MUMBAI/BENGALURU: It was a mixed first quarter for Indian quick service restaurants as headwinds such as the LPG crisis and raw material price increases weighed heavily on the sector in the April-June period even as some companies did better in terms of same store sales growth (SSSG), higher customer traffic and value offerings.
Yet, a sense of optimism prevails, with companies anticipating a stronger recovery during the upcoming festival season.
After three consecutive loss-making quarters in the previous fiscal year, Devyani International, which operates KFC, Pizza Hut and Costa Coffee, reported a net profit of â‚ą17.1 crore in Q1 compared with â‚ą2.2 crore a year earlier.
Jubilant FoodWorks’ Popeyes delivered 97% revenue growth to ₹70.3 crore in the quarter, one of the strongest performances. The company, which also operates Domino's India, said India's fried chicken category is large and growing.
However, Westlife FoodWorld, the operator of McDonald’s restaurants in west and south India, reported a 52% decline in consolidated net profit to ₹60 lakh in Q1. Restaurant Brands Asia, which runs Burger King restaurants and BK Cafes in India, posted a consolidated net loss of ₹33 crore, narrowing it from a year earlier.
“Management commentary during the 1QFY27 results indicated that the QSR sector recovery is gradually strengthening,” analysts at Motilal Oswal said in a 4 August report. “Companies reported improving demand, with positive or better SSSG across most brands, supported by higher customer traffic and strong value offerings.”
The broader resilience in spending on travel, dining, leisure and entertainment has helped support the recovery in the QSR sector, said Arvind Singhal, chairman and founder of The Knowledge Company, a management consulting firm that works in the retail, consumer goods, manufacturing and services sectors.
QSRs faced a tough time due to the war in West Asia, which broke out on 28 February. The closure of the Strait of Hormuz resulted in a drop in crude oil and natural gas supplies, initially disrupting the availability of India’s cooking gas and increasing prices.
“We have seen some food commodity inflation along with the hike in minimum wages and annual increments. LPG prices have significantly gone up in the last few months,” Manish Dawar, president and group chief executive officer at Devyani International, told analysts on 29 July.
Singhal said the LPG disruption was ultimately less severe than initially feared.
“It was more, let’s say, a fear, less a reality. The disruptions were not as intense as they were made out to be,” he said.
Singhal added that consumers appeared to have accepted the modest price increases by QSR companies, helping support their revenue and profitability as the hikes were not necessarily commensurate with the increase in input costs.
Restaurant Brands Asia did not increase prices in the quarter, while Sapphire Foods India, the operator of Pizza Hut and KFC, passed on some of the costs.
“We have taken a small amount of price increase (2%) in this particular quarter, which has helped improve gross margin and, thereby, it has helped the bottom line as well,” Vijay Jain, chief financial officer at Sapphire Foods, said on an analyst call on 24 July.
The board of directors of Sapphire Foods and Devyani International approved a merger scheme on 1 January.