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Devyani International Ltd
Earnings Call Analysis
Q1-2025 Analysis
Devyani International Ltd
Devyani International Limited (DIL) kicked off FY '25 with impressive momentum, showcasing robust growth driven primarily by its Indian operations. For Q1 FY '25, the consolidated operating revenue hit INR 1,222 crores, marking an astounding growth of 44.3% year-over-year compared to Q1 FY '24 and a solid 16.7% from the previous quarter. This surge reflects the full consolidation of their Thailand operations, which began contributing significantly after their acquisition was finalized in January 2024.
In India, the company experienced a quarter-on-quarter growth of 11.7%, bolstered by improved average daily sales (ADS) across its flagship brands, KFC and Pizza Hut. KFC's ADS climbed impressively to INR 104,000 from INR 93,000 in the prior quarter, while Pizza Hut's ADS rose to INR 36,000 compared to INR 32,000. This consistent growth in ADS is indicative of strong operational performance and effective brand positioning.
Despite the robust revenue numbers, gross margins for the consolidated business remained flat at 69.2%, influenced by the lower margins associated with the Thailand KFC operations compared to their Indian counterpart. Nevertheless, the brand contribution was marked at 15.3%, reflecting a 1.8% improvement from the previous quarter, propelled by better cost leverage and sales performance across various markets. DIL achieved a consolidated operating EBITDA of INR 141 crores, up 47% from INR 96 crores in Q4 FY '24, indicating a healthier operational efficiency.
The volatility in currency exchange rates, particularly concerning the Nigerian Naira, posed challenges, leading to a foreign exchange loss of INR 22.5 crores. However, this loss was largely non-cash and excluded from EBITDA calculations. Despite these hurdles, DIL reported a profit before tax of INR 31 crores, a significant recovery from a loss of INR 38 crores in the prior quarter.
The company remains committed to expanding its footprint. During the quarter, KFC India opened 21 new outlets, bringing its total to 617 stores. Similarly, Pizza Hut added 3 new stores, elevating its count to 570. Furthermore, Costa Coffee continues to grow, adding 30 new stores to reach 192 locations. Management has expressed optimism about achieving a total of 2,000 stores across all markets in the current fiscal year, which underscores the company's growth strategy in a burgeoning QSR (Quick Service Restaurant) market.
While consumer spending has shown cautious trends, driven by macroeconomic factors and global conflicts, DIL is actively addressing these challenges through innovative marketing campaigns and strategic promotional offers. The company intends to navigate the competitive landscape by enhancing engagement with younger audiences and leveraging seasonal trends. They aim to optimize their menu offerings and promotional strategies to capitalize on upcoming festive seasons, which traditionally boost sales.
Looking ahead, DIL's management provided optimistic guidance. For KFC, they plan to open over 100 new stores throughout the year, while Costa Coffee is projected to add between 50-60 stores. This strategic expansion aims to drive further revenue growth amid a recovering market. Furthermore, management reassured stakeholders of their commitment to enhancing profitability, with an expectation that improved ADS will correlate with upward margin momentum.
In summary, Devyani International is navigating through challenges while capitalizing on substantial growth opportunities. The positive trajectory in revenue and ADS positions the company well for future success. The strategic expansion into Thailand and a focus on innovation in existing brands is likely to create long-term value for investors.
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Ladies and gentlemen, good day, and welcome to the Devyani International Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Anoop Poojari from CDR India. Thank you, and over to you, sir.
Thank you. Good afternoon, everyone, and thank you for joining us on Devyani International's Q1 FY '25 Earnings Conference Call. We have with us Mr. Ravi Jaipuria, Non-Executive Chairman of the company; Mr. Raj Gandhi, Non-Executive Director; Mr. Virag Joshi, CEO and Whole-Time Director; and Mr. Manish Dawar, CFO and Whole-Time Director of the company.
We will initiate the call with opening remarks by the Chairman, followed by key financial highlights from the CFO. After that, we will open the forum for a question-and-answer session. Before we begin, I would like to point out that some statements made in today's call will be forward-looking in nature and a disclaimer to this effect has been included in the results presentation shared with you all. I will now request Mr. Ravi Jaipuria to make his opening remarks.
Good afternoon, everyone. I warmly welcome you all to our earnings conference call to discuss the business performance of DIL for the quarter of the financial year 2024, '25. DIL added 54 new stores during the quarter, with an aim to reach the consumer in underpenetrated markets and offer an enhanced customer experience and service.
