Okay but laana:
How about some cheese burst pizza?
19th June 2021
Reading time ~ 3 minutes
Hi there,
On Tuesday, Jubilant Foodworks (the company that owns Domino's in India) reported a 3x jump in their profits for Jan-March 2021, as compared to 2020. So we thought for this week's edition, we'll do an overview of Jubilant, our beloved Domino's brand, what it has in store for the future, and what that means for you. P.S: this is not a deep-dive analysis of the company, but a brief explainer on what we found interesting.
Hungry kya?
If you've ever ordered from Domino's, Dunkin' Donuts, or Hong's Kitchen (which you probably have), you now know that you have contributed to the revenues of Jubilant Foodworks Ltd. The company owns and operates the three brands across India, as well as Domino's in Sri Lanka and Bangladesh. Domino's and its 30-minute delivery has been a part of the Indian lifestyle since 1995, all thanks to Jubilant Foodworks. Since opening the first Domino's in Delhi some 25 years ago, the company now owns 1300+ stores across 280+ cities in India, 34 Dunkin' outlets, and 4 Hong's Kitchen restaurants.
One of the main factors fueling this growth has been their customer-centric approach. I mean, there's nothing that boasts more about understanding the Indian palette than serving Masala Pizzas at an Italian Restaurant, Momos at a Chinese Restaurant, and Masala Chai/ Thandai at a Donuts shop.
Further, JFL's focus towards being a "food-tech" company has helped them gain a massive advantage. Infact, 86% of their orders currently come through online mediums, a 16% increase as compared to last year. Covid definitely made a dent to sales, but with their online ordering, zero contact delivery, and frankly massive brand recall, they were able to make headway. Their app has consistently been the highest-rated food app in the Google Play Store. We all love looking at the baking status of our pizzas, and this early investment is sure to help them as they expand and serve the next billion. Not just on their app, Domino's continues to have a strong presence on Swiggy and Zomato as well.
For a segment that sees more potential in delivery than dining in, Domino's will be using its delivery fleet to its advantage. Even with aggregators, they still do delivery on their own, helping them keep in touch with the customers and improve delivery times. P.S: they spent 200 Crores on marketing this year, a part of which was pushing their "tees se bees" (30 to 20) minute delivery. It's also the single largest player delivering hot pizzas to people's seats at 175 railway stations. The trains might not be on time, but Domino's will be.
Overall, the 4000 Billion Rupees Food Services Industry in India is rather massive and JFL is a small (but rising) part of it. It controls 21% of the Quick Service Restaurants segment, ahead of McDonald's, Burger King, and the likes. With the rise of the young Indian working population, nuclear families, and travel (hopefully soon), things are looking up for this segment.
It's worth mentioning that more than half of the value of the food services restaurants actually comes from the unorganized sectors - think, your local street food vendors. So, technically, Domino's and Dunkin' aren't just competing with McDonald's but also your favorite chaat stop down the road. To tackle this, one could argue that affordability - "quality and value" - has been one of the central pillars of the company, and important for its success.
Even as prices of basic food commodities and dairy have been increasing, JFL hardly shifted these price increases to the consumer - instead, mitigating these increases through their operations, targeted campaigns, and low waste. Dunkin' is also experimenting with smaller kiosks - reducing rental costs and focusing on their competitive advantage around delivery. We hope that this approach will continue as Hong's kitchen is set to expand as the Desi Chinese outlet in India - with all the affordability and convenience that Domino's offers.
All of these values, along with the openeing of 50 new stores and improving margins from existing ones, played a part in the 3x jump in profits between Jan-March. This is a good story for a company that struggled with their numbers between 2012-17, but turned it around post 2018, once they focused on their core values of customer experience, rapidly shutting down loss making outlets and finding opportunities elsewhere.
We'd love to see where they go next, as they increase their brand portfolio, not just in India but also in other emerging economies - especially since they recently bought 10% of Barbeque Nation.
So, what does this mean for me?
Well, if you invest in equity mutual funds - do us a favor and check whether your fund invests in JFL (more likely that it would be a mid-cap fund). You can google the name of your fund, and open the link of either Value Research/ Morningstar and check under "Holdings". It'll look something like this (this is from Value Research):
If so, next time you order Domino's or Dunkin' or Hong's, you know that you own a small part in its success. If your fund doesn't - don't worry, they probably see value in other companies (at the end of the day, with mutual funds we don't have to pick stocks), which we might cover if you liked this edition!
Let us know! Email us at rujgupta@laana.club
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