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FLASH Yum! Brands spicing up the QSR space
India Equity Research | Retail
Yum! Brands (Yum), Jubilant Foodworks (JFL) key competitor, has been
upping the ante in the Indian quick service restaurants (QSR) space
through various innovations, higher focus on faster delivery and value to
consumers. In its latest investor interaction, Mr. Niren Chaudhary, India
President, Yum! Restaurants, delineated a roadmap of the companys
strategy in India. In the past few months, Pizza Hut has successfully
launched new products. The company, which operates KFC, Pizza Hut and
Taco Bell stores in India, also plans to be aggressive in store additions and
aims to triple the number till 2020 to 2,000 stores. As per our channel
checks, Pizza Hut Delivery has started 30-minute or free guarantee, in
select cities. Though likelihood of a strong/stable government post
elections is expected to revive urban demand, growth is likely to be backended in FY15. In light of rising competition, continued slowdown in same
store sales growth (SSG), and continuous decline in promoter stake, we
maintain REDUCE on JFL. Also, Yum!s initiatives could potentially lead to
loss of market share for McDonalds India (Westlife Development).
Yum India envisages being the No.1 restaurant company in all three categories
which it operates in.
The company is on an expansion spree and has entered new cities through a mix of
owned and franchise-operated stores. Store additions have tripled in the past
three years. The company aspires to triple again to over 2,000 stores till 2020.
~40% Indians are vegetarians and even non-vegetarians turn vegetarians for ~60
days in a year. Hence, Yum is aggressively tapping this space by new products.
In Pizza Hut, the non-pizza menu comprises ~50% of total menu. The company
plans to increase this contribution further by introducing new products.
From 155 stores in 2011 compared to 240 of McDonalds, KFC has reduced the gap
in two years and now operates 305 KFC stores vis--vis ~350 of McDonalds.
Innovations like KFC WOW! and Rice Bowl (contributing ~7% to KFCs sales) have
been extremely successful.
Pizza Hut has been rated in India as the most trusted food service brand for the
past seven years.
Alankar Garude
As per Yum, eating out market in India is highly underpenetrated and is currently
less than 10% Chinas. While China has 4 restaurants per million, India has less than
1 restaurant per million.
Abneesh Roy
Media
Edelweiss Securities Limited, Edelweiss House, off C.S.T. Road, Kalina, Mumbai 400 098.
Board: (91-22) 4009 4400, Email: research@edelweissfin.com
Vikas Khemani
vikas.khemani@edelweissfin.com
Nischal Maheshwari
nischal.maheshwari@edelweissfin.com
Nirav Sheth
Head Sales
nirav.sheth@edelweissfin.com