Jubilant Foodworks Ltd
NSE:JUBLFOOD
If you don’t study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards.
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
Do you really want to delete this note?
This action cannot be undone.
| 52 Week Range |
431
708.85
|
| Price Target |
|
We'll email you a reminder when the closing price reaches INR.
Choose the stock you wish to monitor with a price alert.
This alert will be permanently deleted.
Jubilant Foodworks Ltd
Earnings Call Analysis
Q3-2024 Analysis
Jubilant Foodworks Ltd
The company has identified the current moderation in inflation as an opportune moment to enhance investments in its category and stores. This is framed as a conscious decision to fortify its market positioning and competitive advantage by betting on its asset-heavy capability in manufacturing high-quality, cost-effective food products through a newly built food park in Bangalore, highlighted as one of the most substantial in the industry.
Looking towards expansion, the organization is progressing with the construction of a Mumbai factory and anticipates a payback period of four years for these investments. The emphasis on growth strategies includes ramping up investments in customers, scaling Popeyes, leveraging technology for growth, and focusing on employee investment. The executive discourse points to a multifaceted approach towards creating a robust framework for future growth and improving their market position.
The company reports a significant increase in the base of repeat customers, particularly those ordering higher quantities of pizzas, with the segment of those ordering between 6 to 9 pizzas growing by nearly 10%. In tandem, the deliverability aspect shows strength, with approximately 70% of deliveries completed within 20 minutes, implying a strong focus on operational efficiency and customer satisfaction.
From a market perspective, despite having less than half the outlet count relative to the cumulative total of 14 pizza chains, the company boasts a commanding market share in revenue terms of 69.7%. This suggests that customer throughput at Domino's outlets vastly outperforms that of competitors, underlining a significant market dominance which is a critical parameter for potential investors.
The financial roadmap outlined includes continuation of a cost optimization project that targets an additional 100 basis points reduction in store level EBITDA. For fiscal year '24, the company is guiding towards a 25% EBITDA margin. Additionally, revenue growth is projected at 18% to 20% for the full year while aiming for at least a 55% gross margin, providing a cohesive picture of expected financial performance and goals for investors.
You don't have any saved screeners yet
Ladies and gentlemen, good day, and welcome to the Jubilant FoodWorks Limited Q3 FY '24 Conference Call. [Operator Instructions] Please note that this conference is being recorded.
I now hand the conference over to Mr. Deepak Jajodia. Thank you, and over to you, sir.
Good evening, everyone, and welcome to Jubilant FoodWorks Limited Q3 FY '24 and 9 months FY '24 earnings call for investors and analysts. We are joined by our Board members, Mr. Shyam S. Bhartia, our Chairman; and our CEO and MD, Mr. Sameer Khetarpal. We will commence with key thoughts from Mr. Shyam S. Bhartia and then turn to our CEO and MD, to share his perspective.
After the opening remarks from the management, the forum will be open for the question-and-answer session. As you are aware, Jubilant FoodWorks Netherlands B.V., which is the wholly-owned subsidiary of Jubilant FoodWorks Limited, has launched a cash offer to acquire the remaining issued and outstanding share capital of DP Eurasia, not already held by JFL.
On conclusion of the open offer, as per the advice by our auditor device, required accounting would be done as per Ind AS 110. As a result, JFL has continued to consolidate its investment in accordance with the provision of Ind AS 28 and accounted for its investment considering a lag of 3 months period after considering the necessary adjustment for material transaction from the latest financial statement of DPEU up to the reporting period of the group.
As of yesterday, based the market purchases and offer acceptance received from DPEU shareholders, JFL will hold 79.02% of the shareholding. We will be releasing subsequent update on this by end of the day today as today is the last date for the close of open offer. Therefore, JFL has also given a notice to the London Stock Exchange for cancellation of listing and trading of shares of DPEU, which would take effect on or shortly after 8 a.m. U.K. time, on February 28, 2024.
Therefore, today's call is meant for discussing our India business only. We will be organizing a separate call to give you an update on our international business.
A cautionary note: some of the statements made on today's call could be forward-looking in nature, and the actual results could vary from the statements. A detailed statement in this regard is available in Jubilant FoodWorks earning documents.
I would now like to invite Mr. Shyam S. Bhartia to share his views with you. Thank you, and over to you, sir.
Thank you, Deepak, and good evening, everyone. Welcome to our earnings call. The team at JFL is focused on basics, investing in the right areas to get growth back in Domino's, building capabilities for the future and scaling Popeyes. We are happy to share that we have crossed the milestone of 2,000-plus store network for the brands in India and progressing well on our network expansion plans.
We observed softer demand, particularly post Diwali and in December, while November was strong. One, delivery has become the most preferred channel, driven by consumer preference for convenience. The channel is significantly ahead of its pre-COVID performance, and this plays to our advantage. Focused efforts on combo sales and initiatives to drive consumer upgrade resulted in highest ever ticket in last 9 quarters. Notably, this is an organic improvement, no price increase in last 6 quarters.
