Yum! doing well in India by providing local offerings

12-Oct-2016 - Last updated on 13-Oct-2016 at 06:46 GMT

Related tags Fast food

Yum! Brands’ Indian operation has reported a significant improvement in current business, with Pizza Hut indicating a rise of 6% and KFC doubling that performance with a 13% improvement, with new menus and promotions driving sales.

Though Indian fast food companies look good this quarter, they face competition from of PE-funded online players like Swiggy and Zomato in the near future, according to Research & Markets.

“We expect Yum’s competitor JFL to add some 20 Dominos stores in the second quarter of the next financial year,” the analyst reported. It expects some 12.4% growth next year for Dominos as the group closes in on sales with Yum.

“We perceive this as the right strategy given: i) a jump in store employees’ salaries due to the bonus act; and ii) JFL’s employee cost over the past four years has ballooned by around 500bps, which has eroded margin,” Research & Markets found.

It said that menu innovations will now drive growth in the fast-food industry. JFL’s new Dominos offerings, Burger Pizza and Pizza Mania extreme, as well as McDonald’s McAloo Tikki in Mexican & Lebanese flavours and Mexican Cheesy Fries, bear testimony to this emerging development.

In a note, Edelweiss Securities said that the frequency of “buy-one-get-one-free offers” surged in the second quarter of this financial year. Global player Wendy, the world’s third-biggest burger chain, has cut prices to shore up India sales.

“QSR players will face rough weather in the medium-term,” the note said.

“However, improvement in consumer sentiments over the next two-to-three years, aided by good monsoon and the Seventh Pay Commission payout, are anticipated to benefit QSR companies in the long-term.”

The quick-service business is currently worth some INR3bn (US$45bn) and is expected to grow to almost INR5bn by 2021, Research & Markets found.

"Key trends emerging in the space include virtual kitchens, stores at travel hubs such as airports, railways and highways, ordering-in and food trucks,” it added.

“India's exponential growth and consumption in terms of frequency of eating-out and experimentation with cuisines and concepts have given the services sector a huge fillip. The restaurant industry is estimated to contribute close to 2.1% to India’s GDP by 2021.”