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September 21, 2016
Richa Maheshwari, The Economic Times
Bengaluru, 21 September 2016
In
2014, Domino’s India sold 120 million pizzas, twice the number of
burgers McDonald’s served in the country in the same year. The figures
may have changed somewhat since, but India’s prodigious craving for
pizza, especially with a generous helping of paneer or chicken tikka,
remains unchanged.
The man who helped stoke this appetite for the Italian staple is Ajay
Kaul.
In
2005, 52-year-old Kaul became the chief executive of Jubilant
Foodworks, which owns the franchise rights for Domino’s in India,
Nepal, Bangladesh, and Sri Lanka. From then on, he expanded the chain
from just 93 outlets to over 1,062 stores across the country, making
India the largest market outside the US for the American brand.
On
Sept. 19, after over a decade at the helm, Kaul announced his
departure. The precise reasons for the exit aren’t clear; in a
statement, the company only said that Kaul wants to “evaluate and
pursue opportunities” elsewhere. Kaul’s exit comes after a management
rejig at the company was announced earlier this year.
Nonetheless,
the move comes at a challenging time for Domino’s. The pizza chain is
struggling to boost same-store sales (a measure of sales at stores open
for at least a year) amid growing competition from stand-alone
restaurants. After the news broke, Jubilant’s stock price plunged by
over 8% on the Bombay Stock Exchange. Kaul will continue in his current
role till March 2017.
Making pizzas
mass
When
Kaul, an Indian Institute of Technology-Delhi alumnus, took over
Jubilant Foodworks, Indians had already been introduced to pizzas and
burgers, thanks to local chains such as Nirula’s, apart from Domino’s,
McDonald’s, and Pizza Hut.
But they still weren’t spending
big on eating out or ordering in. In the early 2000s, Domino’s was
still considered an expensive brand, especially among middle-income
consumers.
Soon after, Kaul, who attended Xavier School of
Management (XLRI) in Jamshedpur in 1989, realised that Domino’s needed
to change the game by selling inexpensive pizzas.
In a 2006
interview with the DNA newspaper, Kaul said that while Domino’s was
well-accepted among the higher-income and upper middle-income groups,
its penetration was below satisfaction in the middle and lower-middle
strata.
That’s why, between 2006 and 2008, Domino’s introduced
the Fun-Meal pizza range at Rs. 45, and later the Rs. 35 Pizza Mania
campaign that brought the price of a single serving of pizza (i.e for
one person) down to less than a dollar. These campaigns “dramatically
expanded the pizza category in India,” according to Kaul, outdoing
Pizza Hut’s attempts at lowering prices.
Indeed, the rock-bottom
prices paved the way for Jubilant to expand beyond metro cities to
smaller towns like Bhopal, Madurai, and Belgaum. Gradually, it also
expanded its India menu, adding cheese-burst pizzas, pastas, and
desserts.
Kaul, who spent a decade working in logistics firm
TNT Indonesia before coming to Jubilant, also bolstered Domino’s
delivery service, promoting its “30 minutes or free” campaign.
The
efforts paid off big time. In 2012, the chain hit 500 outlets across
India and has doubled since. Today, Domino’s is much bigger in terms of
number stores than McDonald’s or KFC. Pizza Hut, its biggest direct
competitor, has only 450 outlets in the country.
“While
pizza was already part of the fast-food mix, over the last 10 years or
so, Domino’s India brought it to the forefront through its systematic
and aggressive growth. Ensuring a flavour mix attuned to the Indian
palate, penetrating into locations that were not previously serviced,
adding dine-in to a brand that essentially had delivery-based DNA, were
all part of this growth,” said Devangshu Dutta, CEO at consulting firm
Third Eyesight.
Kaul also pulled off a successful
Rs329-crore initial public offering (IPO) in 2010 and spearheaded the
India entry of coffee and donut chain Dunkin’ Donuts through franchised
rights in 2012.
For the year ended March 31, Jubilant Foodworks
registered a turnover of Rs. 2,410 crore (US$362.2 million) and a net
profit of Rs. 114.56 crore (US$17 million). That’s 33 times more than
the Rs. 73 crore (US$11 million) clocked in 2005 when Kaul took over.
With
Kaul’s impending exit, though, Domino’s finds itself in a spot of
bother. Fast-food chains have been struggling lately as competition
from newer brands and a general gloom in consumer sentiment hinder
growth. Analysts reckon that the company will need solid leadership in
an environment where the fast-food model is undergoing transition.
“In
the last 3-4 years, consumer sentiment has been more muted. While
inflation has been pushing costs and prices up, the consumer doesn’t
have the same appetite for spending on eating out,” said Third
Eyesight’s Dutta. “All QSRs are facing the impact but, clearly,
Domino’s as a market leader is bound to show the effects of slowing
growth more visibly.”
(Published in Quartz)
