Faced with stiff competition from a variety of players in the quick-service restaurant space who are constantly revamping their offerings, Pizza Hut is now planning to diversify and offer new products like milkshakes, wraps, smoothies and a variety of pastas with a combination of Indian and international products.
Based on its strategy of ‘amazing innovation, astonishing prices’, the food chain is planning diversification across its existing 300-odd stores in the country and aims to add another 150 stores to its kitty next year.
“We will open more Pizza Huts than ever before in 2014 and diversify into much more. We will grow our distribution and innovate much more,” Pizza Hut India general manager Sanjiv Razdan said.
The expansion is planned despite Yum! Brands, which owns Pizza Hut, KFC and Taco Bell having posted losses in the last two years. The company’s income was R449 crore in the year ended March 2012, up 58% from Rs 283.4 crore in 2011.
However, the losses increased from R27.1 crore in 2011 to
R36.9 crore in 2012. Besides 310-odd Pizza Hut stores, there were 280 KFCs and three Taco Bell stores in 2012.
Competitor Jubilant FoodWorks, which runs Domino’s Pizza and Dunkin’ Donuts, reported a 2.8% increase in net profit at R33.2 crore during the July-September quarter, from R32.3 crore in the corresponding period last, bogged by higher expenses. The company gave a muted outlook for the second half of the year due to lower discretionary spending and higher inflationary pressures. Besides, it revised its target to open 135 Domino’s Pizza restaurants in fiscal 2014 against 125 earlier.
“Though the whole category is growing, consumers are under pressure as far as their disposable income is concerned and the amount they spend on eating out,” Razdan said.
Advisory firm Technopak’s chairman and managing director Arvind Singhal added: “Overall, the company had leadership till a few months ago but now Domino’s is leading the pizza market. Though KFC is a runaway hit, Pizza Hut requires a rejig of menu and pricing, especially because India is a highly under-penetrated market when it comes to casual dining. They are building the future here and do not want to miss out on the opportunity. Hence, the addition in stores despite the recurring losses.”
Of the 150 Pizza Huts planned, more than half would be dine-in restaurants and the rest Pizza Hut Delivery points. While the Pizza Hut Delivery require at least R1 crore of investment each, the investment into restaurants is double of that. However, despite the expansion, India contributes only a fraction to the global sales with less than 1% share in total sales.
The quick-service restaurant, which is famous for its pizzas and value-for-money meals, is planning to diversify its menu for the Indian consumer for all occasions. It recently launched its ‘So Cheezy’ pizza, which has 90% more cheese than its closest competitor, and is priced at just R149, which it calls its innovation. The launch was part of a strategy which Razdan called “gateway innovation at value prices.”
Before this, Pizza Hut came up with its Magic Pan pizza for R44 and three-course meal for R99.
Even though the food chain plans to come up with a new menu, Razdan assured that in line with the palate of the Indian
consumer, 60-70% of the menu will remain customised for the Indian market with a mix of flavours and formats.