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September 21, 2016
Richa Maheshwari, The Economic Times
Bengaluru, 21 September 2016
Thailand-based quick service restaurant chain
Five Star Chicken has shut down 133 outlets in India in the past five
months owing to sluggish growth even as it seeks to push sales.
The chain, which recently rebranded itself as Five Star, now has 220
outlets in Kerala, Tamil Nadu and Karnataka, and an outlet each in
Hyderabad, Goa, Pune and Mumbai, where it is testing the waters.
“We have shut down non-performing stores and slowed down our rate of
expansion,” said Sanjeev Pant, senior vice president-food business.
“While we were opening 10-15 stores in a month before, now it is down
to three-four stores in a month,” he said.
The company is now looking at a new strategy to gain growth momentum as
the Rs 6,000 crore quick service restaurant or QSR segment has been
reporting single-digit or negative same-store sales growth for the past
two years.
Other western-style QSR and coffee chains such as Pizza Hut, KFC and
Barista have either shut down or downsized operations in the past year
and a half because of consumers scaling back spends and increasing
pressure on their profitability.
Owned by Charoen Pokphand Foods (CP Foods), Five Star Chicken is
opening shop-in-shop stores in retail outlets, introducing private
label packaged drinks and expanding its menu offerings.
The company, which entered India in 2012, has tied up with supermarket
store Spar, Tata-led Star Bazaar and a few local bakeries to open six
shop-in-shop stores. These stores will entail lower real estate cost
than standalone stores and are expected to have a healthier footfall.
The Bengaluru-based company has launched two drinks, Masala Nimbu and
Green Apple, to attract customers who are drifting away from high sugar
concentrated drinks. Known for its non-vegetarian offerings, the
company has also revamped its menu from 100% non-vegetarian to 40%
vegetarian and 60% non-vegetarian.
“We are aiming to make the menu 50% veg and 50% non-veg to bring in our
vegetarian customers and loyal consumers who don’t prefer eating
non-veg every day,” said Rijoy Prabhakar, assistant vice president.
Experts said
India is a different market than the home markets of such overseas
chains, which is why often such brands take time to adapt to the local
requirements. Besides, the slow growth in this segment is here to stay,
they said.
“As the
expenses are going up, these chains are finding it difficult to pass
these on to the customer as Indians are discretionary spenders,” said
Devangshu Dutta, chief executive of consultancy firm Third Eyesight.
According to a Goldman Sachs report, titled ‘The India Consumer
Close-up,’ the QSR segment grew at 16% CAGR in the past decade and is
estimated to grow over 20% annually over the next few years.
(Published in The Economic Times)