Third, we are able to deliver record performance during the festive season with World Cup Finals and Diwali being the bigger than previous year. However, the performance was subdued on non-occasion days. As a company, we continue to have incessant focus to improve performance despite demand volatility.
Fourth, the current slowdown appears cyclical, mirroring the impact of inflation on mass discretionary consumption and doesn't change our outlook of foodservice industry. While the positive outlook of foodservice industry, we continue to stay focused our strategic direction. It is based on simple premise. Serve the ever-changing consumer with highest quality product at the lowest cost. This is reflected in initiatives undertaken by the team.
Latest brand refresh for Domino's, "It Happens Only with Pizza", aimed at serving 2 broad purposes: a, reimagine brand as a companion for every joyful moments for the new generation; b, grow share of pizza occasions. With Domino's being leader in pizza category, we intended to increase pizza occasion share in $51 billion foodservice market, where pizza is just $1 billion.
Second, commissioned Jubilant Food Park Bangalore in November. With each new commissary, we are advancing and pushing the limits of back-end efficiencies. With the envisaged benefits, the expected payback will be within 4 years.
At closing, I would like to share that we always adopted continuously to circumstances beyond our control, while being thoughtful and deliberate in our spending. This current rough patch will be no different.
With that, I request Sameer to share his perspective on the quarter gone by and progress on our initiatives.
Thank you, Mr. Bhartia, and good evening, everyone. I wish you a very warm welcome to this investor call today and a Happy New Year. I would like to start with sharing some highlights.
In the last quarter and even before that, we have gained in market share, Domino's has gained in market share. Delivery continues to be like-for-like positive and improved proposition of -- has improved proportion of orders were delivered under 20 minutes. As mentioned in previous calls, we have a distinctive advantage because of our network and store processes to offer hottest Pizzas in 20 minutes in top metros.
To win share of occasions, like Mr. Bhartia talked about, in a $51 billion market, pizza is only $1 billion. We have relaunched our brand with a tagline, "It Happens Only with Pizza". We will continue to invest behind the brand and grow the category as 2/3 of the food services industry is unorganized.
On the technology front, the app had 10.5 million monthly active users. Customer conversion was at the highest ever in the last quarter. We launched better couponing experience, leading to better attachment of coupons and improved card and payment experience. This will continue to improve further as we scale these tools inside the app.
Cheesy Rewards enrolled customer base is up 102% year-on-year and now at a record of 21.5 million customers. Customers can now order their favorite pizza on apps integrated with ONDC. Domino's opened 40 stores and entered Q4 with the strongest pipeline ever in terms of approved store and stores under construction. We are on track to open 200 stores in the financial year.
Pace of store openings, which we have talked about in the last call, is now materially up to 10 new stores. Customers in Mysore, Mangalore, Cuddalore and Mohali can now relish bold cajun flavors of Popeyes. We continue to witness long us outside the stores when we open and are confident of making Popeyes India's fastest QSR to achieve a revenue of INR 1,000 crores.
We are positively surprised by Hong's Kitchen and the performance underlying trajectory. It is scaling ahead of our plans. We added 4 new stores, Dunkin' also added 4 new stores, and we are happy to note the progress on copy-first strategy. For the last 4 calls, I have been talking about Project Vijay. We can see the results of it, and the gross margins improved by 118 basis points despite a -- 118 basis points year-on-year. And despite a negative LFL of 2.9%, we held on to the EBITDA of 20.9%.
The Jubilant Food Park in Bangalore is now fully operational, and we expect to sustain the goodness in gross margins. Overall, we stay focused on growing the market, bringing innovation in products, accelerating technological capabilities, capturing white spaces to expand and building a strong culture and team at JFL.
I recognize the biggest question on your minds and our shareholders will be, why is the LFL negative despite festivities in quarter 3? Indeed, LFL was 2.9%, all led by Dine-in, while Delivery was positive. And like I alluded earlier, the average ticket size without taking a price point was the highest in the last 9 quarters. In fact, if I step back, the decline in dine-in started in 2017 when aggregators started to build their food delivery business. Post COVID, it suffered materially more. However, we realize this is a industry-wide trend, but we are not going to give up on it.
As we grow delivery, we will continue to improve our dine-in experience, reimage stores at a healthy pace. We continue to witness sales in Dine-in as we improve experiences. Several more measures are being executed as we speak. Once the cycle of mass consumption turns, we should start seeing the benefits of dine-in being supportive to the overall growth without any cannibalization.
Let me share our thoughts on 2 key updates for Q3 and the rationale behind them. Firstly, as I shared, we invested in repositioning of the brand with, It Happens Only with Pizza. As leaders in the pizza segment, where 2/3 of our -- with nearly 2/3 of market share, the job as a leader is to expand the category and win and get more share of occasions versus more share from competition.
In a $50 billion food services market, as I mentioned, pizza is a miniscule $1 billion. So the job for us is to gain share from other cuisines and grow the category. As a platform, it happens only with pizza allows pizza to gain share from these categories not limited to QSR or international foods.
