Introduction
When you hear the word ‘Pizza,’ what comes to your mind? Domino’s Pizza! Right?
Brand Domino’s enjoys top-of-the-mind brand recall across all age groups, cities, and towns in India. Since 1996, Domino’s Pizza has been delighting the Indian customers with its delicious pizzas, superior quality, exceptional customer service, and offerings.
For over 15 years, much before Swiggy and Zomato even entered the market, Domino’s Pizza has been delivering pizzas home in less than 30 mins!
Jubilant FoodWorks, one of the largest food service companies in India, holds the master franchise rights for three international brands- Domino’s Pizza, Dunkin’ Donuts, and Popeyes. Yet, most people are unaware of this Company.
Launching newer products, superior technological initiatives, consistent expansion plans, cost optimization, and operating leverage offers the Company a strong growth prospect in this competitive industry.
Let’s explore the fascinating journey of the Company, which has been winning the trust of a large Indian population by its resilient business model and innovation.
Inception and Key Business Milestones
In 1995, Jubilant FoodWorks (erstwhile name- Domino’s Pizza India Pvt. Ltd.) was incorporated. The Company entered into a master franchise agreement with Domino’s International for India (north and west regions).
In 1996, the Company set up its first Domino’s Pizza store in New Delhi and reached 100 restaurants in 2006. In 2010, the Company went public by listing its shares on BSE and NSE.
Jubilant FoodWorks launched the restaurant chains Dunkin’ Donuts and Hong’s Kitchen in 2013 and 2019, respectively.
Some exciting business milestones are-
- Launched ‘30 minutes or free’ Domino’s campaign as early as 2004!
- Achieved monthly sales of 1 million pizzas in 2008.
- It opened its 500th Domino’s Pizza restaurant in 2012.
- Became 1stbrand in Food Service to launch an Online Ordering platform in India
- In 2014, Domino’s India became most significant business outside the USA, beating U.K.
- Opened its 1000th restaurant in 2016
Industry overview
The Indian Online Food Delivery Market is expected to reach US$ 21.41 Billion by 2026, from US$ 4.66 Billion in 2020, at a staggering rate of 28.94% CAGR during 2020-2026. (As per Businesswire).
Online food delivery works on two delivery models, i.e., Aggregator & Cloud Kitchen. Let’s try to understand the difference. A Food Aggregator allows consumers to compare and order their meals from different restaurants through a single app (Swiggy and Zomato). It is more prevalent in India than Cloud kitchens as they are commercial facilities purpose-built to produce food specifically for delivery.
Domino’s Pizza operates on the Cloud kitchen model of the delivery system, which reduces the operational cost of setting up multiple branches at prime city corners, where the real estate cost is enormous. In addition, most landlords demand a fixed monthly rent which, along with staffing, consumes 40-50% of a restaurant’s revenues.
The Food-tech market in India is expected to reach INR 1,868 billion by 2025, growing at a staggering CAGR of ~39% during 2021-25.
Demand Drivers of Online Food Delivery and Food-tech Industry
The following are the key demand drivers of this competitive industry-
1. Evolving Demographics
The Indian market for online food delivery services is highly populated. India’s population is nearly 1.4 billion, and assuming that people consume three meals a day, the potential demand is enormous. Further, India is primarily a consumption-driven economy. Private consumption expenditure has formed nearly three-fifths of the Indian economy over the years.
In recent years, there has been a rise in the number of independent households and nuclear families due to the changing cultural dynamics and evolving family structures. This evolution has led to an increase in alternative(non-home cooked) food consumption.
Key favorable demographic factors:
- India has the largest population under the age of25 in the world
- Working-age population to rise, and India will constitute 20% of the world’s working-age population.
2. Urbanization and shift in customer preferences
Better infrastructure now connects semi-urban and rural India, with new urban clusters growing significantly. This trend has led to an increased purchasing power among consumers in Tier-II and Tier-III cities, driving consumption.
Other factors influencing the shift in customer preferences include-
- Digital led online ordering
- Increasing importance of home delivery
- Third-party aggregator options
- Cashback facilities
- Reward points
- Heavy discounts
3. Digitization and Rise in E-commerce
By F.Y. 2030, over a billion Indians from rural and urban areas are expected to have internet access. Digital inclusion is likely to propel India’s consumption growth trajectory further while improving awareness about health, lifestyle, and brands, among others. (Source: World Economic Forum) Along with the country’s booming e-commerce sector and budding food aggregator industry, these factors will offer new and exciting opportunities to the organized food service sector and QSR market.
4. Prioritization of Food quality and Hygiene
Due to the Covid-19 pandemic, there is an increasing need for restaurants to follow additional hygiene and safety measures, adhering to social distancing norms both on the restaurant floors and in the kitchens. The focus will be on re-organizing restaurant layouts, creating an end-to-end contactless dining experience for consumers,and introducing new business models, emphasizing delivery and takeaway. In addition, QSRs may want to employ more stringent norms to ensure the quality and hygiene of the food cooked in their kitchens. Sanitisation will become a significant focus for restaurants due to which day-to-day operating costs will increase.
