Sapphire Foods:Slow Demand & Competition Impacted Q4,Company’s Plan To Tackle With Their Competitors

Summary

In an interview, Sanjiv Purohit, the full-time director and group CEO at Safire Foods India, discusses the company's performance amidst soft consumer demand and heightened competition. He acknowledges a decline in same-store sales growth but remains optimistic about future improvements, attributing the current situation to economic cycles. Purohit highlights the company's strong full-year performance, with significant growth in revenue, EBITDA, and new restaurant additions. He outlines strategies for growth, including innovation, marketing, and cautious expansion, particularly for KFC and Pizza Hut brands, expressing confidence in overcoming current challenges and maintaining long-term growth aspirations.

Takeaways

• 📉 Sanjay Purohit, the Full-time Director and Group CEO at Safire Foods India, discusses the decline in same-store sales growth due to soft consumer demand and heightened competition.
• 📈 Despite the challenges, Safire Foods has had a decent full year with revenue scale growth, EBITDA margin percentage growth, and new restaurant additions, outperforming other QSR companies.
• 🎯 The aspiration for same-store sales growth is between 5% and 7%, which has not been met in the last five or six quarters, prompting internal reviews and strategies for improvement.
• 💡 Sanjay emphasizes the importance of investing in innovation, marketing, and improving customer and operational metrics to drive growth, especially in the KFC brand.
• 🏫 KFC is set to continue its pace of expansion, while Pizza Hut's growth strategy involves being more cautious in new store expansion due to current market conditions.
• 📊 Sanjay mentions that the company's performance in the last quarter of 2021 was strong, with 23 new KFC stores opened, but no new Pizza Hut stores in India and one closure in Sri Lanka.
• 🔮 The company aims to double its KFC store count by the end of the year, a goal that is closer to being achieved in three years rather than the initially projected four.
• 🚫 The economic indicators are strong in sectors like travel and tourism, but the QSR sector is facing a rough patch, which Sanjay attributes to muted consumer expenditures and heightened competition.
• 💼 Sanjay's background in consumer FMCG suggests a deep understanding of the consumer market, which he applies to the strategic planning of Safire Foods.
• 🌐 The company is focusing on taking matters into their own hands by enhancing innovation and marketing efforts, exemplified by Pizza Hut's launch of a new product, 'Melts', a foldable pizza concept.
• 📉 Sanjay acknowledges the current turbulence in the market but maintains a long-term optimistic view for both KFC and Pizza Hut, expecting a multi-decade opportunity for growth.

Q & A

What is the current status of Safire Foods India's same store sales growth?

Safire Foods India has experienced a decline in same store sales growth over the last three to four quarters due to soft consumer demand and heightened competition.

How does Sanjay Purohit, the CEO of Safire Foods India, describe the consumer demand conditions over the past few quarters?

Sanjay Purohit describes the consumer demand conditions as soft, with the private final consumer expenditure metric being the most constrained since 2003-2004.

What is Safire Foods India's strategy to improve same store sales growth for KFC?

The strategy includes investing in innovation, increasing marketing efforts, improving customer and operational metrics, and being cautious with new store expansion where the brand is doing well.

What was the overall performance of Safire Foods India in the full year according to Sanjay Purohit?

According to Sanjay Purohit, Safire Foods India had a decent full year with good revenue scale growth, EBITDA margin percentage growth, and new restaurant additions, making it the best year among all the QSR companies.

What is the aspirational same store sales growth rate for KFC according to Safire Foods India?

Safire Foods India aims to grow same store sales for KFC by between 5% and 7%.

How many stores did KFC open in the fourth quarter according to the transcript?

In the fourth quarter, KFC opened 23 stores.

What is the plan for new store expansion for Pizza Hut in India over the next six to twelve months?

Safire Foods India plans to be cautious with new store expansion for Pizza Hut in India, focusing on getting the brand back on a growth track before discussing further expansion.

Why is the QSR sector experiencing a rough patch despite strong economic indicators in other sectors?

The QSR sector is experiencing a rough patch due to muted consumer expenditures and heightened competition, despite other sectors like travel and hospitality showing growth.

What innovation did Pizza Hut introduce in response to the soft demand conditions?

Pizza Hut introduced 'Melts,' a unique foldable pizza concept, as part of their innovation strategy to boost sales.

What is Sanjay Purohit's outlook for the long-term growth of KFC and Pizza Hut?

Sanjay Purohit sees a multi-decade opportunity for both KFC and Pizza Hut, despite the need to weather current market turbulence.

What was the three-year plan for sales and EBITDA growth as stated by Safire Foods India in December 2021?

The three-year plan stated in December 2021 was for sales to grow by 25-30% and EBITDA to grow by 30%.

Has there been any significant change in the ownership structure of Safire Foods India recently?

No, the ownership structure has achieved a level of stability with the promoter stake at about 31%, foreign institutional investor stake at about 30%, domestic investor ratio at about 30%, and the rest being public and employees.