The investment behind Project Vijay -- the savings from Project Vijay will help us invest in brand building without diluting our EBITDA.
With inflation moderating, we believe that this is the right time to invest more in the category and in our stores. Secondly, another question on your mind will be what drives our conviction to up for an asset heavy CapEx model of commissaries rather than signing up with multiple vendors to build our supply chain? A major reason why we are successful as Mr. Bhartia said in his opening comments that we are able to deliver highest quality food products, which are safe, tasty, but also at the lowest cost. The recently commissioned Jubilant Food Park in Bangalore is the largest and the most prestigious food processing unit, adding unprecedented new capabilities for business growth across multiple brands at JFL.
The facility is designed to serve 750 Domino's stores, 300 stores of Popeyes, Hong's and Dunkin'. In addition to the usual-do manufacturing capabilities and a cold warehouse at our supply chain center, the Bangalore Food Park has large factories within the factory for chicken topping, chicken marination, bakery product, central kitchen operations, seasoning manufacturing and state-of-the-art automation inside the factory. It gives us a unique cost advantage along with end-to-end value control over the value chain -- and as a food supply chain company has to be managed with utmost care.
With a 4-year payback period, we have a strong business as well as financial rationale to continue to -- continue building on even stronger competitive advantage over peers. As we speak, the construction of Mumbai factory is in progress and these investments are quintessential for our continued outperformance and long-term success.
To sum up, we will continue to invest in our customers, grow Popeyes, scale through technology and invest in our employees. We are confident of the turnaround in Domino's and will fund most of this through internal efficiencies.
With that, let me turn on to the moderator to initiate the Q&A for this session today.
[Operator Instructions] We have a first question from the line of Manoj Menon from ICICI Securities.
Good performance in the context of consumption, what we are otherwise...
Mr. Menon, can you use your handset mode, please. Your voice is not very clear.
Is it better?
Yes.
Yes, Manoj.
Just a second, sir. I think, my volume -- yes. Yes, I was just saying that good performance in the context of the consumption, what we're otherwise observing, maybe except [indiscernible] being an exception. So Sameer and team, a couple of questions or clarifications. One, if you could give some more quantitative color on the loyalty program. While I understand the enrollment has been impressive, but the assumption, let's say, 12, 15 months back was that -- this is likely to result in market share gains for you, essentially either it's frequency improvement or consumers walking back to. And actually, that was the experience we kind of read and understood about what happened to DPZ, the U.S. company. So any color on the loyalty because it's been a good, I think, 15, 18 months of implementation?
Yes, Manoj, I think you have been very consistently asking about loyalty, and I appreciate that. So I think -- we have 21.5 million members. A large majority of them have actually gotten 1 pie, 2 pie -- and folks -- and again, a material of them, a good proportion of them also have gotten their first pizza free. So if you recall, pizza frequency is [ 3 ] in India and to earn a free pizza, you need 6 pies.
So the customers who have gotten 6 pizzas -- 6 pies, that base has gone up materially, Manoj. And we continue to see that base grow and that base is very sticky. The base of customers ordering 9-plus pizza, 6 to 9 pizza is almost up by 10% when I look at year-on-year. So that is kind of helping us gain market share, right within the category. To me, I owe this a lot to this program.
Secondly, I think the frequencies have not gone up to the extent that we want, but they have definitely moved when I look at it in the 18-month period. For the last couple of quarters, it has been flat. I attribute more of this to softer demand environment and dine-in being slow. So whatever, like I would have expected this to start resulting in positive like-for-like growth. That is negated by -- and online is positive, like I said, because this program is largely online, while it is available offline, but most customers prefer it online. Therefore, the online part of the business is positive like-for-like. I wish we are able to take the proposition on dine-in also. So therefore, we can get the benefit of this loyalty program in dine-in also, while it is available in dine-in. It just feels harder for customers to imagine, visualize versus doing this on their phone.
Understood. Just one clarification. So is it fair to then make a statement of hypothesis that the current performance what we're actually seeing on the online part of our delivery part of your business, is fully -- basically, all the benefits of loyalty is visible currently, right, or maybe material portion of it?
Yes. Absolutely. Absolutely. These benefits are beginning to flow through. We are seeing very strong stickiness of our customers on our app or even with aggregators, right? Because they -- even they order on an aggregator app to claim for the free pizza, they have to come back to Domino's app. In fact, we are thinking of strengthening the program in line with what U.S. has done. So there is a program already underway, how can we invest more behind this program. .
Understood. Secondly, Sameer quickly on -- now if I heard the number correctly, I think about 80% of all deliveries are now less than 20 minutes, right?
About 66% -- about 70% deliveries are under 20 minutes.
Okay, understood. Sameer, see, one of the important agenda, which you have been driving over the last few years actually has been to, let's say, come closer to the customer, right, which has actually been split store so that you move from 30 to 20. Is it fair to say that, that journey is largely [indiscernible] with -- because what I'm trying to understand is, look, split store by definition is a drag on -- I think you're adding net operating leverage and kind of -- is that investment fees largely coming to -- or do you still think there is still a long way to go?