With this addition, our total store count has reached 1,836 stores as of June 30, 2024. We remain committed to expand our store presence. The consumer sentiment in the first quarter of full year 2025 has remained more or less in line with the trends observed for the consumer, industry and QSR industry.
This is mainly on account of the challenging macro and microeconomic factors. We witnessed an improved performance for DIL in quarter 1 driven by seasonality, cost leverage and better ADS across our business and a relatively lower impact of Nigerian currency devaluation.
The customers remain cautious with their spending, a trend that has impacted our performance as well. Additionally, macroeconomic factors such as international conflicts and global oil cores, continued to impact the operations in certain geographies.
The Nigerian currency continues its weakness, weakening trend in quarter 1 as well. On balance, we are delighted that the positive progress in quarter 1 and shall continue to be relentless in our plans for the coming quarters.
We introduced innovative marketing campaigns, promotional offers and deals on our range of brands, enabling us to capitalize on seasonal trends. Despite challenges, we remain focused on offering value-driven options to our customers to adapt to market dynamics and drive growth.
To further navigate competition and strengthen the connect with younger audiences, Pizza Hut India launched a series of distinctive marketing initiatives across digital platform and diverse channels. These efforts included increased visibility for meals through television ads and videos.
The highly anticipated thin and crispy pizza craft also made an entry to our core business, driving a boost in sales during the holiday season. We are optimistic that the industry will rebound during the ensuing festive season. We continue to expand our store footprint and make our brands more accessible to our consumers.
We are also focused on enhancing our institutional business, including food courts and our presence at high footfall locations like airports. To sum up, India presents a highly promising outlook for our brands and the QSR industry. The robust economic growth, rising disposable income and increasing urbanization will drive demand and convenience and high-quality fast food experiences.
We remain bullish on the India story and the QSR space in the medium and long term and are confident that these favorable trends will continue to drive our expansion and success.
Additionally, our Thailand business is demonstrating good growth with new store openings and strategic focus on customer delight. As announced earlier, we are on track to achieve a total score count of 2,000 stores within the current fiscal year, a milestone that underscores our commitment to growth and our confidence in the future potential of our markets.
With this, I would like to conclude my address. And now, hand over to Manish for the financial highlights. Thank you very much.
Thank you, Mr. Jaipuria. Good evening, everyone. A very warm welcome, and thank you for your valuable time for attending DIL's Q1 FY '25 Earnings Conference Call, our 12th call since the listing in August 21. DIL's total store count stands at 1,836 stores as at the end of quarter 1 FY '25 with a footprint of 1,738 stores across our core brands: namely KFC, Pizza Hut and Costa Coffee.
This consists of 970 stores for KFC, 576 stores for Pizza Hut and 192 stores Costa Coffee. The operating revenue for Q1 FY '25 was INR 1,222 crores, representing a growth of 44.3% versus Q1 FY '24 and 16.7% versus quarter 4 FY '24. This is mainly on account of consolidation of Thailand business since the acquisition was completed in January 24.
The consolidated Q1 FY '25 includes operating revenues of Thailand business for the full quarter. The Indian business witnessed a growth of 11.7% quarter-on-quarter with improved ADS on both of our core brands, that is KFC and Pizza Hut. The gross margins for the consolidated business, including Thailand was flat at 69.2% versus the previous quarter.
The Thailand KFC business operates at a lower gross margin versus the Indian KFC business. The margins for Q1 FY '24 were lower by 1.6% versus Q1 FY '24 because of full financial consolidation. The brand contribution for Q1 FY '25 was 15.3%, with an improvement of 1.8% versus the previous quarter.
This was rated by movement in India by 130 basis points, an improvement in our international business operations by almost 470 basis points. The all-round improvement is on account of better cost leverage across all our operations with improved ADS and relatively better currency situation in Nigeria.
Consolidated operating EBITDA on a pre-India basis was INR 141 crores versus INR 96 crores in the previous quarter, a growth of almost 47%. The pre interest margins for the quarter for the consolidated business were 11.6% versus 9.2% in the previous quarter. The improvement in brand contribution is fully reflected in the operating EBITDA margins for the year on a consolidated basis.
