-ons.
The Pizza Hut franchisee in India, Sapphire Foods, claims that the pizzas it introduced last year, which start at Rs 79, are the lowest-priced in the company’s history.
Pizza Hut’s managing director for the Indian subcontinent, Merrill Pereyra, stated that the company was creating goods that “make the brand relevant and easy to access” for budget-conscious Indian consumers and that its low-cost pizzas were popular with youngsters.
In June, McDonald’s introduced half-price meals. According to Akshay Jatia, executive director at Westlife Foodworld (WEST.NS), which operates 357 locations throughout western and southern India, they would be the focus of promotion activities in the upcoming weeks. He claimed that the meals will increase traffic, sales, and profit margins.
According to Reuters trips to retailers across four Indian states, the low-cost products are indeed being backed by a digital and physical marketing blitz across the country, with outlets, and even a fancy New Delhi mall, plastered with banners.
The Rs 49 pizza, which was introduced in February by Domino’s, is the company’s main inflation-fighter. According to Khetarpal, it was “re-engineered” by lowering the price (along with the tomatoes) from its previous lowest offering of Rs 59.
Franchisee Jubilant reported in May that during 2022–2023, cheese prices increased by 40% and chicken and paper box prices increased by 30%. According to government data, there have been further shocks in recent weeks, with tomato prices increasing by over 400% to record highs and households struggling with soaring prices for everything from milk to cereals and spices.
The industry participants told a story of two consumers living in a nation with vast wealth and poverty divides.
While those with higher incomes continue to spend money on items like more expensive cellphones and SUV cars, whose sales are reaching record highs, many low- and middle-income earners who considered dining at foreign chains as a lifestyle upgrade while the economy was booming are tightening their belts as inflation bites.
Khetarpal claimed to have observed consumers emptying their pockets and coming up with just 49 rupees when he visited Domino’s locations in Chennai and other cities. He said that sales of Domino’s new gourmet pizzas, which have a price tag of up to $14, have increased in some wealthy areas.
“A LITTLE LAYER OF CHEESE”
Domino’s, the industry leader in Indian fast food restaurants with a market share of roughly 12.5%, as well as other businesses, have had a bad year.
In the three months ending in March, Pizza Hut’s Sapphire Foods’ pre-tax profit more than halved. Restaurant Brands Asia, the Burger King franchisee in India, saw its net loss increase by 9%.
There are some bright spots, though. According to Euromonitor International, the almost $5 billion Indian market for quick-service restaurants that provide fast food is a small portion of the $341 billion US market and the $137 billion Chinese market.
The more restricted pizza, burger, and chicken restaurant business in India, which is controlled by Western chains and is worth $2.1 billion, will expand but more slowly. According to Euromonitor, it will expand at an expected 15% annual pace through 2027. Comparatively, growth rates of 21% in 2022 and 43% in 2021 were primarily attributed to a jump in post-COVID consumption.
Yum Brands, the company that owns Pizza Hut, struck a confident tone in June by contrasting its 17,000 US locations with its over 2,000 in India, where it sees “a tremendous growth opportunity.”
In the short term, there are still enormous obstacles to overcome.
“The new offers are still on the higher side,” said Devanshu Bansal, a consumer analyst with India’s Emkay Global Financial Services. “For a population eating roadside, in the current environment where inflation is hurting their pockets, (the offers) are still on the higher side.”
And many pizza followers, like Kiran Raj, won’t even consider low-cost options. As he consumed slices at the neighborhood restaurant Pizza Lounge in Chennai, the 26-year-old bank employee claimed he was willing to pay a little bit more for a product that was cheese-loaded.
He continued, “I steer clear of the sub-100 rupee pizzas at outlets run by big chains because they typically have less toppings and a thin coating of cheese. Just a rough crust, she said.
