Domino’s prominent offering, $0.60 (49 rupee) pizza, gets a hit from surging inflation in India, putting pressure on profitability, according to the CEO of Domino’s franchisee in India.
Jubilant Foodworks, the operator of Domino’s franchises in India, is facing the challenges of rampant inflation, which is impacting their profit margins and pricing strategy and causing some customers to be priced out of their offerings.
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Reuters cited Sameer Khetarpal, CEO of Jubilant FoodWorks, who stated that the company’s aim is to ‘own that price point,’ with the 49-rupee pizza being the lowest-priced option offered by Domino’s worldwide. The stripped-down, seven-inch cheese pizza with a ‘sprinkle’ of basil and parsley is designed to attract customers seeking value amid rising prices.
According to Khetarpal, the attractive price of the pizza serves as a callout to customers, encouraging them to order from Domino’s rather than opting for more expensive dining alternatives. By endorsing this pricing strategy, Domino’s worldwide team aims to retain existing customers who might otherwise be compelled to eat out less due to rising costs in the market.
Fast-Food Giants grapple with Soaring inflation
Online menu pricing shows that in Shanghai, the most affordable savory pizza from Domino’s is priced at approximately $3.80, while in San Francisco, it costs nearly $12. The issue of soaring inflation in the 1.4 billion-person market is driving global fast-food giants like Domino’s, Pizza Hut, and Burger King to reconsider their strategies.
Reuters conducted interviews with six CEOs and 12 shop managers, uncovering the challenges faced by these fast-food giants as they navigate the impacts of excessive inflation in the market. Khetarpal further revealed that the measures taken to manage costs and combat the impact of ‘historically high inflation’ led to a significant 70 percent decline in profits during the first three months of 2023.
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To counter the effects of rising costs, Khetarpal shares insights into Domino’s India turnaround and financial advantages. One cost-saving measure involved eliminating lids from all pizza boxes sold in shops starting in December, resulting in a savings of 0.6 cents per box. As 37 percent of Domino’s business in India is dine-in, this move has contributed to substantial savings in packing expenses.
India’s fast-food inflationary price wars impact and Navigation
In India’s highly price-sensitive market, Domino’s is not the only player prioritizing pricing strategies to tackle the impact of inflation, which is more pronounced compared to many other markets, including the United States. Executives across the fast-food industry believe that offering low-cost options can entice customers to visit their stores and applications, leading to potential additional purchases and upgrades.
Pizza Hut, in particular, is actively promoting its pizzas, starting at an attractive price of $0.96 (79 rupees), introduced last year. Sapphire Foods, the franchisee of Pizza Hut in India, claims that this is the brand’s lowest-priced pizza globally.
Likewise, McDonald’s has joined the pricing competition, introducing half-price meals in June. Akshay Jatia, the Executive Director of Westlife Foodworld, which operates 357 locations in western and southern India, revealed that these discounted meals will be the focus of promotional activities in the upcoming weeks. Further, he anticipates that this move will not only boost customer traffic but also increase revenues and profitability for the company.
As these giants navigate the challenges of India’s dynamic market, the emphasis on pricing and enticing offers reflects the fierce competition and the pursuit of strategies to maintain a strong foothold in this ever-changing landscape.
The surge in inflation is influencing the strategies of pizza makers, making them reconsider their focus on offering more affordable cheesy and soft-crust pizzas. While cheaply priced pizzas may seem attractive, the effects of inflation are causing some customers to avoid these offerings due to their poor quality.