So I think the -- so let me tease this out a little bit, Manoj. So firstly, the most convenience-seeking consumers like you and I are in top 7, top 9 cities right? So if you were to go to Lucknow or Kanpur, there, we have done the experiment, if we move give from 30 to 20, the benefits are not that material. Of course, customers like it. And there is -- the brand improves. But the material benefit comes if you are in Goregaon or Andheri or Koramangala or Gurgaon, right, these are the places where we see the most convenient seeking PIN codes are, and the moment we move to 20 minutes, we see faster growth, case in point being Bangalore, where we have consistently been positive like-for-like.
Now we have 200 stores in Bangalore. Our endeavor is not to add more stores unless and until the store is struggling and bursting at the seams. And that's a good problem to have. So I would directionally agree with your statement. But I also want to consistently give 20-minute delivery in top cities. We may have to add a few stores. The number of split stores have come down because the like-for-like growth is not there. So has there been a 4% or 5% like-for-like growth, we would have added another 25, 30 stores per split, which we are not doing at the moment.
We have our next question from the line of Vivek Maheshwari from Jefferies.
My first question is, Sameer, you mentioned in your opening remarks that Domino's gained market share. How do you define market share in -- or how do you measure market share in pizza category?
So there are 3 ways to do this. Firstly, there are publicly listed companies will report their numbers, which is easy to do. Second is we get market share information from aggregators. And number 3 is we also do our own internal tracking of market share based upon a few stores that we track. On all 3 accounts, we have gained market share within the pizza category.
So just a follow-up, Sameer, in the context of, let's say, there are enough number of, let's say, pizza outlets who have come about, which have, let's say, store count of anywhere between 100 plus to as much as 600, 700 or even higher. How is it -- how is it that these are not impacting your market shares is something I'm unable to understand?
So I mean if you see the -- just to kind of take your question head on, Vivek, there are only 3 players with more than 100 stores. Domino's, Pizza Hut and La Pino'z, one should correct me, right? And we do have internal mechanisms of tracking store level sales, catchment level sales. Of course, will it be 100% accurate? No. But will be directionally with aggregators, with listed companies and our own internal tracking, all 3 are indicating share gains.
Interesting, interesting.
If you take all 15 pizza chains, we have around 4,000 outlets from all these 14 pizza chains. So it's coming from a proprietary study, but just to tease out a larger impact because we made a very big point. If you see the outlet count, we would be around 46.8% in outlet share, but our revenue share is 69.7%. So the high throughput done by Domino's translate to a dominant market share gains, and that's the point which Sameer sir was also explaining in opening remarks that gaining incremental share from, let's say, 70% to 72% in pizza category will lend us nowhere, and therefore, we invested the savings from gross margin to improve the category.
These numbers are very helpful. So the second thing is on the dine-in bit. What is your assessment of what's happening? Because I think the whole issue around, let's say, cannibalization and all of that was perceived to be more on the delivery side. Of course, delivery has also moderated a bit, there is macro environment, but dine-in is the piece, which is quite a bit of -- has been quite under pressure. What is your assessment on that? Because you also mentioned that you are not giving up on dine-in. So what needs to change over here?
Yes. Nothing we -- so Vivek, as an overarching statement, we want to serve customers wherever they are, right, whether it's an ONDC, aggregator, our own app, dine-in, carryout right, in a mela, in a fair, on a train. So we are building multiple channels based upon a physical store infrastructure. So that is point number one that -- just keep that in mind, right?
Now if I have to serve from a -- even in a moving train, the physical store is important. But your question is more specific on dine-in, what is happening? It is a worldwide trend, Vivek, if you look at U.S., Europe, including emerging Asia, the dine-in on-premise sales are declining and delivery sales are improving and where the Domino's has a strength.
Now specifically, what is happening in dine-in is, India has lowest cost or lowest price per delivery anywhere in the world, and therefore, delivery comes out to be more convenient and relatively cheaper versus anywhere in the world. And we are doubling down on delivery. We should grow faster, and that is the objective over there.
In dine-in, customers then -- if overall dine-in share is, let's say 35%; in Tier 3, Tier 4 cities, it is about 50%. So it is still a material channel for us, and we want to invest behind it. It is hard to pinpoint that there is one reason, which is only pinpointing to weakness in Domino's only. All we care for is we should continuously benchmark our experience, improve it, and every time the customer comes over there to get great value, a functional experience and a very consistent -- functional and consistent experience in the store.
So therefore, we spotted about 150-odd stores, which were -- did not meet our threshold. 66, we have already reimagined. We do see 8% to 12% growth in the store immediately and sustaining. And there are about another 50 to 60 stores that we want to reimagine. Then we get into a recycle of like a healthy pace of reimagination every year. So there is a pressure on dine-in, but it is still a significant channel and it is also a channel where we believe we can recruit more customers. And in food, seeing is believing. And the most stickiest customer that we have in our portfolio over the years, the first purchase was on dine-in.
