Hungry for more

Smokin' Joe's has added pizzazz to its pizza business. Will it work?

Smokin' Joe's wants a larger piece of the pizza pie. With an all-new menu, ad campaigns and more outlets, the Mumbai-based pizza chain is aiming for the top crust of the Indian pizza market.

Since 2000, it has spread to nine cities, with 34 outlets. The chain released its first TV campaign in November 2003 and has a new toll-free number.

With a new menu, now positioned as Kitchen Secrets from Smokin' Joe's, it also launched value-for-money promos like a single-topping pizza for Rs 60 (half the price of other pizzas).

"The new initiatives have increased orders by 10 per cent per month," says Navroze Bilimoria, managing director, Smokin' Joe's.

The spiced-up strategies mark quite a change from the bland fare of the mid-1990s when the chain was confined to Mumbai and brand visibility was poor.

"It didn't make sense to invest in mass advertising when we catered to specific localities. So promotional activity was restricted to pamphlets," says Bilimoria.

It worked, mainly because home delivery at the time was limited to local Udupi restaurants. Within the roughly Rs 100-crore branded quick service food business (foods that can be served in 10 to 30 minutes), pizzas accounted for a minuscule 1 to 3 per cent. (Now, pizzas account for 60 to 65 per cent of the Rs 400-crore quick service foods sector.)

Around 1996-97, the pizza pie changed size. Multinationals like Domino's and Pizza Hut took huge bites of the market.

Domino's global USP "" the 30-minute delivery promise "" was its wow-factor in India as well; Pizza Hut emphasised the restaurant-dining experience. Consequently, local players like Smokin' Joe's were relegated to the low tables.

But the biggest change with the arrival of global competition was the increase in customer expectations, especially in delivery time and service. "Competition forced us to take a more systematic approach to delivery," recalls Bilimoria.

Previously, Smokin Joe's employees avoided immediate delivery of single orders, preferring to wait for more orders from a locality.

Result: orders would sometimes be delivered up to an hour later. "We had to change the mindsets and show them that by doing this, they were losing business to competition," he adds.

At the same time, the multinatonal brigade was going slow on expansion, as it was picking up lessons in the new market. That would have been the ideal time for Smokin' Joe's to shore up its operations.

It was familiar with local preferences, its prices were 30 to 40 per cent lower and, importantly, the global chains were focusing on the northern markets initially.

"We weren't bullish on expansion till the late 1990s. Expansion out of Mumbai was also difficult because outlets were company-owned," admits Bilimoria.

With only five to six outlets in Mumbai, the company was operating on a turnover of Rs 3 crore to Rs 4 crore till 1998.

By 2001, Domino's grew to 101 outlets from just 37 outlets in 1998, Pizza Hut had 10 outlets while Smokin' Joe's had added only another four. (At present, Domino's has 90 outlets and Pizza Hut has 56 restaurants.)

To cope, Smokin' Joe's needed to re-think its business model. Says Bilimoria, "We realised that to grow on presence, franchising would be a good option."

For starters, two outlets outside Mumbai, in Pune and Surat, were franchised. Then, in 2000, Smokin' Joe's bought out Pizza Express, a Rs 4-crore Mumbai-based pizza chain.

Of Pizza Express' six outlets (all Mumbai franchises), four were taken over by Smokin' Joe's and two were scrapped. The reach within Mumbai was expanded, and Smokin' Joe's set out on the franchising route.

But it also needed to cut down on overheads. "We can't afford high rent and employee costs. So we don't go for visibility," says Bilimoria. Now the chain sets up shop close to "" but not in "" high-footfall areas.

For instance, Domino's is on Peddar Road, a hot spot for retail outlets in southern Mumbai, and Smokin' Joe's has an outlet on Carmichael Road, a mere 10 minutes away. Bilimoria explains, "This has reduced our rent by at least 20 to 30 per cent."

Reducing the headcount at outlets also helped. At Domino's, speed of delivery is sacrosanct, so an average 1,000 sq ft outlet has about 20 employees, with eight managing the back-end. Smokin' Joe's makes no delivery time promises, so it can do with 10 to 15 employees per outlet.

"We could have gone for an even lower headcount if we were a purely delivery-based business," says Bilimoria. "But our surveys showed people still like to eat out, so we can't remain just a delivery business."

Another change is in the sourcing of materials. The multinationals follow a centralised sourcing model, but Smokin' Joe's opted for decentralisation in 2000.

Now, each city has a separate vendor network, except for critical items like cheese, which has a single vendor. "Centralised kitchens only add to the costs of transportation," points out Nirmal Momaya, director, Smokin' Joe's.

The model has helped the company expand its coverage to A-class towns like Nasik and Aurangabad in Maharashtra and Walkeshwar and Surat in Gujarat.

At present, 14 out of 34 of Smokin' Joe's outlets are in the A and B class cities. (Domino's, in contrast, has withdrawn its outlets from small cities like Nagpur and Surat.

"The supply chain was just not working out because of the distance," Arvind Nair, chief executive officer, Domino's told The Strategist in May 2001, on this point.)

Competitors are critical, though. "The chain still runs like a small-scale business. Quality control is impossible without a centralised supply chain," says one competitor.

"The franchisee model is not easy to sustain in the foods business," warns another. Despite the criticism, Smokin' Joe's has its eyes set on the new strategy.

"What will work in our favour is our understanding of the Indian market," says Momaya. As of December 2003, Smokin' Joe's claims to have increased its turnover to Rs 20 crore and is planning to add another 15 outlets across Delhi, Bangalore, Chennai and Hyderabad over the next year. Will the new recipe turn out a home-grown success?