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Our confidence in the Indian consumption story is intact: Jubilant Foodworks


Jubilant Foodworks, which operates Domino’s Pizza and Dunkin’ Donuts franchises in India, posted tepid earnings in the January-March quarter. While the total income is up by 14 per cent, profits have taken a hit 6.6 per cent. Speaking to Bloomberg TV India, Jubilant Foodworks CEO Ajay Kaul says consumer demand remains intact even as the company faces pressure on the top-line.

You saw a bit of a hit in the profit numbers in Q4. Can you take us through the pressure points in Q4?

The pressure is clearly coming on the top-line. Unfortunately, despite all the analysis, all the analytics and all the consumer feedbacks that we get, we are not seeing any statistically significant shifts in the consumer sentiment, which means it is more of the same. If you look statistically too, our 3-percent same-store sales growth for Q4 is the same number we have delivered throughout the year. Otherwise, in terms of food inflation, it is very much in control in the country. We have done very well there and that has given quite a relief and thereby we have been able to protect our margins. The labour line and the rental lines are again off-shoots of the lower same-store growth.

On the technology side, we are investing in online ordering. Nearly 40-41 per cent of all our delivery orders are booked online and nearly 38-40 per cent through mobile – AJAY KAUL CEO, Jubilant Foodworks

Had the same-store growths been higher, these lines probably would have looked better in terms of their EBITDA trickle and so on. So I would say it’s predominantly sales-driven. While in the short run the same-store growth numbers and consumer sentiment do not seem to be very positive, I want to reiterate that our confidence in the consumption story of the Indian masses is still intact. And that is why we created 150 new stores last year for Domino’s and around 20 odd for Dunkin’. We are investing heavily in building commissaries and factories. One is coming up in Greater Noida.

We end up paying close to Rs. 100 crore. It will arguably be the best such facility anywhere in the world for Domino’s. On the technology side, we are investing in online ordering. Nearly 40-41 per cent of all our delivery orders are booked online and nearly 38-40 per cent through the mobile. So the kind of advertising we do, the mobile platforms we are creating, all point in the direction we are setting our company up for 2020 and beyond. In the short run, it may not look as rosy, as optimistic as I may be otherwise sounding.

Will you consider or be open to a shift in strategy? If you are saying that online and delivery services are starting to take up a huge percentage of sales or that growth in that medium is definitely far outpacing your physical store, will you consider moving to delivery-based outlets as against large walk-in stores?

Domino’s globally is a delivery-oriented company. About 70-80 per cent of revenues in most countries come through delivery. We realised nearly 8-9 years back in India that going out of your household in an air-conditioned environment was also a form of entertainment and as a result a lot of business would get transacted at the store. So we made this shift not only in terms of menu, we bought in products, which were amenable, which had value for money and which could be consumed. We also remodelled our stores in a fashion that our consumers could spend time.  Today the business is split 50-50, which is unusual in the Domino’s model anywhere else.

Source: Hindu Business Line
(Photo: jubilantfoodworks)

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