Got it. And just a follow-up, and that would be my last one. Sameer, have you analyzed -- I'm sure you would have -- historically, I think the earlier management view was that cloud kitchen doesn't make sense. But what is your view given how delivery is -- and for cloud kitchen for a new brand, the biggest issue is the -- is creating brand awareness and therefore, higher take rates to aggregators, which is not a problem that you face. So do you think that the next wave of store expansion, also because you are promising 20 minutes delivery. Do you think cloud kitchen will be a way forward at least, at least in the top 10 cities?
Yes. So I think I will just nuance it from cloud kitchen to what we call as the DELCO stores, right? And I think the -- somewhere, this is the innovation done by Jubilant Foods long before I came in, and the world is more enamored by dark stores. The highest payback period -- the payback and the ROC is actually for what we call as a DELCO store. It is slightly bigger than a dark store. It is more -- marginally more visible than a dark store, almost the same CapEx, but customers can also come and take away their orders versus not seeing it.
So we have a material number of stores in top 7 cities, we do ask a question, why do we need a 1,200 square feet dine-in store when there is a store available in 0.5 kilometer. So we take those calls. If there's a new market that has developed or there's a new mall that has come up, we are happy to open a dine-in and the delivery store. But the operating word for me is not dark, the best payback period in India actually is in the DELCO store, which is delivery and carryout, but visible to the customers. The rental savings is minimal, to be very honest, far more compensated by the incremental carryout sales that one gets.
We have a next question from the line of Amit Sachdeva from HSBC.
Sameer, my question is on the value proposition for pizza as a category. And obviously, as the inflation has been very high, and we have talked about this in the past as well, that -- there is a significant down trading in pizza category, which led to also you launching several value for money products, et cetera. And now can you give us a little bit given that phase of inflation is now quick way past, have you started to see some of that down trading that was hitting the category at least has started to sort of weigh in and come back and you see customer willingness to pay for maybe slightly higher value pizza is increasing? Or you see still pressure on category continuing. That's the point number one, but I'll have a follow-up to that on the premium side of things, but if you can perhaps give us some update whether the down trading has stopped in the category or not?
Yes. So at least as you look at data, Amit, that down trading has declined in our system in the last quarter. And therefore, we saw the highest ticket size in the last 8 or 9 quarters. Now one can say how much of that is pure macro driven by customer behavior and how much was it in our -- with our efforts, hard to say, but we took several efforts to improve the ticket size. One was we launched the Viva Roma range of gourmet pizza, which are doing very well. We relaunched it rather. It is going materially better, becoming a very strong business just in few stores that we have launched.
Second is we purposefully targeted our discounts towards more discount seeking customers and lesser towards customers who were not. So that is one piece where we saw discounts being more targeted on, I would say, our regular pizzas versus Pizza Mania and therefore, we saw the increase.
For the first time, we ran the offer of Buy 2 Get 1 across all channels, aggregators, dine-in, OA, but those were not on Pizza Mania. So we purposefully took some actions. Having -- therefore, we are happy about the ticket size. But I am not happy about the new customer acquisition, which if you were to target on Pizza Mania, we would have seen that. So it was a bit of a judgment call we took assuming the underlying new customer acquisition will continue to be there. And therefore, it's reflecting actually in our like-for-like growth.
So we are learning from it. We are getting better at targeting our discounts. So inflation is definitely moderated. It is on the commodity side, but the inflation on -- it is not negative. Inflation is still there. Secondly, we are seeing inflation in wages, right? So but when you look at our basket of consumption, that is, oil, electricity, diesel, petrol, gas, raw materials, it is still material in terms of inflation.
Got it. No, that's very helpful, Sameer. And I think I will take the question in the mirror image to the premium end as well. Like we have noticed in various categories, the premium side has done very well and rhetoric case at mass end -- mass end is very -- which is more impact we have seen in the consumption side. But in that pizza as a category where the marginal growth is coming from mass, but I would assume that large consumer, very frequent consumer of pizzas also would be a consumer cohort of very premium customers.
But in that, but they also perhaps seek value at some level, given that, that pie was growing at least there was a large spend there. Have you been able to monetize some of that tailwind that was coming theoretically at least we understand from distance that there was some tailwind there. But have you been able to sort of launch some new categories in Pizzas, gourmet pizza, perhaps you can comment whether it was successful or not. But was the pricing wrong or you could have been very -- value offer in the gourmet pizza kind of positioning you could create so that there's a value locking which other can't offer and you can offer. Do you see some opportunity there? Or is it like very small and it's not meaningful for you?
No. I think the -- so firstly, I take your point on premiumization. And therefore investing in the right product and the processes to relaunch Viva Roma is paying benefits. You are saying, can you push the envelope further by doing price corrections? It has only been 6 weeks since we launched -- relaunched it, Amit, definitely on the cards, we're also seeing we look at smaller size pizzas versus larger size pizzas. So that piece, the team is experimenting as we speak. And I'm hopeful that we will invest behind.
