Sapphire Foods:Slow Demand & Competition Impacted Q4,Company’s Plan To Tackle With Their Competitors
Summary
TLDRIn 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.
Outlines
📉 Declining Sales and Future Growth Strategies
Sanjay Purohit, the full-time director and group CEO at Safire Foods India, discusses the challenges faced in the recent quarters due to soft consumer demand and heightened competition, which have led to a decline in same-store sales growth. He mentions that this situation has persisted for about three to four quarters and could continue for another one or two quarters. Despite this, Safire Foods has had a decent full year with good performance in revenue scale growth, EBITDA margin percentage growth, and new restaurant additions. The company aims to grow same-store sales by 5-7% and is focusing on innovation, marketing, and operational improvements to boost growth. Sanjay also outlines a cautious approach to new store expansion, especially for KFC and Pizza Hut, with plans to double KFC's store count by the end of the year.
🚀 Innovation and Marketing to Revive QSR Performance
In the second paragraph, Sanjay Purohit emphasizes the importance of innovation and marketing in reviving the performance of Safire Foods' QSR brands, particularly Pizza Hut, which experienced a downturn after a period of strong growth. He highlights the launch of a new product, 'Melts,' a unique foldable pizza concept, and the company's commitment to increasing marketing investments. Sanjay expresses confidence in the company's ability to overcome current challenges through internal efforts, rather than relying on macroeconomic factors. He also addresses the company's three-year plan, stating that they have exceeded the initial guidances and remain committed to growing revenue by 25% and EBITDA by 30%. Regarding the ownership structure, he confirms stability with a balanced distribution of shares among promoters, foreign institutional investors, domestic investors, and the public.
Mindmap
Keywords
💡Sanji Purohit
💡Sappire Foods India
💡Same Store Sales Growth
💡Consumer Demand
💡Private Final Consumer Expenditure
💡Competition
💡Innovation
💡Marketing
💡Customer and Operational Metrics
💡Expansion
💡Discretionary Spend
💡Economic Indicators
💡Multi-Decade Opportunity
💡Investor Presentation
Highlights
Sanji Purohit, the full-time director and group CEO at Safire Foods India, discusses the company's performance in the face of rising competition and a decline in same-store sales growth.
The company has experienced softness in consumer demand for about three to four quarters, which is the most constrained since 2003-2004.
Safire Foods has had a decent full year with growth in revenue scale, EBITDA margin, and new restaurant additions, despite the challenges.
The aspiration for KFC's same-store sales growth is between 5% and 7%, but the last five to six quarters have fallen short of this target.
Internal strategies include investing in innovation, marketing, and improving customer and operational metrics to boost growth.
A cautious approach is being taken with new store expansion for Pizza Hut due to current market conditions.
KFC opened 23 stores in Q4, while Pizza Hut did not open any new stores, reflecting a strategic focus on brand performance over expansion.
The company aims to double KFC's store count by the end of the year, a goal that is closer to being achieved in three years rather than four.
Discretionary spending in the QSR sector is being affected by broader economic trends, despite other sectors like travel and tourism booming.
Economic indicators are strong, but the QSR sector is facing a rough patch due to muted consumer expenditures and heightened competition.
Long-term optimism for KFC and Pizza Hut remains, with a view to weather the current market turbulence.
Confidence in the market recovery is based on internal efforts such as innovation and marketing, rather than macroeconomic factors.
Pizza Hut's experience shows a strong performance in the first half of 2022-23, followed by a softening in the last four to five quarters.
Innovations like Pizza Hut's 'Melts', a foldable pizza concept, are part of the strategy to improve same-store sales growth.
The company's three-year scorecard has exceeded initial guidances, with revenue growth of 37% and strong EBITDA growth.
The long-term aspiration for revenue growth is around 25%, and for EBITDA growth, around 30%, despite potential fluctuations.
The ownership structure has achieved stability with a balanced distribution of shares among promoters, foreign institutional investors, and domestic investors.