Business Strengths and Competitive Advantage
Jubilant FoodWorks has a competitive advantage to sustain competition and grow the business resiliently in the future. Some of the key differentiators which helped the Company achieve this vital position are as follows-
1. Operational Excellence
Being a franchise-based business, the Company’s significant expenditure is to pay the franchise owner for the rights. The Company has strategically modeled its business as Cloud kitchen. Cloud kitchens are better suited to the needs of socially distanced customers than traditional dine-in restaurants. They are also able to minimize some costs such as rent and manpower. The drivers of economies are pretty different for cloud kitchens than dine-out operations, which entail location, kitchen size, and utilization; multiple versus single cuisine configuration; order aggregation and delivery.
The Company doesn’t have its restaurant chains in prime city centers. This reduces the cost of operations significantly as the lease rentals in those locations are enormous and will eat up the profit margin. Hence, the Company focuses more on home delivery and takeaway, which reduces pay-outs for rent, staff, and utilities.
2. Robust integrated supply chain systems
The Company has a robust supply chain system and works efficiently to help deliver to consumers at every corner of the city on time. The Company has an efficient supply chain, an extensive network of certified partners, and a countrywide presence. This makes it well-positioned to serve the customer needs and helps capitalize on the robust business model of home delivery and takeaways. The Company has 12 supply chain/ distribution centers in India and many cold chain trucks facilitating it.
Due to the COVID-19 outbreak, the need to maintain social distancing has led to reduced footfall and seating capacity at restaurants. With more people stuck at home, there has been a surge in demand for food delivery services. With escalating stress levels amid lockdowns, having delicious recipes served through digital channels to enjoy with family creates an altogether different experience. Takeaways can emerge more strongly as a channel,alongside delivery.
High operating excellence is the key supporting factor for its kitchens’/restaurants’ need to service a higher number of orders online.
3. Continuous Product innovation
From the beginning, the Company has been focusing on product innovation to suit the needs of customers. Some of the key product innovation and diversification measures undertaken by the Company include-
- Domino’s constantly innovates to meet evolving customer expectations. Some of the popular initiatives undertaken by Domino’s Pizza are-
- World Pizza League- Inspired by the top teams participating in the IPL and World Cup, the brand unveiled ten new international flavors (across both vegetarian and non-vegetarian options) during the cricket season.
- Indian Masala Pizza- The brand introduced ‘All-New Masala Pizzas’ in six new flavors, which exceeded the Company’s internal benchmark and expectations and helped drive same-store revenues. Each of these pizzas captured the richness of Indian cuisine and was inspired by some of the most popular dishes served in Indian restaurants, giving consumers a truly unique fusion experience.
- Thirteen- Domino’s piloted three new value-added beverages in select restaurants, which were well accepted by consumers and would be launched nationally. The beverages are available in Cola Twist, Lime Twist, and Jamun Twist flavors.
- Combos- Domino’s strengthened its play in combos in both dine-in and delivery.Meals/combos for different group sizes were introduced.
- Embarked upon an ambitious goal of moving from30-minute to 20-minute delivery: ‘Tees Se Bees!’
- 57 cities covered in All Night Delivery/late Night Sales post-midnight and the operations are livein 307 restaurants covering the delivery area of 712 restaurants
- The single most significant player in QSR in the e-catering portfolio (IRCTC) has been delivering hot pizzas to the customer’s seat at pre-selected railway stations(175 stations as of March 31, 2020).
- Domino’s Pizza, in partnership with ITC Foods, has launched “Domino’s Essentials.” The delivery infrastructure of Domino’s will be leveraged to help customers order everyday grocery essentials offered by ITC Foods, India’s most trusted packaged staple brand.
- The Company introduced “The Unthinkable Pizza,” Domino’s Pizza, in December 2020. India’s first plant protein-based product made entirely from plant-based proteins, The Unthinkable Pizza is 100% vegetarian and yet has the sensory properties of chicken.
- As a response to Covid-19, the Company introduced Zero Contact Delivery across its Domino’s Pizza restaurants. This service enables customers to receive their order without contacting the delivery person, ensuring the safety of both customers and the delivery person. Zero Contact Dine-in is also launched, enabling consumers to maintain social distance, order pizzas in dine-in, and stay and consummate the transaction. In addition, all dine-in restaurants have been redesigned, and the layout has been changed completely to ensure six feet of separation between tables.
4. Diversification of business
Apart from the franchise businesses of Domino’s Pizza, Dunkin’ Donuts, and Popeyes, the following are the Company’s efforts to diversify its business with homegrown brands. This will significantly improve the profit margin once they grow and start generating independent profits.
- Entry into Chinese cuisine segment with the launch of its first homegrown brand – Hong’s Kitchen. The Company launched its first restaurant in Gurugram in March 2019. The restaurant has a young, international-looking, and trendy design inspired by the colors and the hustle of Asian street markets.