The consolidated reported EBITDA on a port indaba was 18.3%, an improvement of 1.7% versus quarter 4 FY '24. The Nigerian currency continued its weakening trend in quarter 1. The rate of currency depreciation is better versus the previous quarters. During the quarter, Nigerian Naira got depreciation by almost 10% versus the USD.
As a result of this, the Nigerian business has recorded an overall loss of INR 22.5 crores on account of USD-denominated liabilities during the quarter. Out of this FX loss, INR 7.6 crores has been recorded in the P&L and has been disclosed as a separate line item.
The remainder currency loss has been recorded as OCI. Such foreign exchange loss on account of Nigeria currency devaluation in the consolidated financial statement will not form part of the EBITDA calculation being a noncash item. The PBT for Q1 FY '25 on a consolidated basis of INR 31 crores versus minus INR 38 crores for the previous quarter.
The improvement in PBT is on account of improved margins in quarter 1 FY '25 and reduction in currency divided [indiscernible]. Taking the discussions to our core brands, KFC in India added 21 new stores in quarter 1 FY '25. With this, the total store count for KFC in India stands at 617 stores as at the end of quarter 1 FY '25.
Average daily sales for quarter 1 '25 improved to INR 104,000 versus INR 93,000 in the previous quarter. Revenues at INR 555 crores grew 12.3% on a quarter-on-quarter basis. Gross margins for KFC during the quarter was 9.5%. And brand contribution margin was 19.5% for the current quarter, wherever reflecting an improvement of 50 basis points over the previous quarter.
During the quarter, Pizza Hut added 3 new stores, reaching a total count of 570 stores in India. Revenue for quarter 1 FY '25 was INR 182 crores versus INR 162 crores in the previous quarter.
ADS for the brand improved to INR 36,000 versus INR 32,000 in previous quarters. Gross margin for the quarter was 76.8%, the contribution for the quarter was INR 9 crores with margins at 5%, which grew by 60 basis points on a quarter-on-quarter basis, mainly due to better leverage on account of higher ADSs.
Costa Coffee added 30 new stores during the quarter, reaching a cumulative store count of 192 stores. Quarter 1 FY '25 revenue was flat at INR 45 crores versus the previous quarter. The revenue grew by 40.5% on a year-on-year basis mainly due to expansion of new stores.
The gross margin for the quarter was 75%, then contribution in quarter 1 stood at 15%, resulting in a drop of 2.9% versus the previous quarter because of ADFs impact. Our international operations now fully include the Thailand acquisition. The total number of international stores was 363, with the addition of 10 new stores in quarter 1.
So in turn, the international revenue for the quarter was INR 390 crores giving a gross margin of 63.7% and the brand contribution margin of 14.8%. The reported EBITDA was 13.1% during the quarter.
To conclude, we want to reiterate our commitment to the Indian QSR market. As we continue to expand, we remain committed to improving our financial performance by way of total financial management and creating long-term value for our shareholders.
On that note, I would like to request the moderator to open the forum for any questions or any suggestions that you may have. Thank you so much.
[Operator Instructions] The first question is from the line of Saurabh Kundan from Goldman Sachs.
My first question is on Chairman's opening comments. You had mentioned that the company is optimistic of a rebound in the industry in the festive season. I just wanted to understand those comments better. Are there any signs or any data points that you are seeing based on which you are turning optimistic?
Saurabh, typically, we've seen in the past also that in any market, it is a festival season, which kind of walks up the store, which kind of backs up the overall consumer sentiment. And that's the reason we are kind of basing our view that this festival season, we could see because we've been in this kind of scenario now for the last almost 5 to 6 quarters. And that's how we are kind of hoping that festival season could probably be a turnaround situation for the industry.
Sure, sure. Second one, on KFC, if I recall correctly, you were more impacted because of, I think, in the September quarter last year, should we expect a sharp improvement from current -- your base is minus 4 next quarter? Can we hope for a flattish [indiscernible] on that base?
So Saurabh, you're right. But again, as you know, I mean, the overall macroeconomic situation of the macro environment continues to evolve, right? So for example, it is not absolutely the same environment, which was there last year. We are facing headwinds on account of this whole West Asia war and the boycott of brands, which is kind of going on. And therefore, I mean, there is -- so there are multiple other factors also at play, not just the big mass as far as the current quarter is concerned. Our store count is also much better versus where we were last year, so therefore.
