UPS AND DOWNS IN THE JFL STORY

The various awards and endorsements that we have won during the year (2012) amply demonstrate the success of our growth strategy, which is focused on delivering more across every aspect of our business function - Shyam S. Bhartia Chairman, Jubilant FoodWorks Limited

Abstract
Quick Service Restaurant (QSR) is one of the most exciting sectors in the Indian consumer market. Several factors such as nuclearization of families, lack of time, etc. are driving increasing out-of-home food consumption. The trend takes a new meaning when a large proportion of population is young and very receptive to new ideas, products and services. In 2011, Indias GDP reached Rs. 91.7 trillion, per capita disposable income was Rs. 61,591 and per capita spending was Rs. 44,462. The total foodservice market is worth about Rs. 43,000 Crores and is growing at 25% per annum. The organized segment of the restaurant industry, at approximately Rs. 9,000 Crores, forms 16% - 20% of the industry. The size of the industry is expected to be Rs. 62,500 crores by 2015. Enterprises wishing to enter the QSR industry must choose one value on which the business would be built. In case it wants to address different value segment, it must choose different format that require a different business models, than a linear extension. The industry has high potential and is also showing high growth. However, it is also witnessing high competitive intensity. This happens because the entry and exit barriers are close to nil in the industry. Even though there are failures, as the market is witnessing growth due to several reasons such as huge young customer base, evolved eating culture, rising middle class, surge in disposable income and shift in spending pattern, more and more new outlets are started.

Contents
Introduction ............................................................................................................................... 2 Milestones Achieved ............................................................................................................. 2 Challenges Encountered............................................................................................................ 3 Strategies Employed ................................................................................................................. 4 Taglines with a twist! ............................................................................................................ 5
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The Results................................................................................................................................ 6 Road Ahead ............................................................................................................................... 7 Exhibits ..................................................................................................................................... 8 Exhibit I: Financial performance of JFL (2008-2012) .......................................................... 8 Exhibit II: Expansion of Dominos India by JFL (2008-2012) ............................................. 9 References ................................................................................................................................. 9

Introduction
Fast-food retailer Jubilant Food works, promoted by Shyam and Hari Bhartia of the Jubilant Bhartia Group, made its debut in 1995 as Domino's Pizza India. The company & its subsidiary operates Dominos Pizza brand with the exclusive rights for India, Nepal, Bangladesh and Sri Lanka. JFL is currently Indias largest and fastest growing food service company. Domino's Pizza has 4 large regional commissaries in India catering 500 stores (as of Aug 30, 2012), in 110 cities and 9 small back end commissaries in cities that are far away from the larger commissary locations. Over the last 15 years the company has developed a network of more than 510 vendors who have grown significantly along with the Domino's Pizza brand by partnering in the brands success as well as by working together to develop new products, recipes and ingredients to meet growing consumers needs. The company is the market leader in the organized pizza market with a 55% market share (Euro monitor Report 2012) and 70%+ share in the pizza home delivery segment in India. JFL has turned India into Dominos Pizza's (International) fastest-growing market outside the United States. It was also the first in the quick-service restaurant space to go for an initial public offering in February 2010 at Rs. 145 a share. Today, after two years, the shares hover around Rs. 1,200, giving the company a market capitalization of about Rs 7,500 crore. In February 2011, it edged out three rivals to sign a master franchise agreement with US doughnut and coffee retail chain Dunkin Donuts. The Company launched Dunkin Donuts in India in April 2012 in Delhi. The Company has 5 Dunkin Donuts restaurants in India (as of 6th October 2012).With the launch of Dunkin Donuts in India. The business strategically focuses on the home delivery segment and has been widely recognized for its differentiated business model with a focus on Innovation and Operational Excellence to offer "Great Taste", "Customer Service" and "Value for Money". The company is now well poised to address two distinct non-competing segments of the Food Service Industry in India, viz. the home delivery of pizzas market and the all day part food and beverage market. Milestones Achieved Most Promising Company of the Year award at CNBC TV18's India Business Leader Awards (IBLA) 2012.
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Emerging Company of the Year at Economic Times Awards 2012. The Most Admired Food Service Retailer of the Year: QSR Foreign Origin at the Coca Cola Golden Spoon Awards 2012. Received the Gold Franny Award from Domino's International for the last 6 years for being the fastest growing country. Ranked as No. 1 in Quick Service Restaurant (QSR) Industry in India's Best Company to Work for 2011, survey conducted by the Great Place to Work Institute, India (GPWI). Award for Excellence (Customer Service) in franchising and business development 2009 by Franchising World. Ranked as the 9th best employer in India in 2009 by Hewitt Associates and amongst the top 25 employers in APAC. Received Award for Brand Excellence in Service/Hospitality Industry in CMO Asia Awards by CMO Council.

