By Rajiv Singh
When Domino’s entered India in 1996, it identified three main rivals, all Indian. McDonald’s and KFC were not on the list. “Around that time, people only had a taste for dal, roti and chawal,” recalls Ajay Kaul, CEO of Jubilant FoodWorks, the master franchise holder of Domino’s and Dunkin’ Donuts.
“Pizza was alien to them.” Things have changed after 18 years. Domino’s is the largest pizza brand in India with a 72 per cent market share. The country is set to become the biggest market for the American pizza maker outside the US. But Domino’s claims some things remain unchanged.
“Our biggest rivals are still dal, roti and chawal,” reiterates Mr Kaul, underplaying the fact that Domino’s has overtaken Mc-Donald’s to become India’s largest QSR (quick service restaurant) brand in terms of revenue. “India is a chappati nation,” says Harish Bijoor, founder of an eponymous brand consultancy. And yet pizzas have made inroads and are now perceived to be more wholesome than burgers.
“We never set a target to become No 1 in India,” says 50-year-old Mr Kaul, expressing admiration for McDonald’s. “It’s (McDonald’s) double our size in almost every country. So, it does give us some sort of kick and joy. Khushiyon ki home delivery ho gayi hai,” he says in an excited tone, riffing on Domino’s latest thematic campaign.
However, while respect has its place, Domino’s is not relinquishing its No 1 slot. “That’s very clear,” says Mr Kaul. Where Domino’s posted revenue of Rs 16,222 million in 2013, Mc-Donald’s logged in Rs 14,259 million, according to the latest report by Euromonitor.
In terms of store count, Domino’s is more than double the size of Big Mac-772 versus 350! And in market share, McDonald’s’ 14.2 per cent is less than Domino’s’ 16.2 per cent. Though Domino’s was always bigger in store count, it took the pizza brand more than a decade and a half to overtake its American rival in revenue. McDonald’s is of course not giving up without a fight.
In fact, it believes the change in stacking is an aberration. Says Amit Jatia, vice chairman, Hardcastle Restaurants, the master franchise of McDonald’s in western and southern India, “It’s not about being No 1 or No 2. We serve over 320 million Indians annually, and this is what matters. When you wake up in the morning, do you think of ordering pizza? You don’t.” But you can hit McDonald’s for coffee along with breakfast. “Comparing pizzas and burgers is like comparing Chinese food with South Indian food,” he contends.
McDonald’s for the longest time made the most of its start in India. While Domino’s revenue was Rs 303 million in 2001, McDonald’s was way ahead at Rs 946 million. In terms of number of outlets, there was not much difference between the two players in 2001 – McDonald’s 105 to Domino’s 128. However, over the subsequent years, the gap kept widening at an astonishing pace.
By 2011, when McDonald’s was comfortably pacing its expansion and touched the 250 mark, Domino’s was galloping at 437. So, why did McDonald’s fail to capitalise on its initial success? Mr Jatia points out that McDonald’s spent the first 10 to 15 years growing the eating-out market, specifically creating products and habits which did not exist in the country. It forged partnerships and attracted consumers.
All of this is available on a platter to new entrants which helps them ramp up their presence at a faster pace, he observes. However a trick that McDonald’s appears to have missed is one that’s as old as the Domino’s franchise. Back in 1959, Domino’s founder Tom Monaghan and his associates used his Volkswagen Beetle to deliver pizzas to customers who lived at a distance of 30 minutes or less.
Home delivery continues to be the lynchpin of Domino’s strategy and has evidently served it well. It marks a shift in consumer perception of the QSR category from being aspirational to convenience driven. One would not drive down five km to hunt for a restaurant but look for closer options. This is where Domino’s scores a point. “It is at arm’s length of a consumer’s desire,” says Ashita Aggarwal Sharma, head marketing, SP Jain Institute of Management & Research.
After making the brand synonymous with home delivery and the popular ‘Hungry Kya?’ campaign driving pizza as both a food and snacking option, Domino’s tweaked the other parts of the mix. In 2008, it brought down the price of pizza to Rs 35 from Rs 60. This increased acceptability, induced consumption and pushed home delivery.
“The pizza came home first, and stayed an in-home consumption item. The burger remained for long an item consumed at a QSR outlet. This made a big difference,” says Mr Bijoor. “Mc-Donald’s failed to crack the home delivery code.”
Another important factor that helped Domino’s was its positioning as a meal replacement as compared to McDonald’s. A family restaurant must have a meal for the family, says Mr Sharma of SP Jain Institute. Though young people still go to Mc-Donald’s, even for them it is not a substitute for a meal.
However, McDonald’s Mr Jatia believes that being an all-day restaurant gives the brand an edge in terms of product offering. But he is quick to acknowledge the era of single-player dominance is over. There will be two or three players who will dominate the QSR space, he feels. “And McDonald’s definitely will be one of them.”
Indeed, the space is huge, but the lines are getting increasingly blurred among the top players. The chains are already beginning to cannibalise on each other’s core offering with Domino’s serving up chicken wings a la KFC; McDonald’s pushing wraps and KFC dabbling with burgers. Mr Kaul of Domino’s, however believes in sticking to what his firm knows best. “70 per cent-80 per cent of our revenues come from pizza,” he says. The side dishes merely give consumers ample snacking options.
Experts too agree that in spite of similar meal offerings, the focus should remain on core products. “All players want to stay relevant throughout the day,” says Saloni Nangia, president of Technopak, a management consulting firm. “All are trying to maximise revenues and that’s why identical offerings.”
Domino’s might have taken the top slot for now, but the pizza versus burger fight has just started. As an increasingly health conscious west avoids fast food, the battlegrounds have clearly shifted to the wallets and waistlines of Indian consumers.
Source:The Economic Times
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By Anil Thakraney