- KFC, McDonald's face pressure from inflation, local competition
- Jubilant's digital strategy boosts sales; margins under pressure
- Fried chicken to drive long-term growth
May 5 (Reuters) - India's Jubilant FoodWorks' strong sales growth for the March quarter is set to outpace rivals whose franchisees are expected to report muted growth despite value-focused promotions, several analysts said.
Operators of U.S. chains KFC, McDonald's and Burger King are likely to report a decline to mid-single-digit growth in same-store sales, as inflation-hit consumers cut back and local competition intensifies, according to six brokerages.
Jubilant, however, has already flagged a 12.1% increase in like-for-like sales in India in its quarterly update, which analysts say has benefited from its focus on online sales, discounts on third-party platforms, and a waiver of delivery fees on app orders.
Other franchisees have not issued sales updates. Sapphire kicks off earnings for the sector on Wednesday.
"Competitive intensity is growing in fried chicken and burger and the larger existing players like KFC and McDonald's don't have anything different to offer versus rivals," said Karan Taurani, an analyst at Elara Securities.
"Jubilant is performing the best of the lot," Taurani said, adding that its investments into 20-minute in-house delivery and app-led orders are helping reduce its reliance on third-party platforms, which rivals are heavily dependent on.
India's fast-food sector is cooling as inflation-hit consumers cut back, with franchisees relying on discounts to stay competitive in a crowded market.
Unlike Jubilant, which has pushed delivery and app-based offers, KFC and McDonald's franchisees rely more on dine-in traffic and face growing pressure from local cafes and restaurants, analysts said.
Jubilant reported a 34% jump in consolidated revenue to 21.07 billion rupees ($250.05 million) for the March quarter.
While Jubilant's digital strategy has delivered steady outperformance through the year, analysts expect its profit margins — like those of other operators — to remain under pressure in the March quarter, partly due to rising raw material and marketing costs.
Three brokerages expect Jubilant's core earnings margin — a metric the restaurant operator aims to boost over the next few quarters by tightening its costs — to be unchanged from a year earlier.
However, some analysts see fried chicken as a key long-term growth category, despite the challenge of sameness.
"If you see from a longer-term perspective, the next growth driver is the overall fried chicken category in India, but there would be some pressure for one or two quarters," said Preeyam Tolia of Axis Securities.
($1 = 84.2630 Indian rupees)
Reporting by Shivani Tanna and Bharath Rajeswaran in Bengaluru and Praveen Paramasivam in Chennai; Editing by Nivedita Bhattacharjee
Source: Reuters