And I think your point is around why do you have to charge prices equivalent to some of the other gourmet players? My answer to that is it is always easier to reduce prices than increase prices. So we started with a higher price point or an equivalent price point, but a competitive price point. We've been running high discounts also on that one, specifically targeting, so almost INR 300 off on a INR 1,500 purchase of gourmet pizza. So that is material in terms of -- so we are using more promotion to learn, but I will not be surprised that we take some price corrections on the gourmet range to be more competitive and make it more mass. That's the point you are making. I'm also in the same camp.
Okay. Great. That's very helpful, Sameer. Just a small bit on Hong's Kitchen, you seem more excited now about the format. And obviously, it's a small one. You opened 4 stores. Menu may have obviously stabilized and you start seeing encouraging trends. But do you sort of still talk about running that format using the same own-store format? Or is there wider options open that business model could be different for expansion here versus other formats that you've done so far? Or it would still continue in the same pace as it is going? Is there a -- what I mean to say is, can we see more aggressive rollout through a variety of means in this format?
I think, Amit, again, thanks for being consistent on this question and pushing us towards the learning that somehow the other jewelry companies have had on franchisee model. We are learning. In fact, one of the reasons of acquiring DP Eurasia was their unique franchisee model, which is probably to the best of my knowledge is outstanding and North Star even from anywhere in the world that we know of within the Domino's system.
We will definitely learn from it. I think this franchisee models at the right pace and with the right rigor we should bring to Hong's in some of the other places, very much on the card. But right now, I want the Hong's team to have the highest throughput per store like Domino's has for Domino's anywhere in the world. Once we get that, we will definitely evaluate where to franchise. In fact, there are multiple at least internal strategy papers that we are writing, where we can franchise and not in the context of Hong's.
We have a next question from the line of Latika Chopra from JPMorgan.
Few quick questions. The first one...
Ma'am, we cannot hear you clearly.
Can you hear me now? Is that better?
Are you on your handset mode?
Yes, I am.
Can you increase the volume a little?
Is it better?
Little better.
Sure. So my first question was, you mentioned that the split store savings could moderate going forward. [Technical Difficulty] influence in any way your [Technical Difficulty] plan?
We're unable to hear you.
Yes. Let me come back in the queue, then.
We'll take our next question from the line of Jay Doshi from Kotak.
My question is generally on profitability. So in December 2020, with about 1,300 stores, you had a pre-Ind-AS EBITDA of roughly INR 200 crores, that in December '23 is INR 175 crores, INR 176 crores with 600 more stores. So could you share some thoughts or give us some color whether even those 1,300 stores that were mature prior to pandemic that profitability or absolute EBITDA is still intact or because of weak SSSG over the last 3 years and inflationary pressure that you talked about, other than RM costs, that profitability per store has deteriorated for the mature portfolio as well. And the 600 stores that you have opened in the last 3 years, are these stores at an overall level EBITDA breakeven or essentially it is a drag on absolute EBITDA?
Yes. So I think the -- all the stores, the new stores, we have a payback of about less than 3 years and EBITDA positive in line with the business case. So highly positive. We don't see any deterioration from the business case when they opened, right? I think -- so I want to assure you that each and every store we open is very closely tracked. And once it is a -- very -- we have an internal committee, which approves the store, there is a lot of groundwork that goes in and a lot of rigor that goes in approving a store. And then Deepak and team track this like a hawk month-on-month in terms of sales and EBITDA delivered.
So that process works very well. I have no doubt -- and it is not -- and I know some of the analysts does have a hangover of the past where we shut down the stores. Definitely, that is not happening and all our stores on track. Now your question -- the larger question is, I would say, a more relevant one why has our EBITDA, which was almost 300 to 400 basis points higher earlier, why are we not at those levels? The answer over there is the like-for-like growth. Had the like-for-like growth being plus 300 basis points versus minus 300 basis points, you would have seen that 200, 250 basis points of EBITDA naturally coming into our P&L. So that is the short answer, and that is a job to be done by the team.
Understood. One more question, if I may. See, as a consumer -- and this question was asked earlier as well. As a consumer, we sort of feel that when we talk around and discuss, Domino seems to be losing mind share and market share at that INR 400, INR 500 or INR 600 price point pizzas and because there are a lot of gourmet pizzerias who offer pizzas that are probably slightly more expensive than your premium portfolio and a notch below your gourmet portfolio. So is there any thought internally to sort of work around product portfolio in not just gourmet, but at that price point where you may be losing share, both mind share and market share to gourmet pizzerias of local ones?
Yes. So I think good point. So Jay, I think the -- firstly, like we've launched Viva Roma to take care of a more premium segment. And our value share is higher than the transaction share on some of the aggregators. So we are -- so actually, if I see the bigger opportunities on the transaction side, there are local pizzerias or [ 1Zs and 2Zs ] who may be offering a better promotion or a deal on a particular day.
Less on the premium side. We are constantly benchmarking our portfolio of loaded pizzas and gourmet pizzas Viva Roma with the relevant competition set. Similarly, on the lower end, whether it's Pizza Mania or INR 100, INR 109 margarita, we are benchmarking against that relevant set. So both places we must win and have a dominant share, and that is what we are focusing on. So it is not either or for me. Yes.