Challenges Encountered
Domino's Pizza India Private Ltd started operations in 1996; an attempt to organize the food chain industry in India from scratch was an arduous task because in the year 96 pizza was just making an entry in the Indian fast food industry which was heavily dominated by burgers. So against all odds and disconcerting questions such as: Would being the first mover prove to be a smart choice? JFL went ahead with its effort to creating the pizza category in the fast food industry. Although an ambitious vision it had its own hurdles some of which were by default and others created: As the Indian palate which was accustomed to a specific taste, the difficult task for JFL was to help the Indian consumers in creating a likeness for pizza. JFL faced another issue which was: peoples perception towards pizza was that it was meant for an upscale consumer and not for everyone. JFL set up stores in small towns where consumption was low and those willing to opt found the price per meal high. In 2000, JFL chose some non-lucrative locations such as Meerut and Ghaziabad which were located far from the nearest commissaries and led to high transportation costs. After entering home delivery segment JFL faced another snag when it prematurely released an all-India toll free number which would direct the call to the nearest outlet of the caller but the number of existing stores were less.

The chief hurdle that JFL had to overcome was influencing the Indian palate which was habituated by years of resistance to Western food and an innate preference of paneer over cheese and chutney over pizza sauce. From the setting up of first Dominos store in 1996 in New Delhi, even after the pizza category was fairly established and the news of the new Italian delicacy reached
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the masses. The concept of pizza was alien to the majority of the market targeted by JFL and the intended consumers were apprehensive of it as being a product meant for a niche market. The same was not true for the entire fast food industry in general but was just specific to pizza. Another slightly interconnected challenge was the affordability and overall utility of pizza. Location of outlets was an important determinant of revenues, in its race to dominate the pizza business. The launch of stores in areas far away from commissaries led to exorbitantly high transportation costs throwing the profits margins amiss. Also, setting up stores in smaller towns which comprised mainly of lower to middle income group consumers proved costly for JFL as the consumption was very low and the pricing was too high for a pizza which was at the time largely considered as a snack and not as a meal. A need for expansion led to the launch of Dominos home delivery model in 2003 and with it came some new issues as the concept of food delivery (even of Indian food) was pretty new and JFL had already established that it would not be entering the dine-in store segment. When JFL released an all-India toll free number many customers were left discontented as the number of stores present were few and the customers who wanted to place an order couldnt as there were no stores nearby which could deliver. In 2005, JFL faced the problem caused due to frenzied expansion of the number of stores which resulted in accumulated losses. The CEO of JFL, Ajay Kaul, was also quoted saying that he inherited an intensely tightly-run company which lacked a mid-term vision as key divisions like quality and HR were operating as one or two-men teams, and focus on supply chain and operations was lacking. The problem was that the sole focus of JFL was on expansion and not value deliverance. Dominos India Pizza is the market leader in the organized pizza home delivery segment. But like other QSRs, in recent times it continues to face challenges with respect to customer engagement in a market where loyalty to both brand and cuisine is almost a Utopian concept.

