Pizza, Kapda and Makaan: How Domino's Pizza is doing business in India

Pizza, Kapda and Makaan: How Domino's Pizza entered IndiaA view of a Domino's Pizza in Dadri, a small town in the Gautam Buddha Nagar district of Uttar Pradesh. Photo: Madhu Kapalath

MaAnish Kumar Sharan recounts a chapter in his life. “There are only two reasons why people buy Nike,” believes the 50-year-old businessman who runs a pharmacy in Delhi-on-Sone, a small town on the Sone River in Bihar. The first is when people can't afford the original brand, so they buy a knock-off, he explains. “If you can't afford Nike, you'll buy Nike,” smiles the pharmacist, who has been cruising around 140 km on his Pulsar bike to buy designer goods for his family and sate his hunger for pizza in the state capital, Patna.

The second reason people buy a knock-off, but not a fake, product is when the original is unavailable. Sharan emphasizes that both cases highlight the yearning for a branded product. Just a few blocks from his pharmacy in Delhi, there is an Indian pizza joint with the quirky name of Pizza Wali Babu. “I wanted Domino's Pizza. I don't know why it took so long to come here,” Sharan jokes, adding that Delhi lacks a global QSR brand. “But you could try the Italian brand La Pino's,” his 22-year-old son interjects, alluding to a pizza brand that has been in the city for a while and is widely present in Tier II, III and above areas in most states, including Delhi NCR, Uttar Pradesh, Punjab and Gujarat. “It's an Indian brand,” Sharan retorts, adding that Chandigarh-based brand La Pino's has been credited with bringing pizza to small towns.

Pizza, Kapda and Makaan: How Domino's Pizza entered India

About 1,000 km from Delhi lies Dadri, another small town in Uttar Pradesh's Gautam Buddha Nagar district. Every weekend, Manoj Sisodia takes his young nephew to a Domino's Pizza outlet. “My family lives in a village about six km from here,” says Sisodia, a civil engineer from Noida, who visits his family every weekend. The recently opened Domino's Pizza outlet is sandwiched between an HDFC bank and a homeopathic clinic. A two-wheeler repair centre stands right next to the pizza parlour, and tractors are a frequent sight on the road. “Pizza keeps my kids from having roti on weekends,” says Sisodia, who loves garlic bread with cheese, with a smile.

Pizza, Kapda and Makaan: How Domino's Pizza entered India

About an hour away, at Domino's glitzy headquarters in Noida's Sector 98, Samir Khetarpal explains why India's largest pizza brand was attracted to small towns. “Tier III, Tier IV and beyond are huge opportunities for Domino's,” says the managing director and CEO of Jubilant Foodworks, the master franchisee for Domino's in India and global markets like Bangladesh, Nepal and Sri Lanka. “The way people spend, earn and celebrate in such places is similar to that of top tier and tier I cities,” emphasizes Khetarpal, who joined Jubilant Foodworks in September 2022.

Pizza, Kapda and Makaan: How Domino's Pizza entered IndiaManoj Sisodia treats his nephew Honey Rawal to pizza from Domino's, Dadri. Photo: Madhu Kapalath

The Amazon boss explains why QSRs will explode in the hinterland. First, there isn't much of a QSR culture or experience in India. “They want a world-class experience and we know they won't be afraid to be criticized,” he says. Khetarpal's colleague, Sameer Batra, president of Jubilant Foodworks, presents data to make the CEO's point more persuasive. “If you look at India in towns with populations over 100,000, there are hundreds of towns where QSRs don't exist,” he believes, adding that KFC has more than 10,000 stores in China. “We want to be the first QSR chain to go into the next 800 to 1,000 towns and cities across India,” Batra says, adding that Domino's Pizza recently opened its 2,000th store in the Delhi NCR. “There's an opportunity to go deeper with pizza,” he adds.

Pizza, Kapda and Makaan: How Domino's Pizza entered India

It's no wonder Domino's Pizza is expanding at a ferocious pace in India. Just look at where the pizza brand has been in the past two fiscal years: From Gopalganj, Sitamarhi, Sasaram and Delhi-on-Sone in Bihar, to Haldoi, Lakhimpur, Hathras, Budaun and Sultanpur in Uttar Pradesh, and Giridih, Ramgarh and Daltonganj in Jharkhand, the brand is expanding into tier 3 and above in search of consumers, growth and capital (see box).