But at least an improvement from the current minus 7% that we are at, I would assume?
We will not be able to make any forward-looking statements.
Okay. sir. One last one, if I can add, is if I subtract the brand contribution of KFC India, figured Costa from the total India brand contribution, I'm getting a number of INR 12 crores, which I'm assuming is your noncore India businesses. This number is much higher than in the past. Is there any one-off in the India noncore, which is one thing the profits the contribution?
Yes, Saurabh, there are 2 key things at play here. One is, obviously, we have other small businesses also apart from the 3 core brands and Bango, which includes the food courts and some of the noncore businesses at the airports and so on and so forth. And at the same time, because this time, we are giving the India business and international business separately, there are some elimination entries because of the intercompany transactions. So therefore, that also kind of -- so you would see that the total India and total international also would not equate to consolidated because in the consolidation, the elimination of entry will also happen. So these are the 2 reasons why on an overall basis, you will not be able to reconcile the numbers. But let's say, if I were to evaluate India performance separately and international performance separately, those are the numbers strictly seeking.
The next question is from the line of Garo Jogani from Axis Capital.
My question again is with regards to the Saurabh's question because earlier that you need to subtract the PR to PSC and all the other numbers. And you see it the other domestic bank contribution number, the run rate is INR 3 crore to INR 4 crores, INR 5 crores. And [indiscernible]. So I'm guessing the regulation who have been existing earlier as well. So on the other way around, can this INR 2 crores number be [indiscernible]. That's the question.
See, the difference was that if you go back, let's say, a couple of quarters, obviously, Thailand wasn't there. And Thailand is a large business compared to, let's say, the Nepal and Nigeria operations which were there. So that is the reason. We do charge some small management fee from the business operations. And so -- and that is how it kind of gets eliminated.
Sure. And sir, the other question even as you said, that if we total India international business, that would not actually go to the control business. So is the adjustment for the ForEx loss that is reflecting in the international business and that is why the difference is there.
Yes, the ForEx loss also gets treated differently because, for example, let's say, when we consolidate, there is some element of ForEx loss, which gets into OCI. There is some element which comes into the P&L line item. Whereas at the Nigerian level, everything is supposed to be recognized in the P&L. So.
Got that. And sir, if you can help us out what kind -- what is really driving the operational performance improvement in the Interac business? Because if we go by the last year -- the last quarter at it was around 39% and the sharp this quarter now. So what is really driving that?
If you see, the ADS has improved across all of our brands and the operations. So let's say, KFC India, the ADS is better, it's 104,000 versus 90,000 in the previous quarters. If you look at Pizza Hut, India, it is 36 versus 32. If you look at Nepal, Nigeria and Thailand, the ADS is better versus the previous quarter, and therefore, that gives you a better leverage from a P&L perspective. At the same time, we've been kind of unrelenting as far as the cost-saving measures are also concerned. And the some element of cost contract because of the better number than so on and so forth.
Anything specifically related to pilot here, I mean because you look at business was only acquired by you in the last quarter. And because now we have a quarter that side of assumed. So any particular one-offs that you've been getting in port of that will be sustainable go?
No, there are no one-off benefits from Thailand.
The next question is from the line of Percy from IIFL.
So just reconfirming what you said. So basically, the sales of India plus international minus console, the difference I'm getting is 77 million. So does this mean that basically, the services at the parent is providing to the Thailand subsidiary for which it is getting charged. That is roughly equal to about 77 million, which comes into the sales of India and probably goes into the cost line item of Thailand.
Yes. So it is basically [indiscernible]. So that is how it kind of comes in the separate this thing and then.
Got it. Got it. So if I have to actually evaluate the India performance I should be deducting 77 million from the pre-IND EBITDA or the post-IDS EBITDA to get the true performance of India. Would that be -- would that understanding be correct?
So it's a regular income per se. And because, as I said, I mean, there are costs that are incurred by India on account of the other subsidiaries in terms of the supply chain services in terms of central negotiations and all. So basically, it is at cost with this kind of [indiscernible] away.
Okay. Okay. Understood. And where does that cost sit in India, it would not be sitting in any of the 4 major brand contributions, right? It would be outside that, right?
It will be spread across various rates basically. But would it be part of, let's say, a KFC brand contribution because that's a service provided for an entity outside India, no need to have it as part of the brand contribution of KFC India or Pizza Hut India, right?