- Entry into FMCG vertical with the launch ChefBoss. It offers a range of ready to cook sauces, pastes & gravies. ChefBoss has a mission to open you up to new possibilities in the kitchen. It’s the perfect culinary toolkit to explore different Indian and international cuisine.
- It entered into the exciting world of Biryanis with the launch of “Ekdum!”. It offers the broadest range of Biryanis curated from various parts of India using authentic ingredients along with an extensive range of Kebabs, Curries, Bread, Desserts, and Beverages. The biryanis are prepared right in front of your eyes in a transparent kitchen that prioritizes hygiene.
5. Investments in Digital technology
The food service industry is experiencing a vast technology transformation. Technology is challenging traditional business models and paving the way for the emergence of new ones. Over the past few years, there have been rapid online transactions with an increased preference for simplicity and convenience.This trend continues to accelerate further in a post-COVID world where social distancing is the new normal.
The Company has been embracing the latest technologies to enhance its operations, connect better with its customers and bolster the productivity of its employees. The Company continues to invest and focus on leveraging digital technology for driving convenience and transparency in online ordering (OLO). As a result, online sales remained strong, with the share of OLO increased to 86% in F.Y. 20 of delivery sales as against 70% in F.Y. 19.
New store design was introduced in F.Y. 19 with self-ordering digital kiosks, improved lighting,contemporary look, feel, etc., which has helped improve the customer ordering experience.
Other technology innovations and digital initiatives include-
- Implemented GPS rider tracking for live orders on the mobile app.
- The app and the Progressive Web Application (PWA) now sport a superior user interface and lighter web pages for faster menus loading.
- Introduced the Zero Contact Delivery experience for customers ordering on the digital platform to ensure customers have a safe and hygienic experience.
- Installed dashboards in all restaurants where the restaurant managers can see all relevant information in real-time, including driver score card, delivery times, etc.
6. Customer focus and innovative marketing
Customer delight is a crucial part of its brand – the Company always focuses on delivering quality products to its patrons. Over the years, the Company has taken many initiatives to improve customer experience and build trust. Some of the key initiatives include-
- Launched Everyday Value offer in F.Y. 2018, augmented by a robust online ordering platform with a countrywide presence.
- They rolled out a new advertising campaign, ‘Dil, Dosti, Domino’s, to strengthen the emotional connection with the consumers.
- We conducted the ‘Atithi Devo Bhava’ mega guest centricity training program across India.
- Embarked upon an ambitious goal of moving from 30-minute to 20-minute delivery: ‘Tees Se Bees!’
- Collaborated with FSSAI on all its initiatives under the‘Eat Right Movement’.
International operations
One of the Five-pillar strategies of Jubilant FoodWorks is ‘Win in International.’ As a result, the Company forayed its business beyond India and currently has operations in Sri Lanka and Bangladesh.
Domino’s Pizza- Bangladesh
During FY 2019, Domino’s Pizza entered the Bangladesh market through a joint venture between JFL and Golden Harvest QSR Limited, a Golden Harvest Group. The first week of operations witnessed a record number of orders – the highest for Domino’s Pizza brand in a new market across its network in 85 countries.During FY 20, two more restaurants were added,taking the total count to three. Delivery service was also launched with 30 minutes guarantee. Domino’s Pizza Bangladesh has made appreciable progress in the country in a short period and continued to deliver healthy performance in terms of orders served, restaurants added, and customer satisfaction scores.
Domino’s Pizza- Sri Lanka
Various initiatives were undertaken during F.Y. 20 to drive profitability in the Sri Lanka market. This entailed upgrading the quality of products and customer experience, launching new developments in its menu, focused marketing activities while driving the ‘Everyday Value’ promotional proposition and various cost optimization initiatives. Domino’s Pizza Sri Lanka continues to focus on cost efficiency while enhancing consumer experience through service enhancement. The Company is in the process of substantially improving its product proposition, delivery of service, and digital experience.As of March 31, 2020, the Company had 21 Domino’s Pizza restaurants in Sri Lanka.
Recent Transactions
Jubilant FoodWorks announced Fides Food Systems Coöperatief U.A., Netherlands (Fides) for GBP 24.8mn (INR 2.5bn). Fides is the beneficial owner of 32.81% of equity shares of D.P. Eurasia N.V. (D.P. Eurasia). D.P. Eurasia is the exclusive master franchisee of the Domino’s Pizza brand, having 771 stores in Turkey, Russia, Azerbaijan, and Georgia. It is listed with London Stock Exchange PLC.
As per the Press Release dated March 24 2021, Jubilant FoodWorks entered into an exclusive Master Franchise and Development Agreement with PLK APAC Pte. Ltd., a subsidiary of Restaurant Brands International Inc. (RBI), to develop, establish, own and operate hundreds of Popeyes® restaurants in India, Bangladesh, Nepal and Bhutan in the coming years.
Leadership team
The following is the leadership and key management team of Jubilant FoodWorks:-
Financial Performance Highlights
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Sources
- Jubilant FoodWorks- Company’s website
- Company’s Annual Report (F.Y. 20)
- News articles (Businesswire)
- Research and Markets
- Business Standard- Research report