Strategies Employed
It was not all bad news as Dominos effort to create the pizza segment coupled with various o fferings from competition led to a radical shift in the Indian taste buds and Dominos due to its viable growth strategies, capitalized the most from this. But increasing share led to need for further expansion and differentiation. In an effort to curb the issues faced by JFL, they had to rethink their strategy and devise several competitive strategies to counter competition from other players in the fast food industry. The first major hurdle for Dominos was to make the pizza palatable for the Indian consumer and it did so by offering toppings inspired by Indian cuisine such as Paneer, etc. for its pizzas. The fact
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that this strategy was picked up by Dominos competition verifies that pizza manufacturers at that time were struggling to get the pizza accepted as not just a snack but a meal. And the best way to do that was recognized by Dominos (JFL) by offering the consumer something they were familiar with and helping them the transition. To capitalize on increasing brand recognition and acceptance of pizza Dominos had to expand and that too speedily. They did so by targeting less niche areas and opened outlets in new and less penetrated markets. This was two birds with one arrow strategy as firstly it helped Dominos enter new avenues and take advantage of the consumers which were willing to experiment. Secondly and more importantly it helped change the perception of pizza as a product meant only for urban dwellers to a product for all. Now as Dominos entered new areas it realized that the main reason that made consumers shy away from pizza and not other fast food options was: Price. To counter this Dominos devised an innovative strategy of launching pizzas for as little as Rs. 35/- which made quite a few heads turn of both consumers and competitors alike. And like all well thought out strategies it worked well on various accounts as the consumers with tighter budgets were delighted and it even stirred up an interest in nonbelievers to give pizza a try. The introduction of online delivery was another initiative of JFL which was aimed at increasing convenience for consumers. Along with better value for customers the integration of technology in Dominos delivery model made the brand more accessible and enhanced the ordering experience as well. Due to the erratic real estate market of India; JFL had to figure out land and location acquisition, screening, etc. and another one of a kind strategy employed by Dominos came into picture. To effectively curb the loss of focus from the core business of selling pizza JFL sort of outsourced its real estate operations. JFL entered an agreement with real estate consultant CB Richards Ellis to help with locations, conducting feasibility studies, and manage construction.

Taglines with a twist! Dominos entered Indias advertisement space in 2001 with the tagline Hungry Kya? this seemed to follow the adage that the way to a person's heart was through his stomach. It was centrally pitched for appeasing hunger & although from 2004 onwards the focus shifted to the promise of 30 minute delivery but the tagline remained the same. In 2004, Dominos started home delivery of its pizzas & differentiated itself from the competition by giving a literal guarantee of the pizza being delivered fresh & within 30 minutes of the order being placed which if not met would result in the order cost being waived off. A tagline such as 30 minutes or free differentiated the brand USP by establishing an unsaid commitment that the pizza would be delivered fresh & hot. It was not a product attribute but a service associated to its
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product & was picked up from Dominos delivery model which is followed internationally. Being an innovative technique it garnered interest from customers & helped create a point of difference which greatly aided Dominos growth. This strategy was formulated after a systematic mapping of the whole process which included time required to make, pack & make an order ready for delivery, drive time to deliver pizzas & some extra safety net minutes for keeping in view the possibility unpredictable traffic issues in the city, etc. In 2008, Dominos decided to shift from 30 minutes or free & bet on emotional quotient for the first time with a new tagline Khushiyon ki Home Delivery (Happiness Home Delivered). It was realized that it was important to connect with people on an emotional level. So, Dominos recognized that the delivery factor helps to lighten the mood, bring joy & happiness. In 30 minutes or Free, Dominos pizza not only brought joy, but also a lot of sharing & bonding. Hence, the new positioning was brought in wherein the delivery factor was retained but an expressive viewpoint was appended. As when the consumer evolves, the brand has to evolve as well. After spending four years with the aforementioned emotional proposition Dominos launched a new brand positioning campaign with Yeh Hai Rishton Ka Time in 2012. This was done to strengthen the engagement with consumers by focusing on relationship & bonding. The new positioning effort was a step up to the next level from functional fulfillment to emotional connection.

The Results
Jubilant FoodWorks Limited made its debut in 1995 and came up with many competent strategies to curb its initial losses incurred while inventing the pizza category for the Indian QSR industry and organized home delivery models. JFL evolved from a loss-making entity till the early 2000s to a pioneer for the quick-service restaurant industry, it has current net revenue of over a Rs. 1000 crores and has recorded a 142% sales revenue growth for the last two financial years. In terms of growth rate JFL has turned India into Domino's Pizza's fastest-growing market outside the United States, continuously for the past three years. Since its inception JFL has been on a steady upward path with a gradually learning curve and they have devised some highly efficient strategy is to maintain its supremacy in the Indian QSR sector. JFL was the first quick-service restaurant to go for an initial public offering in February 2010 at Rs 145 a share (current prince is Rs. 1200). As of September 30, 2012 JFL had a market cap of Rs. 5796.65 crores. JFL boasted net sales of about Rs. 1000 crores in the year 2011-12; for the latest quarter the company has reported a 44.4% growth in its net sales to about Rs. 342

crores from Rs. 240 crores in FY11Q3. For FY12, JFL posted a net profit of Rs. 1056.43 crores. The company distributed about 61% i.e. an EPS of about Rs. 16. JFL is the largest pizza company in India with over 500 company owned stores across 110 cities in India with a market share of 70 % in the organized Pizza Home delivery market in India. The company has a strong network of 510 vendors serving stores through 4 large regional commissaries and 8 backend commissaries. It has an employee base of 14,626 engaged and motivated persons (as of 31st March 12). From a struggling company for its initial five or so years, JFL has come a long way and bagging the ET Award for the Emerging Company of the Year is one of many nods of approval the company has received from the industry and consumers collectively.