See, there could be some small elements, which could be there because, for example, we do nominate some of our slower guys to go and visit there. So therefore, it could well be.
Okay. Understood. Secondly, I just wanted to understand on the India margins that you have reported in your PPT on pre-Ind basis, the India margins have declined by 70 basis points from 12.6% to 11.9%. But on post India basis, they have increased from 20% to 20.5%. So there is 120 basis points kind of differential or rather a swing, which is happening. So what is causing that?
See, as you know, the IndAS calculations are based on how many new stores you've opened. What are the stores you've shut, what is the variable central deals which are there, what are the fixed end rental deals which are there. And therefore, it kind of gets completely operated differently versus what flows in from the [indiscernible] numbers. So that's a completely independent lease accounting standard calculation and the entries are past like that.
Sure. I got that. But generally, the rough basis point change in the pre-Indus and post-Ind AS, I mean, roughly speaking, is similar. This time, the direction only is different. So is there any particular reason for this quarter or?
Because our store openings have been relatively lower. So that is the reason.
Okay. Okay. I probably take this offline.
We've talked about 7% to 8% difference in the pre-Ind and post in test numbers. So it's pretty much close to that.
The next question is from the line of Shirish Pardeshi from Centrum Broking.
I have 1 question on KFC India. I think directly last 2 quarters, we have been seeing that the areas and also the same-store sales growth is also under pressure. Obviously, it's a function if the SPs are higher, you will see the areas will improve. And obviously, the overall business will improve. So I just wanted to understand the product interventions and whatever we are doing, is it enough giving us the confidence that the recovery will happen if the festive season come back with a strong momentum.
CDC product innovation is always a continuous process. But at the same time, if you look at the numbers and the CSG numbers, we've been able to deliver the margins very well. And obviously, it's a combination of how do we optimize as far as the marketing spends are concerned, how do we optimize from a value layer menu instruction perspective, what are the promotions we run, and therefore, all of that result into the margin numbers.
So there are multiple equations at play, which is what we need to balance and that's how we kind of make sure that even though, let's say, the typology is negative, we are able to deliver the margin. And obviously, let's say, once we see the ABS and the typology coming back, the margins will improve ahead of that.
The reason why I'm asking, when you look at the Pizza Hut, which is most affected and people had seen a higher decline of SSG, but we have been able to maintain the revenue. So what is it about the change consumer is seeing between KFC and Pizza Hut. That's what my bigger question is.
So Shirish, from Pizza Hut, we are spending from extra because, as you know, I mean, we've seen a continuous decline in this brand over the last, whatever, almost about 12 to 18 months. And we've taken a conscious call to of our marketing on Pizza Hut and as well as the product innovation. So therefore, that is what is kind of happening. But again, because of that, you will see that the brand contribution margin for Pizza Hut are still low. So we are trying to -- it's like we are going back to basics and building the brand again.
So therefore, my larger question on Pizza Hut is that in the medium term, we have taken a pause on our number of stores opening? So as a management priority, what is the important thing is this ADS or is profitability is important?
See, Pizza is the largest QSR category. So there is no reason why we should not play Pizza Hut brand or we should not be present in the pizza category. So it is important. Pizza Hut is a national #2 brand. And therefore, it is important that we -- and it still has a very high consumer recall, very high consumer confidence. So therefore, it is important that we should be able to bring the plan forward.
Okay. My last question on Thailand, since you have done the acquisition and you gave us the logic why we have taken Thailand under our side. Just wanted to be more curious, what are the changes we have made, what are the things which has not yet happened. And whether you think -- because somewhere when you did the acquisition, you said there is a gross margin opportunity and there's a margin improvement, which can happen. So in that journey, if you can give some qualitative comments.
See, I mean it's been a recent acquisition. The team there is very stable. The business is doing well. We got it at a great valuation. So there is no need to kind of finite model, which is there on a huge basis. Of course, I did say that we will be able to improve the margins. And I also said that it will happen over a period of time. So we are going to be starting that journey. And fundamentally -- and again, remember that structurally, the gross margins in Highland for KFC brand are lower because the brand positioning is more mass premium versus premium compared to India. So it addresses a far bigger consumer space. And therefore, the number of transactions in Thailand are higher than the. And we don't want to tinker it because KFC is very well positioned from the overall brand hierarchy point of view. So -- but again, I mean, there are margin opportunities. Let's say, if I were to look at, say, brand contribution or at the EBITDA level, which we will gradually capitalize on as we go along.