We have a next question from the line of Arnab Mitra from Goldman Sachs.
My first question was when we looked at the last 2 quarter results, it did give a sense that things are bottoming out and the LFL growth is not going worse from where it was. Now this quarter, despite obviously cricket world cup, on festivity, it's actually gone more negative even though you did give the color of dine-in versus delivery at an aggregate level. So my question was, do you get a sense that things have bottomed out, they are not worsening further? Or is it that things could be worsening further, and we first need to address that problem? And if you could help us understand if there was any change in the trends after the World Cup got over in December, Jan, which helps like to look at this problem more closely?
I think it's -- I can't say anything conclusively at the moment, Arnab. I think the -- is January better than December? maybe marginally but not materially. December was particularly worse compared to November, which had both Cricket World Cup and Diwali. So it's hard to say just like within like the first month of the quarter, is there a material uptick where the demand is back, we absolutely know that's not the thing. I think what we are doing internally is to capture the demand. Some of the questions being asked by other analysts, friends on premiumization, having more occasions and our biggest weapon over here is taking more share from other occasions. Therefore it happens only with Pizza is a natural answer to that. So that's how we are targeting.
We're confident about the internal capabilities that we are building that we should be despite demand being soft, would -- is the worst over, I hope so, it looks like, but I can't say confidently too.
Understood. My second question was just related to this that in the context of this negative LFL, and SSSG may be a little worse than LFL because of store splitting, is there a case for like slowing down store expansion at least in the top 8, 9 cities where you probably are -- the density is already quite high? Or is that not the right way to think about it in the current environment?
I think you're right. So if this is to be at least store, so why do we need a split. Split is not for the sake of the splitting. It is when the mother store is not able to serve the customers, when during peak hour, they are taking shutdowns and the delivery metrics are poorer or dine-in metrics are poor, that is what causes a split.
Now if the store is not growing, there's no reason to split that, right? So you're right. Therefore, we have reduced the number of splits. And as you see in the last quarter, we expanded to 10 cities, right? These are all 10 new cities and therefore, white areas. So we do play this tactically, right? Given the bandwidth of the team, if the one pocket is growing and they're not able to manage the peaks, we do go for splits. Otherwise, we have a list of cities or the white spaces that we want to go to. And there are several in the top 10 cities also that we are not even covering the entire 100% of the city. So we are focused on more white cities.
Lastly, you will see on the investor deck, we are utilizing the demand signals to expand delivery service area for the existing store network also. So we realized that in this little bit of a demand-constrained environment, we have to work harder. So we have expanded the polygons and the coverage of existing stores also.
We have a next question from the line of Tejash Shah from Avendus Spark.
A couple of questions. First, with 113 stores of Domino's opened in first 9 months, and we're still holding on to our guidance of 200 stores, the ask rate from fourth quarter is almost 1 store per day. So just wanted to know any reason that we have bunched up the opening for the fourth quarter?
I think the 2 reasons, I would say, or 3 reasons. Firstly, we started with a very weak quarter 1, where we were kind of fine-tuning the team, changing the team, that was done in Q1 and happy to note we have like a rock-solid team driven by analytics, insights, automation. That's what we wanted to bring in. So we started in Q1.
In the Q3, there were a few restrictions in construction, especially around NCR, where we had the store approvals, we had to stop the construction due to pollution measures. So therefore, the number in Q3 would have been slightly higher than 40, and that was the reason why it got delayed. So as we speak, like I said, we are -- for the first time, we are entering into the next quarter with a very large pipeline. I'm confident of reaching about 200-odd stores overall.
Very clear. Second question, there are 2 parts to it. So interestingly, in your recent communication, we are broadening our focus to behave like position ourselves of the category and the addressable market, we are actually targeting as a whole food service market and not only pizza. So is it a fair understanding that as you try to gain market share from other categories, subcategories, the dining proportion there will be higher.
And second part to the question is that we also have been pointed that dine-in is a growth hurdle. And there's an observation that even in our recent communication, it happens only with pizza, in a campaign of, let's say, 1-minute advertisement, there is only 5 seconds, which we are actually showing customers enjoying pizza at our store. So how we plan to reshape aspiration if we are not seeding it ourselves?
So your voice was a bit breaking. I think what you're saying is the advertising campaigns of it happens only with pizza are largely delivery-oriented, and -- right. Is that the question?
Yes, yes, yes.
Yes. I think you will see, like I said, what you saw is a first 2 overs of a test match, right? And it happens only with Pizza is a full platform. The next set of ads you will see actually will be inside the store. So we will build this across channels.
And are we in sync of that adding more investment in the existing stores also so that dine-in experience can improve?