JFL has a market share of more than Rs. 700 Crores which is more than 50% of the entire Rs. 1,300 Crore valued Pizza category. The Indian Food Service industry is currently worth Rs. 43,000 Crores (as of 2011) and is projected to rise to Rs. 62,000 Crores by 2015 which sheds light on an obvious fact that JFL is slated to garner more and more gains in the coming years. From a worldwide perspective JFL has bagged many accolades as it is amongst top 5 in Dominos Pizza global network outside US in terms of absolute number of stores. Also, due to the immeasurable efforts of JFL, India is Dominos Pizzas fastest growing market globall y in terms of new stores opened and India is also the largest market for Dominos Pizza globally in terms of weekly orders per store. A 70% market share in Pizza home delivery segment symbolizes the prowess with which JFL has implemented Dominos International delivery model with aggressive and to the point promotions coupled with acute focus on value transference.

Road Ahead
Jubilant Food Works has further expanded its range by entering into an Exclusive Franchise Agreement with Dunkin' Donuts, the worlds' largest baked goods and coffee chain, for bringing the brand to India through a chain of company owned stores. Dunkin' Donuts is an American global doughnut company and coffeehouse chain based in Massachusetts, USA. It was founded in 1950 and has more than 10,000 outlets in 32 countries. In 2011; it reported global sales of $6.4 Billion. For India, it plans to earmark its journey to slowly turn out to be a pan-India player with about 100 stores in the country in the next five years. Its strategy is to be an affordable eating place that would rely on food items to bring in the bucks, unlike the case in the US, where coffee reigns supreme in terms of revenue. Jubilant FoodWorks plans to invest Rs. 12 Crore to open a mini7

mum of 10 stores in the country in 2012-13. Initially, the focus will be on the Delhi-NCR area, before moving on to other locations. It has invested Rs. 9 Crore in setting up the back-end, research and development, and a factory in Noida. Dunkin' Donuts & More is offering a diverse food options ranging from doughnuts to cabiatta sandwiches. To keep a tab on costs as well as on the quality, 90 per cent of the ingredients are being sourced locally. The Company has 6 Dunkin Donuts restaurants in India (as of Nov. 7, 2012). Starbucks, which recently set up a joint venture with Tata Global Beverages Ltd., is the biggest competitor to Dunkin' Donuts and will adopt a more aggressive expansion strategy, and is aiming for 50 stores by the end of 2012. There will be a neck to neck competition between these big names. According to researches, India where coffee consumption stands at 100 grams per person versus 4.5 kilograms in the U.S., provides enormous scope for growth. Increasing adoption of international tastes is leading local coffee consumption to rise by 6%-7% annually, faster than the 3% growth in tea, a more conventionally preferred Indian beverage. So, Jubilant FoodWorks brand Dunkin' Donuts effort will be to differentiate between other coffee players by offering allday services, which will help it to overcome this challenge which comes from these diverse brands. One of their other strategies is, while serving the "core" Dunkin' Donuts menu; the Indian outlets will also serve dishes that appeal to the distinctive Indian palate. JFL had a first mover advantage while entering the Indian QSR space with Dominos and setting up the pizza category from scratch but in case of Dunkin Donuts JFL is foraying into a heavily diversified Indian coffee retail business, so the question needs to be asked Will the JFL strategy of relying on the food sales for revenue from a chain known for its coffee? work in favor or against the company. A repetition of the success story with Dominos in case of Dunkin Donuts can really bolster JFLs standing in the QSR sector but it still remains to be seen how achievable that is.

Exhibits
Exhibit I: Financial performance of JFL (2008-2012) Total Sales Year (Rs. in Million) 2008 2,116 2009 2,810 2010 4,243 2011 6,803 2012 10,233 Net Profit (Rs. in Million) 85 73 330 720 1,056

Exhibit II: Expansion of Dominos India by JFL (2008-2012) No. of Dominos Year No. of employees Pizza Stores 2008 4,240 181 2009 5,677 241 2010 8,196 306 2011 11,514 378 2012 14,626 465

No. of Cites covered 34 47 69 90 105

References