That's helpful, Manish. Just one suggestion, like you have started giving much more information on Vaango. Can you start giving such more such details for ailing business at least for next 3 quarters?
We will evaluate that, Shirish.
The next question is from the line of Latika Chopra from JPMorgan. .
My first question was on KFC India. Could you give us some flavor of how the month-on-month trends behaved during the quarter? It seems the 3 months will have been a little tougher because of the shift in Arati. But any color on how May and June progressively looked to you?
So Latika, obviously, as you know, I mean, there are seasonal months in between the quarter. So let's say, whenever there is a summer holiday season, whenever some sporting event is happening, those months kind of pick up. So the same thing has played even in the. Whatever the current -- the last quarter between April, May and June. So it's very, very different trends.
Okay. So it doesn't give much color on where sequentially you have sensed any change in consumer behavior.
Not yet.
All right. The second question was when you analyze or in case you have the data on market share of KFC on third-party aggregator platform revenues, have you seen any discernible change?
See, overall, Latika fiber to look at our AES numbers, the revenue, whatever the percentage contribution from the aggregators have remained similar. Obviously, we don't kind of formally measure the market share on the aggregator platforms. I think we have an opportunity to improve on the dine-in for KFC and Pizza Hut, and we are working on that.
Sure. The third question was, would it be possible for you to give us a pace some color on what is the in-store sales growth for timing in the quarter?
So we've not disclosed the Thailand numbers. And as Shirish mentioned, we will evaluate. But just to give you a comfort of Thailand, the same-store sales growth is positive. And at the same time, the kind of geopolitical impact that we are seeing in India, we are seeing that same in Thailand, our stores in South. And if I were to negate that, the overall ALS is even more healthier. So even including our these out stores, the Thailand [indiscernible].
All right. And since you brought up you talked about the geopolitical issues. I remember in the previous quarter, we were kind of spoken about some stabilization from this impact. But is it now -- is there any change in that expectation given the recent development?
Let's see. I mean, because there is again big news flow, which has started to come in whatever last couple of days and today and so on and so forth. And therefore, obviously, as these things happen, there's this whole WhatsApp campaign, which again tends to builds up. So let's see what happens. We'll keep you posted.
Sure. And last one was any incremental update on the food court partnership?
We've incorporated the company. I don't know whether you've noticed that or not, which is between like [indiscernible]. And you will see some business to start coming in from the last quarter of the current calendar year, which means October, November, December.
The next question is from the line of Nihal Mahish Jham from AMBIT.
Two questions. First is on the PH revolving. -- if I look to say the market the product launch of a long with a lot of campuses side, the major the efficiency ratio that is happening even by [indiscernible].
Sorry, your voice is echoing a lot. So therefore, I'm not able to make out.
Nihal, sir, if you are using the speaker more, may we request to use the handset mode, please.
I'm so sorry, is it better now?
Much better.
I was asking in case of tight, is it the launch of Melon the marketing campaign around that, the initial driver of revival that you're in, there are other aspects also in the backdrop that have happened to get the band back on its core performance.
So we've launched melt, Nihal. We've launched one, which is thin and crispy which were new dough basically. And we are supporting it well with the new marketing campaign, and that is helping us.
Maybe the FSB numbers that you reported, still point the overall weakness, but anything over the last few months that is pointing to the brand showing improvement also the specific product launches helping you out?
Let's see, because sequentially, the TLAC numbers are better. So it's too early to kind of call out, but we are moving in the right direction after whatever continues almost 3, 4, 5 quarters, we started Pizza Hut moving in a positive direction. So let's hope it continues.
Until then, is there a thought on the number of stores you plan to open other remains depending on how the performance?
So Nihan, as I have mentioned earlier on Pizza Hut, we are kind of approaching a little cautiously. And you would have seen in the current quarter also, the new store openings are relatively very small versus what we used to do in the past. So the whole objective is to kind of make sure the brand comes back. Overall, I mean, we remain bullish on the category as well as the plan.
Understood. Second question was on KFC tiling. And during the acquisition, you mentioned that the 3 player market in terms of [indiscernible] If I look at India and experiences globally, there are a lot of places where the 2 franchises that opening. Is there a possible future that you are interested that you could acquire on the franchise? Would that be a possibility we should think about from our side?