Transcripts
Sanji purohit the fulltime director and
group CEO at safire Foods India joins in
to talk about how their quarter has been
Sanjay hi morning uh with the rising
competition your same store sales growth
has seen a bit of a decline when is it
that you see it um you know
recovering so good morning Aisha good to
speak to you uh it has been about three
four quarters when we've seen softness
in consumer demand I if you look at the
private final consumer expenditure
metric that the government puts out it's
been the last couple of quarters has
been perhaps the most constrained over
uh or since uh 2003 2004 So Soft demand
conditions and heightened competition is
what um makes this quarter also a little
constrained I think uh we might see this
for perhaps another one or two quarters
and then we will see
um an improvement in overall uh uh
demand conditions having said that all
in all sappire foods has had we think a
really decent full year uh are when you
look at all around performance and I
look at Revenue scale growth eida margin
percentage growth and new restaurant
additions we perhaps have had the best
year of all the qsr companies
but is there a level that you're working
with specifically for KFC for your same
store sales
growth so our aspiration is that we've
got to grow same store sales growth by
anywhere between five and 7% this last
five or six quarters has been nowhere
near that and hence we're looking
internally saying uh while demand
conditions might be muted what can we do
to um you know to improve uh growth on
each of the brands and really it comes
down to two three things one is invest
in Innovation invest in uh greater
marketing and get further Improvement on
our customer and operational metrics and
then be uh cautious on um on our new
store expansion on KFC where the brand
is really doing well we'll continue at
the pace of expansion that we have had
on Pizza Hut a little more
cautious deal that out for us Sanjay
because I think in Q4 the overall store
Edition was 22 uh you talked about how
you're going a bit cautious in a certain
segment but give us the numbers what's
the plan for the next six to n months so
typically don't like to give a 6 to n
month uh uh uh a forecast uh but what
we've said is KFC so if I just look at
quarter 4 KFC we opened 23 stores we
didn't open a store um in Pizza Hut
India um and we had one closure in Sri
Lanka but and that we will make up as we
go forward I think that we will if you
look at December 21 we said we should be
able to double our store count in 3 to
four years in KFC now it is closer to
three years so we should be able to
double our store count by the end of the
year on pizza
given that we are at about 5% restaurant
iida the conditions are not really
conducive for expansion and that's where
we are going cautious give us two or
three quarters let's get the brand back
on track on the growth track and then um
we will talk about
expansion let's say discretionary
spends and going out and qsr is also
part of discretionary spend I look at
car sales I look at Travel I look at
tourism all these sectors are booming
because India is doing well qsr in a
sense is perhaps the first go to space
because you want to experience and you
want to eat out you want to dine out why
is the sector going through a rough
patch when in general the economic
indicators are so strong yeah so I guess
uh that's the little dichotomy that we
are seeing um when you see some sectors
doing well uh for for example as you
said travel and hospitality and perhaps
Airlines and looking at the cues that
the airline counters seem to be doing
well but a large part of
consumer uh expenditures actually muted
uh if I look at the results that most
other consumer product companies have
put out they've been uh and I've got a
background in consumer fmcg they've been
really really poor I think qsr postco
saw incredibly good uh bump up for about
18 months we are cooling off from those
Highs but uh and there's been a little
amount of heightened competition also
perhaps so I think these are all cycles
that we go through from a long-term
perspective I would still see a
multi-decade opportunity in both KFC as
well as Pizza heart but we've got to
weather the
Uh current turbulence a little bit when
you say you expect things to improve
that is how you started the your opening
remarks Pi what is giving you confidence
that in the second half of this year it
things will look up yeah so um really
internally I speak very little about
what will happen on the macro side uh
because that's not something that is in
our hands I think what we are doing
however is putting are best out in the
market and I'll give you Pizza Hut's
experience I think if you've seen Pizza
Hut in uh the first half of 2223 the
brand was flying we were U our same
store sales growth was really good
margins were good and then the last four
five quarters have been soft what we
what we have said consistently is what
how can we take matters into our own
hands and I'm repeating what I said
earlier heighten the pace of innovation
put greater levels of marketing
investment uh further improve our
customer and operating metrics and then
be cautious on expansion and uh in the
last quarter I had called out saying
that our Innovation you should be able
to see in the next one or two quarters
in March we launched melts which is
really a unique Pizza concept it's a
foldable concept and if if uh the if you
any of you have not tried I urge you to
try it it's a brilliant product sure
further investment in marketing I think
this gives me the confidence that we
will come back not the uh not the macros
the macros will be the icing on the cake
okay clearly their Innovation is going
to do the trick just quickly last couple
of questions s Before I Let You Go you
talked about the long-term medium-term
Outlook and I remember in December 21
you had laid out that threeyear plan
that sales and the bid Sr is going to be
25 30% it looks like a tall task right
right now do you stick with that and
secondly I think last year there was
that large deal also happened with P
your P partner trimming down stake is
there something else which is likely to
happen over the next five to six months
yeah so first I'll just address your
first question actually if you see our
three years scorecard which we've put in
our investor presentation we've beaten
uh these um guidances by a mile so we've
grown Revenue by 37% we've grown iida
also really strong
um on KFC instead of three four years
doubling the store count we've been able
to grow it in we should be able to grow
it in three years
so truly that's so what we articulated
in December 21 we've been able to beat
by a mile that's our aspiration even
going forward that Revenue should grow
in the region of
25% iida should grow in the region of
30% you'll have quarters and years when
it might be a little up and down but I
think that's the uh longer term
aspiration undoubtedly from a uh from a
ownership structure perspective I think
we've achieved a certain level of
stability our promoter stake is about
31% our P our foreign Institutional
Investor stake is about 30% again
domestic investor uh ratio is about 30%
and then rest is uh public and employees
so if you look at our shareholder cap
table perhaps again it's among the best
in or among the best if not the best in
the
industry okay San on that note we let
you go appreciate you making time and
speaking with us so
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