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Consumer spending boosts food services


Westlife Development, which runs McDonald’s restaurants in the west and south regions, reported strong same-store sales growth (SSG) for the September quarter, indicating consumer discretionary spending was bouncing back after a sustained lull.

For the three months ended September, Westlife’s growth here was 6.5 per cent, higher than the 3.4 per cent in the June quarter and way above the L7 per cent SSG it reported in the year-ago period.

Amit Jatia, vice-chairman, said the environment showed signs of improvement. “Consumers are coming back and our growth was led not by promotions but by our investment in brand platforms such as McCafe, McSpicy, McVeggie, Aloo Tikki, etc. The innovation we drove in these segments, combined with our focus on digital, helped us during the quarter ” he said.

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Westlife was not the only company to report good SSG numbers. After 11 quarters of decline in sales growth, fast-food chains KFC and Pizza Hut, both part of US-based Yum! Brands, reported a six per cent and 13 per cent SSG, respectively, for the September quarter.

Jubilant Foodworks, master franchisee of Domino’s and Dunkin Donuts in India, reported a 4.2 per cent growth in SSG, compared to a decline of 3.2 per cent in the June quarter and higher than the 3.2 per cent SSG a year before.

Abneesh Roy, senior vice-president at Edelweiss, the financial services company, said Jubilant benefited from the shift in Ramzan dates, beside innovation in its menu such as Burger Pizza and Navratra Pizza,

This point is endorsed by Arvind Singhal, chairman, Technopak, who says in the past few months, quick-service restaurants in general have pushed the envelope on both innovations and consumer offers.

Yum!, for instance, has been pushing Buy One, Get One Free offers on its pizzas, marketing longer chicken burgers and KFC duo buckets aggressively. Price has dropped to 30 for a burger at KFC, said an Edelweiss report., lower compared with McDonald’s (32), Burger King (35) and Wendy’s (39).

However, Roy warns that companies will have to be watchful of their margins, as excessive promotional activity takes its toll. For the September quarter, Jubilant saw gross margins dipped 134 basis points year-on-year as promotions grew. Westlife Development was better off, reporting a 90 bps expansion in gross margins over the year-ago period.

Source:Business Standard

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