Fast-food giants faced a sales dip in September. Explore the causes and future outlook.
What is the reason for the decline in fast-food sales? In the September quarter, several major fast-food companies in India observed a decrease in sales. Understand the reasons behind this and the possibilities for the future.
India is known for its rich and diverse culinary heritage. With the advent of the fast-food sector in India, there has been a significant change in people’s eating habits. The industry has experienced tremendous growth due to changing lifestyles and the increasing urban population. However, in the September quarter, a decline in sales was recorded for several major fast-food companies.
In this article, we will explore why these companies faced a decline in their fast-food sales in the September quarter and what lies ahead for the industry.
What’s Happening?
According to Mint, companies like Westlife Development Limited (owner of McDonald’s franchises in West and South India), Devyani International (operator of KFC, Pizza Hut, and Costa Coffee in India), and Jubilant Foodworks Limited (Domino’s Pizza) reported weak sales in the September quarter. However, their net sales remained positive on an annual basis.
As per Mint’s report, Westlife saw only a 1% growth in same-store sales on an annual basis, which is significantly lower than the 20% average of the previous four quarters. Devyani International’s sales growth heavily depended on opening new stores, with a sequential decline of 4% and 10% in same-store sales for KFC and Pizza Hut, respectively. Jubilant Foodworks recorded a 1.3% decline in same-store sales growth for Domino’s Pizza in the quarter.
According to Moneycontrol, Devyani International’s net profit for the quarter ending September 2023 decreased by 31.61%, reaching Rs 41.10 crores, compared to Rs 60.10 crores in September 2022. Jubilant Foodworks also experienced a 26.1% decrease in net profit for the same period, totalling Rs 97.20 crores, down from Rs 131.53 crores in September 2022.
Now you might be wondering, what were the reasons behind the decline in sales for these companies during the September quarter?
Reasons for the Decline
Increasing Competition
The primary reason for the decline in same-store sales growth for many fast-food chains is the growing competition, especially from local pizza and burger chains. Increased competition in local markets is impacting established companies.
Inflationary Pressure
Particularly affecting the cost of vegetables, inflation is impacting the domestic budget. Companies have raised prices to cope with food inflation, affecting consumer preferences. For example, Mint reports a 10% decline in same-store sales growth for Pizza Hut due to increased paneer prices, leading consumers to choose non-pizza dishes.
Changes in Consumer Behaviour
The rise of restaurant aggregators and the rapid growth of categories like fried chicken and burgers, compared to pizza, have influenced consumer preferences. Additionally, increasing vegetarian consumers during religious festivals has impacted the demand for non-vegetarian fast food, presenting challenges for these fast-food chains.
Recent Trends in the Fast-Food Industry
In recent years, several noteworthy trends have shaped the fast-food sector in India, giving it a new dimension. Firstly, urbanisation and busy lifestyles have increased the demand for convenient and fast food options, providing time-efficient solutions for people.
Furthermore, the influence of global cuisines has played a crucial role in reshaping the fast-food landscape in India. The globalisation of flavours has developed consumer tastes, contributing to the diversification of fast-food offerings. Technology has also been a major trend, with the advent of mobile apps making ordering easier, leading to digital transformation in the industry.
What’s Next?
According to a report by Statista, the revenue in the food market in India reached USD 905.20 billion in 2023. The market is expected to grow annually at a rate of 8.40% from 2023 to 2028. It is estimated that 1.7% of the total revenue in 2023 will be generated through online sales. Despite the decline in sales in the September quarter, the current quarter seems favourable due to events like the Cricket World Cup and festival season, as reported by Mint.
While the fast-food industry in India faces several challenges, its adaptability and commitment to innovation are likely to sustain its growth in the coming years. The commitment to global influences, technological advancements, and catering to diverse consumer needs will continue to drive the development of the fast-food sector in India.
That’s it for today. We hope you’ve found this article informative. Remember to spread the word among your friends. Until we meet again, stay curious!
*The companies mentioned in the article are for information purposes only.This is not an investment advice.
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