We have seen there are multiple types of markets and Yum! has all kinds of models. So there are markets which are operated by a single franchise. There are markets where there are dozens and dozens of franchise partners. There are markets where, let's say, one franchise partner operates multiple countries also. So as such, therefore, that does not give us any trend that could happen in Thailand. So I mean -- so there's nothing we are able to kind of get anything out of it. So.
And last is on the per tip into alluded to some kind of outlook in terms of the number of food courts or planning. Any change on your side, what is the ballpark opening of the full costing for this and next.
It's a similar number, Nihal. Obviously, I mean, because it's a joint business plan.
[indiscernible] so the clarification because it was not a ultimate that number was console. It's obviously been 3 months and I thought there is no clarity in there.
Yes, yes. So let's see because as I said, I mean, you will see in quarter 4 of the current calendar year that we will start to see some of the food courts opening there. And let's see because, I mean, to construct the business plan is one. Second is it actually lies in improving. So we want to kind of experiment with the food court. We want to see how the JV is progressing. We want to test that out before we kind of go with a big bang expansion.
The next question is from the line of Devanshu Bansal from Emkay Global.
Congratulations on a good margin performance. Manish, if we look at channel performance, KFC's offered channel has grown faster at about 19-odd percent, while Pizza Hut has seen about 4% to 5% decline. What is the reason according to you for this different consumer behavior across Pizza Hut and KFC.
Devanshu, sorry. Can you please repeat your question? I just missed the initial part.
Yes. Manish, the question is on optimized growth for KFC and Pizza Hut. KFC has seen about 19% growth in Q1, while Pizza Hut has seen a 4% to 5% decline. What is the reason for this different behavior across Pizza Hut and KFC?
So if you look at KFC, our optimized consumption was 41% in the current quarter, and it has more or less remained the same over the last 3 to 4 quarters. So the uptick that you're seeing is basically coming from a higher ADS and therefore, with the higher ADS, your percentage on optimize remaining the same, you are seeing the improvement. So whereas, let's say, if you look at, say, a Pizza Hut, the improvement on the overall ADS is better, and therefore, you are seeing a better one. Because otherwise, if you look at, let's say, from a contribution perspective in terms of optimize and on-premise, even Pizza Hut also named the same on [indiscernible].
Okay. So you're saying last time around in Q1, optimize was 37% for KFC, which has moved to 41%. But over last 3 quarters, it is about 40%, 41%. So maybe lower base was there, right? Is that 40 million?
And even Pizza Hut if you look at, I mean, last 4 quarters, it's been pretty much in the same zone 55, 56.
Right. Okay. Got it. And second is on Costa Coffee, has sort of moderated this time around in Q1 versus high single digit in past few quarters. Anything to call out here? Or is there some one-off because of what the performance has been impacted?
So one is, obviously, we are expanding on Costa, and we are seeing some impact because of this aggressive store expansion, which is coming into. And then there were some disruption on our food supplies in between which was a one-off, and therefore, we will see those numbers coming back.
Any call on the store openings for Costa or they are expected to continue?
They are expected to continue. But again, I mean, as you know, I mean, Costa, it's a much more moderate target versus, let's say, a KFC or a Pizza Hut.
Third, a bookkeeping question. If I look at your overhead costs, they have largely remained stable sequentially this year versus a significant pickup last year. So have we deferred about annual increments, et cetera?
No, we've not deferred our annual increments. It has been on time. We've been kind of on time as far as variable pays are also concerned. So that is not an issue. But obviously, we've been kind of -- we initiated some cost-saving measures. And therefore, we are trying to kind of control the cost in the environment we are in. So.
The next question is from the line of Dhiraj Mistry from Antique.
So first question is on Pizza Hut. I'm looking at sequential numbers where your EPS has improved from 32,000 to 36,000 but we have not witnessed that kind of margin improvement at the store level EBITDA despite not material store addition during the quarter also. Can you explain that, sir?
So Dhiraj, as I mentioned earlier on, we've invested back in marketing, and that's how we are trying to kind of get the brand back. So we invested in the innovation. We've invested in the marketing campaigns. And that's the reason we are able to see a better ADS numbers and not yet on the planned contribution side. So as we go along, the marketing cost will taper down once we've managed to reestablish the brand. And therefore, you will start to see that the brand contribution also will come back.