Pizza, Kapda and Makaan: How Domino's Pizza entered India

What's driving the big push into the hinterland is the growing realisation that Domino's needs to look beyond delivery. “If we don't focus on dine-in, in 10 years we will be a dark store brand,” Khetarpal said, adding that dine-in accounts for more than 30% of sales in urban areas, but in tier III and above, the figure is closer to 50%. The brand has targeted around 150 stores for remodelling, and the results have been good. “We are seeing 8% to 12% growth in the stores that we have remodelled,” he asserts. While acknowledging that dine-in is under pressure in major cities, it remains a key channel to capture more customers. “All of our most retained customers in our portfolio are first shoppers through dine-in,” he said.

Pizza, Kapda and Makaan: How Domino's Pizza entered India

Also read: KFC, Pizza Hut, Costa Coffee: Ravi Jaipuria's Devayani International and its insatiable appetite for growth

Pizza, Kapda and Makaan: How Domino's Pizza is entering IndiaA family at a Domino's Pizza outlet in Dadri, GB Nagar district, Uttar Pradesh. Photo: Madhu Kapalath

Khetarpal explains why dine-in is important for brands that have mastered the art of delivery. “In the food business, you want an experience, so dine-in becomes important and it becomes important to see your brand,” he says. If you have 10 brands and cuisines in your dark kitchen, not many customers will appreciate it. “Globally, we are yet to come across a scaled up dark store model,” he says, adding that it is not easy to scale dine-in and food businesses in India. “In the last 30 years, there are only three brands in India that have crossed Rs 100 billion in sales and crossed 10% of EBITDA — Domino's, KFC and McDonald's,” Khetarpal says. “The rest are struggling,” he adds.

Pizza, Kapda and Makaan: How Domino's Pizza entered India

Another factor driving the brand's aggressive expansion is its pecking order and harsh market realities. India's foodservice market is estimated at $50 billion. “Pizza is only $1 billion,” says Khetarpal. A vocal advocate of category expansion, the CEO believes Domino's can't rest on its laurels with the $1 billion category and pizza's 70%-plus market share. “That's not the game we're playing. We have to grow the category,” he says. The push into the hinterlands is geared towards category growth and sales growth.

Pizza, Kapda and Makaan: How Domino's Pizza entered India

Brand and marketing experts are in favor of the strategic move to reach out to the third tier and beyond. “I have always maintained that pizza is the new roti,” says Harish Bijoor, who runs a brand consultancy of the same name. Pizza is likely to be a big hit in India, he stresses. “Pizza is roti topped with vegetables, cheese and chicken. Pizza is a luxury food in small towns,” he says, adding that providing for those who don't have enough is always a better choice than opening more outlets in cities where people are already well-endowed with options. As he explains, India can be divided into different categories in terms of socio-economic growth: urban, suburban, rural and deep rural. “The deep rural is where it is thriving today. They have the money, the aspirations and the thirst to consume,” he adds.

Pizza, Kapda and Makaan: How Domino's Pizza is entering India

Back at Noida's Sector 98, Khetarpal talks about Domino's big challenges. One of them is sticking to its value for money proposition. “If we have to compete with vada pav, idli and samosa, Domino's has to be present at the affordable price point,” he says, adding that Domino's recently launched a pizza for Rs 49. The response has been encouraging, he claims. The challenge is also to expand the product offering. For instance, Domino's recently launched its oregano rice bowl in the Bangladeshi market. “We will launch it in India too,” he says.

Pizza, Kapda and Makaan: How Domino's Pizza entered India
But the aggressive push into Bharat is poised to present the brand with a new set of tough challenges. “The more stores they open, the more they have to ensure that same-store sales don't fall apart,” warns a veteran QSR food analyst. And there's another dilemma: As they add more stores in major cities to execute on 20-minute delivery, they'll have to contend with a sea of ​​local pizza brands trying to chip away at their market share. “It's a tough balancing act,” said one person, speaking on condition of anonymity.

Meanwhile, Khetarpal doesn't think the brand is spreading itself too thin: “We are committed to Domino's. There is a lot of room to grow,” he concluded.

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