Domino’s India: A Sinking Ship Gasping for Breath?

Domino’s India, the poster brand of Jubilant Foodworks which solely enjoys over 16% market share is now trying hard to retain its Unicorn status. The stocks have plummeted to under Rs.1000, merely half of what it held in August 2015 and the sudden plunge has led to the valuation of the firm to dip below the $1 Billion mark. With over 1000 stores in India and many more around the corner, Domino's India is the second largest market for Dominos Inc., the leader being The United States. While the number of stores is rising, it is surprising that Jubilant Foodworks has lost over Rs 6,200 Cr. in terms of market value, reaching 6,500 Cr. from its initial value of 12,700 crores. 

The Initiation

Jubilant Foodworks started its business under the name Domino’s Pizza India Private Limited in 1995 and opened the first outlet of Domino’s Pizza in 1996. In 2011, Jubilant Foodworks signed a franchise agreement with Dunkin’ Donuts, an American coffee, and donuts chain to open its stores in India, the first of which opened in 2011. In the first quarter 2014, Jubilant Foodworks inaugurated the 700th Domino’s Pizza outlet and in the next 24 months, they went on to open 300 more outlets, making India only the second country after the United States to reach the 1000 store mark for Domino’s Pizza. After being in operations for over 20 years now, Jubilant Foodworks has over 1000 Domino’s Pizza outlets in India and 20 outlets in Sri Lanka while holding contracts for both Bangladesh and Nepal. The company aims to double their outlets till 2021.

The Expansion

With the fast food market booming in India in the past decade, Domino’s has enjoyed its share of profit as well. While the dine-in option flourished, the technological boom did not leave the food sector unscathed. Domino’s Pizza, which was already enjoying its success through its successful marketing campaigns and buy one get one offers, started racing past its competitors even faster. To put this into perspective, Domino’s India was lagging behind McDonald’s India in 2012, but after 4 years Domino’s has doubled the outlets as compared to the latter and enjoys a 16% market share in the Rs 100 Billion Indian Chained Food Service Industry. Its closest competitor in the pizza market, Pizza Hut India holds a meager 4.4 market share, showing the grave difference between the two.

Domino’s India has stated that it enjoys a database of around 20 million unique customers, showing its hold on the Indian Pizza market. The ’30 minute or free delivery’ has helped the firm build an image of a dependable brand. Connecting with the government, Domino’s had also started pizza delivery to railway passengers in 2015 and in March 2016, Domino’s announced that they would double their railway reach from existing 60 stations to over 130 in the coming months.

The Downfall

It is always said, the only thing constant is change, and that is what has happened in the last year. The Same Store Sales Growth (SSSG) of Domino’s has been consistently declining. To put things into perspective, Jubilant Foodworks has lost half their valuation and dropped from a peak value of Rs 12,700 crores in mid-2015 to Rs 6,500 crores in mid-2016. The 12 months have been really hard for the company and it has shaken from the core. Many key people have resigned from the company in these 12 months, causing internal instability. Harneet Singh Rajpal who held the position of Senior Vice President and Head Marketing in Domino’s India resigned in July 2015, followed by Ravi Gupta, Chief Financial Officer who left in July 2016. But the biggest blow the company witnessed was on 20th September 2016 when Ajay Kaul, the CEO of Jubilant Foodworks resigned after holding the position for 11 long years. The notice not only hurt the company from inside, but the shares tumbled over 3 % on the D-Day while only a fortnight ago on September 6, 2016, the shares of Jubilant Foodworks dropped more than 10%.

Domino’s India: A Sinking Ship Gasping for Breath?Source

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How They Failed

The techno boom that helped Domino’s India increase their already flourishing customer base led to the fall of its profits as well. It is always said, you should move with the times and this is where Domino’s has been failing to cope up. With the increase in the number of food related applications and the huge number of new restaurants piling up, the customers received a vast number of cuisines and food types to choose from. The stifling competition in the fast food industry, with a number of new Food Startups competing with the attention of the customers, led to the marginal downfall in the Domino’s sales.

The major blow came from the Food Delivery Services which nullified Domino’s major USP: quick and easy food delivery. Suddenly the options to order food from widened, leaving Domino’s far behind in the race.

One other factor that has taken Domino’s to a spot of bother is the growth of Pizza Hut. Pizza Hut might not have such a big customer base in India as Domino’s but its idea is a lot different that Domino’s. While Domino’s boasts being a quick service restaurant, Pizza Hut, on the other hand, offers a casual dining experience combined with thee food that everyone loves, Pizza! Pizza Hut is a now also offering neck-to-neck competition to Domino’s by releasing BOGO offers and other such discounts.

Domino’s has suffered a lot from the growth of local and international brands as well such as Burger King, Sbarro Pizza, Smokey’s BBQ & Grill, and Insta Pizza.With the increase of food brands everywhere and many more foreign restaurant chains setting foot in India, not only Domino’s but giants such as McDonald’s and KFC have suffered losses as well. The entire QSR industry has seen a loss, not because of low demand, but because of the sheer size of the supply.

Quality Depression

With the increase in prices all around, Domino’s has seen a quality depression to cater to the needs of the customers without increasing the prices and this has put them in a spot of bother. The decrease in quality hasn’t been well received by customers and many people have shifted to other joints to fulfill their pizza needs. Dominos even tries to innovate and has brought many new lines of pizzas, including the Chef’s Wonder pizzas which failed miserably, thus pushing Domino’s further into the abyss. Their newest addition, the Burger Pizza has not been able to impress the customers, thus keeping Domino’s still off-track.

Adding to the despair of Domino’s, on May 23,2016 The Centre for Science and Environment (CSE) posted results of a study conducted by them. The study conducted tests on the products of 38 fast food brands in Delhi which sell ready-to-eat bread. It was found that almost 84% of the brands including Domino’s and Subway sell bread which contains potassium bromate and potassium iodate, components banned in many countries as they may cause cancer. The results did not bring any joy to the shareholders and the prices of Domino’s shares dropped to a three-month low. Attempts were made to deny usage of any such components by both Jubilant and McDonald’s but the damage had already been done.

Domino’s India: A Sinking Ship Gasping for Breath?Domino’s has always been a favorite among the Indian foodies, especially the youth. A birthday party, an office celebration or a simple get together, people have celebrated with Domino’s. A cheesy pizza or stuffed garlic bread has always been the life of the party. But in the current scenario, when the Indian Food Sector is blooming and is currently valued at Rs 300 Billion and will almost touch the Rs 500 Billion mark in the next 5 years, it is really unfortunate to witness that the market leader has to struggle to stay on course.

With over 1000 outlets in India and every outlet offers the same tasty pizzas that everyone loves, Dominos has shown everyone that standardization of taste and quality is very well achievable no matter how big the enterprise is. With over 1000 stores in just over 20 years and the goal of 1000 more in another 5, Domino’s India has shown what it looks like to be successful.With the supremacy that Domino’s has on the market, it is still being hoped that Domino’s India will prove everyone wrong and will start to flourishing again. 

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