Got it. And sir, if I go back in the history, let's say, 2 or 2 years, 3 years down before, where your average daily sales was somewhere around 28,000 and last time you were making a big store level EBITDA margin of almost mid-teens type of numbers. And currently, we are at mid-single digits. So can we expect that once the ADS process 40,000 or 42,000 a double-digit EBITDA margin can be made in this Pizza Hut franchise?
Yes. At that level of ADS, we will be able to easily get into the double-digit margin.
Got it. And sir, second, another question on KFC. During this quarter, there was Naratil, which was there in Petland also geopolitical tensions, which impacted CFC sales. Excluding number, can you give us what kind of SSG decline we would have witnessed during the quarter.
See, Dhiraj, I mean, if, let's say, this was a onetime event in a year, I would have given you those numbers very happily. But again, I mean India, if you see, I mean, during festival seasons, we are getting into southern this time, although it is not a festival season and where people turn vegetarian. So there are multiple -- I mean, [indiscernible], for example, are twice in a year. So there are multiple such occasions, which are fast around the full year that will be kind of difficult to measure by those blocks.
Okay. So what I mean to ask is like, if I narrow in April and then May and June was relatively much smoother month. The SSSG growth or decline during those 2 months versus April month would be materially different amount?
It is different. It is not material, but obviously, it is different. So let's say, whenever as are there than ever, let's say -- so for example, if you look at, let's say, Kalata, Durgapur time, the sales actually go up. Similarly, for example, during save time in North, it be is a different time during stim and south, it behaves differently. So I mean, there are multiple such variables which are there.
Got you. Okay. And sir, can you give you guidance on KFC store addition quarter year? Is that -- yes, we have maintained our conscious stance on store addition. But what are the expectations for KFC during the year?
So we are looking at 100-plus to account for KFC. So therefore, for the full year.
Okay. And for Costa Coffee?
Costa coffee will be about 50, 60 stores.
The next question is from the line of Mark [indiscernible], an Individual Investor.
Am I audible?
Yes, you are.
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We will take the last question from the line of Tejash Shah from Avendus Park.
Just 1 question from my side. When you are looking for recalculation in 2 statements that come on [indiscernible]. You said that...
There are some disturbance in your voice. Are you on speaker for bans?
Is this better?
Just just say again, sorry.
Yes. So I was just looking for a reconciliation and 2 statements that you made on Pat margins. We said that despite higher ADS, the margins were under pressure because we -- there was heightened marketing activity. And I think at some point, we also said that brand was slightly underinvested or perhaps we wanted to add on the branding franchise. So should we see this heightened activity as a normal spend. So that brand doesn't suffer again in future, and then we don't have to go through this volatility on brand franchise from the consumer perspective.
You just see whatever post COVID, there have been multiple exceptional situations. There was a very, very strong inflation. We have reduced intensity on promotions and so on and so forth. And then we had issues on the fund flavor pizza. So there were multiple such issues, which kind of impacted the brand. We've corrected most of that. We are now putting a new innovation in the market. and we are supporting that innovation to build the brand back. So we don't think it's going to be required on a continuous basis. So it's a matter of just kind of bringing the brand to a stability level, and then we will see the margins coming back again.
Sure. Can you a bit elaborate on the nature of the spend? Is it like we actually increased ad spend or we support innovation with slightly lesser margin discounts. What exactly do you think it is?
It's predominantly the spend across mass media and digital and plus heightened 1 around the stores in terms of outdoor media and so on and so forth. And perhaps we kind of tweak promotions also a little bit so that the consumers are able to get a good value when they walk into the store. And therefore, you would have seen that there is a small impact on the gross margin as well.
Sure. And just last one on this. Has the larger proportion of this hike in spend goes into food aggregator platform? Or is it equal between amount to platforms?
It's mainly on mass media.
Thank you. Ladies and gentlemen, I'd like to turn the conference over the management for closing comments.
Thank you so much. I hope we have been able to answer all your questions to effect or should we leave any further clarification or would like to know more about the company, please to increase to contact our investor relations team. Thank you once again for your interest and support and for taking the time out to join us on this call. Look forward to interacting with you soon. Thank you very much.
Thank you. Ladies and gentlemen, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.