Top quick service restaurant (QSR) chains like Pizza Hut, McDonald's, Café Coffee Day (CCD) and KFC have stayed ahead of the double-digit inflation to record top line growth of 20 to 30 per cent in the first half of the year.
While these companies say the growth has largely been possible due to tightening supply chain management, moderate price rise and aggressive marketing campaigns, they have now embarked on an aggressive expansion plan this financial year.
Said Vikram Bakshi, MD, McDonald's India (North & East), "Despite double-digit inflation we have achieved 27 per cent growth in sales so far this year." Endorsing the growth sentiment, coffee chain Café Coffee Day's director Alok Gupta said, "We have been witnessing 20 per cent increase in footfalls this year."
Both KFC and Pizza Hut, from the Yum Restaurants stable, also clocked handsome first-half growth.
CCD's Gupta explained the double-digit growth rate saying, "For us the growth is coming both from new stores and increased footfalls at existing stores. Secondly, we are ordering larger volumes from our supplier partners so that they are able to run their operations efficiently and do not pass the cost increase to us." The coffee chain increased prices by 5 per cent from April 1, 2010 after a gap of almost 20 months.
McDonald's Bakshi said, "We have grown because of a variety of factors. While we did not increase prices, we also entered into long-term sourcing agreements with vendors. Given the growth, we would not like to increase prices going forward."
The chain's pricing became tax-exclusive from April 1, thus enabling it to pass on the VAT burden to the consumer without actually hiking prices. KFC and CCD have also since become tax-exclusive.
"We have modified our sourcing pattern. We are now buying in bulk. For products such as cheese and flour we are entering into six to 12 months' contractual agreements with the large vendors so that there is no backing out by any side," said director-marketing of Yum! Restaurants India-Pizza Hut, Anup Jain.
KFC too is fine-tuning its supply chain. "We have been handling the cost pressure by making the supply chain more efficient. If we had four vendors giving us packaging material, now we have two vendors," said Varma.
A senior official at Mrs Bector's Food Specialties, which supplies buns and condiments to major chains such as Barista, CCD and McDonald's said, "To keep costs under check companies are entering into six to 12 months' contracts so that there is no price change in between until and unless there is a very significant pressure on price."
The growth sentiment has led these companies to expand their constituency. CCD currently owns and operates 972 cafes in 141 cities and is looking at taking the number to 1,150 by end of this fiscal. While Pizza Hut is planning to open 20 outlets, KFC, which has 77 outlets now, is looking at taking the count to 120 by the yearend.
These chains have also stepped up promotions and campaigns including tweaking of menus. CCD has launched a new menu from July 23 themed around Friendship Day, which is a week away. Pizza Hut has introduced a new meal offering starting at Rs 99 per person. KFC has been adding new items on their menu to create excitement. McDonald's latest campaign unveiled last week also reinforces the value proposition.
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