Yes. We are very much in sync. I think we want to give good experience to customers. We stand for high-quality pizzas, affordable, low-cost and very functional experience, right, whether it's inside the store or delivery. So we do want to give good experiences. And we are not -- again, I think -- please don't mistake it for fine dining or casual dining. In fact, wherever we are correcting the experience inside the store, we are adding more seating to the store, right? Because we have redesigned, we have shortened the -- we reduced the size of the kitchen. We have taken some equipment out. We have made the operations leaner, we have a better restroom experience. So it's functional, higher ROI, higher turns, and that's what we want to stand for. So please don't equate dining experience improvement to fine dining or casual dining experiences.
Ladies and gentlemen, we will take the last question from the line of Shirish Pardeshi from Centrum Broking.
Just 2 quick questions. On Slide 14, when I look at you have given the cumulative Cheesy Rewards membership, which has now moved to 21.5 million over last 6, 7 quarters. I was more curious because in beginning -- in middle, you said that this program is going to do more success drawing the U.S. experience. So how do you measure the success of this program when you're setting after 7 quarters? And maybe I'm more curious what percentage of customers have already achieved 6 pizzas and redeemed the seventh one?
So your voice was little muffled. You asked me 2 questions. One is how are we measuring the success of Cheesy Rewards program? And second is what proportion of customers have gotten a full -- like reclaimed the reward, right, the free reward?
Yes.
Okay. So I think the best way to -- I would say the simplest way to look at Cheesy Rewards program is that online channel is like-for-like positive, right? That's the best, easiest correlation you can make. And the reason why I say that is, and the ticket size is increasing. So again, it's hard to tease out what is the most accurate driver. But had the Cheesy Rewards program not been there, our frequency would have reduced, right? When consumption -- when everybody is reporting negative SSG, our frequency is not reducing. It is stable for last 2 quarters.
The cohort of customers ordering 6 pizzas and 9 pizzas is increasing and customers with almost 2 pies are increased by 10% quarter-on-quarter. So I believe this program is working for us, especially for online and delivery credential. It is a great program. We also see lesser churn rates for customers who have claimed the free pizza versus a customer who's ordered 7 times, but not claimed the free pizza. So it drives stickiness. And this is very consistent with learnings from Domino's U.S.A.
Now the next question was on the proportion of customers who ordered like that base is growing. Unfortunately, we don't disclose that. But I measure this like a hawk in terms of how many customers have a free pizza, 6 pies but not claimed the pizza and 5 pies and 4 pies. So we track this on a weekly basis, that base is only growing.
Okay. I mean I was more curious in the marketing success, when we do TRP, GRPs, we measure what kind of customers we have been able to convert. So that's why I was more interested in that number. Anyway, I'll take it offline. On...
Yes, we can take it offline. Sorry, your voice is a bit muffled, Shirish.
One quick last question, if you permit. Hello?
Yes, Shirish.
Yes. So on Popeyes, now we have entered [ 210 ] cities. But if I go back about 2 years, we took almost to get the model right, to get the store economics right, the product menu pricing. And now we have entered into the north. So what gives you the confidence and what parameters you decide entering into the new city? And sub question is that if you can be able to share some contours in terms of financials, what is it at this point of time?
Sure. So I think parameters are very simple in terms of 4 things. Does the -- is there a chicken eating market over there in that city. So there are a few parts of -- most of the India, like 70% of the India is nonvegetarian and chicken. It is -- the proportion is larger in South versus some of the western parts of India. So we are cognizant -- firstly, how big the mark is. Second is the -- our store ROI, right? So the payback period and the discipline of finding a store, the rental negotiations, that's number 2 is the location in the rentals.
Number 3 is our ability to serve the customer because, as you know, we are the only player which offers fresh chicken. And therefore, it is more juicier, tender. We use chicken, which is never ever antibiotic fused or never -- or antibiotics free forever. So that is -- so building that supply chain is number 3. And number 4 is ability to manage the operation because you have to have a crew which is trained, which is -- which knows how to fry, which knows how to change the oil and how to serve the customer. So these 4 factors we use to enter a city, the overall demand, our ability to serve and the store economics -- these are the criteria.
I think it is fair to say that we will be in top 30, top 40 cities like in anywhere from 12 to 18 months, right? We believe in this product, the product satisfaction scores for Popeyes in India is not the highest among the top 2, top 3 for anywhere for Popeyes in the world. So we believe in the product, we've gotten that piece right.
Yes. And as you know that Popeyes in U.S. is now #2 player behind Chick-fil-A and ahead of KFC. So clearly, there is something, the bold Asian flavors lend itself to Indian palates and we have innovated fast. So I think it's -- overall very happy with how the team is executing.
On the -- on sharing more color, I would just request the analyst friends to be more patient on this one. We are only 25 stores. Once we get to closer to 100, I think that is where -- and I want to get there quickly. Once we get there, we'll be sharing more. But in between, we will share more color, and we're happy to take you to some of the Popeyes store and experience the bold Asian flavors of Popeyes.
Thank you, Sameer. I hope very soon we'll get a taste of Popeyes in Mumbai.
Thank you. On behalf of Jubilant FoodWorks Limited, we conclude the conference call. Thank you for joining us, and you may now disconnect your lines.
Thank you.