Quick service restaurants shine amid slump; post strong sales growth

Jubilant FoodWorks, Westlife post 6-9% same-store growth

Two of the country’s top quick service restaurants (QSRs) — Jubilant FoodWorks and Westlife Development — have reported a stronger set of sales growth numbers in the December quarter (Q3FY20), ahead of what they registered in September and June quarters of the current financial year.

The performance also comes at a time when overall sentiment has been weak in the domestic consumer market, something that research agency Nielsen had indicated last week in its quarterly update.

Jubilant FoodWorks, which is the master franchisee of Domino’s Pizza and Dunkin in India, saw its same-store sales growth (SSG) come in at nearly 6 per cent in Q3. Westlife Development, which runs McDonald’s restaurants in the west and south of India, reported a sharper 9.2 per cent SSG for the period. SSG is sales growth of stores for one year and above. It is a number tracked closely by analysts, since it gives a sense of consumer demand at retail outlets.

In the September quarter, the two listed players had reported SSG in the range of 5-7 per cent. While in the June quarter, SSG was within 4-6 per cent, data from their financial results show.

Nielsen had said consumer sector value growth in India had crashed to its lowest level in six quarters, standing at 6.6 per cent in Q3. This figure excludes the e-commerce channel. If online sales were added, consumer sector value growth improved to 7.3 per cent in the December quarter, the market researcher had said, adding recovery in the sector would be visible in the January-March 2020 period, improving in subsequent quarters. Most analysts were also expecting the high base effect to kick in during the three months ended December 2019 for the two QSRs, since SSG in the year-ago period was in double digits (14.5 per cent for Westlife and 14.6 per cent for Jubilant FoodWorks).

So what aided growth in Q3?

Amit Jatia, vice-chairman, Westlife Development, said the company’s strategy of providing everyday value, customer experience and digitisation had paid off. “Through platforms such as McCafe, McDelivery and McBreakfast, we have mindfully created more occasions to drive usage across day-parts. This has helped us stay the course of growth despite tepid consumer sentiment,” he said.

Shyam Bhartia, chairman, Jubilant FoodWorks, said, “Our increased focus on the basics of the business and elevating the customer’s experience helped drive growth. We will continue to emphasise on these key pillars as we go forward.”

Priyank Chheda, analyst, Reliance Securities, said, “Near-term growth looks intact for Jubilant FoodWorks. While margins would remain under pressure due to higher raw material costs, the company is unlikely to hike prices further as it would attract competition,” he said.

According to experts, for both listed players online deliveries today constitute 85-90 per cent of overall sales, higher than the 70 per cent number reported by them a year ago.

Abneesh Roy, executive vice-president (research), institutional equities, Edelweiss, said a larger footprint of stores in urban areas, value meals and lower price points as well as aggressive offers had helped growth for the two companies.