Domino’s Reinventing the Pizza Game: A Slice of Success

Introduction

What comes to your mind when you think about ordering a pizza? Dominos, that’s what most of the people would say. There are many pizza companies in India and many international companies which are currently trying to penetrate the market, but the first thought that typically comes to your mind when you mention pizza is Domino’s. The reason is pretty obvious, it is the market leader in the organised market with a 50% market share and 70% share in the Pizza home delivery segment in India. India surpassed the UK to become Domino’s second largest market with 1700+ stores behind the United States with 6400+ outlets as of September, 2023.

But where did everything begin?

History of Domino’s India

Shyam Sundar Bhartia and Hari Bhartia of the Jubilant Bhartia Group, which was into the pharmaceutical and chemical sector, entered into a master franchise partnership with Domino’s Pizza. Domino’s Pizza India Pvt. Ltd. was incorporated on 16th March, 1995 and began operations in 1996 and opened India’s first outlet in New Delhi.

During that period, the pizza market in India was non-existent, necessitating Domino’s to establish the market. In the next 9 years, the company opened 128 outlets, but the rate of growth was on a decline.

In 2005, Ajay Kaul became the CEO of Domino’s India. He is the man who was behind the dominating success of Domino’s India. Under him the company implemented some of the best marketing strategies which led to the growth of Domino’s.

Growth of Domino’s under Ajay Kaul

Kaul’s aptitude for leadership paid off. Under his guidance, Jubilant Foodworks’ turnover surged to Rs2,410 crore ($362.2 million) in 2016, a staggering 33 times more than the Rs73 crore ($11 million) recorded in 2005. During his tenure, he expanded Domino’s presence from a mere 93 outlets to an impressive network of over 1,062 stores across India. This accomplishment earned India the distinction of being the largest market for Domino’s outside of the United States, solidifying Kaul’s legacy as a driving force behind Domino’s colossal success in the country.

He recognized the need to redefine the value proposition of Domino’s by offering affordable pizzas to the masses. He introduced game-changing campaigns like the Fun-Meal pizza range at Rs45 and the Rs35 Pizza Mania campaign, which made single servings of pizza accessible to everyone.

Kaul implemented the famous “30 minutes or free” campaign in India, which had a 99.6% success rate. This was one of the biggest factors which created the market in India.

But from 2012, the growth started declining, the profit margins of the company started decreasing. Over the next 5 years, there was no significant improvement in profit margins. In 2016, Ajay Kaul decided to step down as the CEO and director of Jubilant Foodworks.

In 2017, Pratik Pota joined the company as the CEO. It was very clear to him that the company was in big trouble.

Pratik Pota worked in PepsiCo as sales head, he also had an important role in launching “Nimbooz”. The iconic marketing campaign of Mountain Dew: “Darr Ke Aage Jeet Hai” was also launched under his tenure.

Increasing Growth Rates – Pratik Pota

Pratik Pota analysed the reasons which were pulling the company down and took actions, one of the reasons was Dunkin Donuts.

In 2012, Jubilant Foodworks signed a deal with Dunkin Donuts to run their franchise but could not manage that properly which led to 20-30 Cr loss annually.

So, the company reduced the outlets of Dunkin Donuts from 71 to 24.

Another major factor was the rental cost of restaurants. They decided to reduce the rental cost by:

Renegotiating with the landlords.
Reducing the outlet size from 12000 sq ft. to 600 sq ft. wherever possible.
Instead of putting new outlets on the main road, they took them a little inside where the cost would be less.

By focusing on online orders, the company was able to reduce its reliance on sitting and dining areas, which saved them a lot of money on rent and other costs. This also allowed them to open outlets in less expensive areas of the city, without sacrificing customer convenience. As a result, the company’s profitability increased significantly.

They knew that the sales in metro cities will show much less growth after reaching its peak, that is why they started focusing on tier 2 and tier 3 cities.

Pratik Pota broke the tie up with Coca-cola and did a deal with PepsiCo on favourable terms, where he previously worked.

These minor changes showed a great result. The company’s net profit margin increased from 3.5 % to 9.5 %, EBITDA Margins also went up by nearly 100% .

Their annual compounded revenues, profits and share prices increased by 11%, 48% and 51% respectively.

In March 2022, Pratik Pota resigned as the CEO.

Sameer Khetarpal is the CEO of Jubilant foodworks (as of Oct 2023).

Stock Analysis Of Jubilant Foodworks (2008-2023)

The stock trend of Jubilant FoodWorks from 2008 to 2023 has been largely positive, with a few minor setbacks along the way. The stock price has increased by over 2,200% over this period, outperforming the broader market.

Here is a brief overview of the stock’s performance during this period:

2008-2009: The stock price fell sharply during the global financial crisis, losing over 50% of its value. However, the stock recovered quickly and reached new highs in 2010.
2010-2017: The stock price continued to rise during this period, albeit at a more moderate pace. The company’s strong financial performance and its dominant position in the Indian pizza market were key drivers of the stock’s performance.
2017-2020: The stock price entered a period of hypergrowth during this period, increasing by over 1,000%. The company’s expansion into new markets, such as online delivery and quick-service restaurants, was a major catalyst for this growth.
2020-2023: The stock price continued to rise during this period, albeit at a more modest pace. The company’s strong financial performance and its well-positioned for growth in the Indian food and beverage market were key drivers of the stock’s performance.

Conclusion

Domino’s success in India can be attributed to a combination of factors, including localised menu offerings, emphasis on convenience and delivery, affordability, strategic marketing, consistent quality, technological advancements, and a well-established nationwide presence. These factors collectively contribute to Domino’s being one of the largest and most preferred pizza chains in the Indian market. Ajay Kaul’s operational efficiency, supply chain management and leadership skills along with Pratik Pota’s innovative adaptation and transformation made Domino’s the most dominating Pizza brand in India.

Bibliography

Jagrav JoshiMember