Daybreak - Who is Domino's real rival?

Episode Date: January 31, 2024

It was Dominoes that made delivery under 30 minutes a thing. Before Swiggy and Zomato came along, Domino’s was more or less the only place you could order in from. It showed Indians that pizza could be cheap and also enjoyed in our own houses.  Jubilant, the company that runs the Dominos franchisee in India has nearly 3/4ths of the pizza market share which is also why it is among the first to be affected down by the slowdown in consumption. Jubilant’s shares have grown up by just under 3% in the past year. But its rivals—Westlife, Devyani, and RBA—have seen their value rise by a much bigger margin.The Ken spoke to around 60 Domino’s customers and nearly half of them told us they have cut back on ordering from Dominos, because of the meagre toppings, other options, and of course, the shift to gourmet pizzas.But are smaller pizza chains the really the only rivals Domino's is faced with right now?Tune in.

Hi, this is Rohan Dharma Kumar. If you've heard any of the Ken's podcasts, you've probably heard me, my interruptions, my analogies, and my contrarian takes on most topics. And you might rightly be wondering why am I interrupting this episode too. It's for a special announcement. For the last few months, I and Sita Raman Ganeshan, my colleague and the Ken's deputy editor, have been working on an ambitious new podcast. It's called Intermission.

We want to tell the secret sauce stories of India's greatest companies. Stories of how they were born, how they fought to survive, how they build their organizations and culture, how they manage to innovate and thrive over decades, and most importantly, how they're poised today. To do that, Sita and I have been reading books, poring over reports, going through financial statements, digging up archives, and talking to dozens of people. And if that wasn't enough, we also decided to throw in video into the mix. Yes, you heard that right. Intermission has also had to find its footing in the world of multi-camera shoots in professional studios, laborious editing, and extensive post-production. Sita and I are still reeling from the intensity of our first studio recording.

Intermission launches on March 23rd. To get an alert as soon as we release our first episode, please follow Intermission on Spotify and Apple Podcasts or subscribe to the Ken's YouTube channel. You can find all of the links at the ken.com slash I am. With that, back to your episode. Domino's is actually a tech company that happens to sell pizzas. It's true.

The largest pizza chain in the world launched its own app in 2011 and now it has its own own. in-house tech team. To give you a sense of the scale, take this for example. In July 2020, four months into the national lockdown, the Domino's app had 1.4 million downloads. Zumato, on the other hand, had 1 million. And Swiggy, less than a million. Things might have turned around now, but it was Domino's that made delivery under 30 minutes a thing. Before Swiggy and Zomato came along, Domino's was more or less the only place that you could order from. Domino's showed Indians that pizza could be cheap and also enjoyed in the comfort of our own homes.

So it is not surprising that Jubilant, the company that runs the Domino's franchise in India, has nearly three-fourths of the pizza market share, which is why it is also among the first to be affected by the slowdown in consumption. Jubilant shares have grown by just under 3% in the last year. But its rivals like KFC have seen their value rise by a much bigger margin. You know, it was actually the pandemic that was a wake-up call for dominoes. And there are two reasons for this. One, the increased presence of Zomato and Swiggy

and a suddenly crowded pizza market with smaller chains and cloud kitchens like oven story and lapinos. Number two, better quality pizzas. The Ken spoke to around 60 Domino's customers and nearly half of them told us that they have cut back on ordering from Domino's because of the meager toppings, other better options and of course

the shift to gourmet pizzas. So, are Indians falling out of love with Dominoes? Welcome to Daybreak, a business podcast from the Ken. I'm your host, Nickaaj Sharma, and I don't chase the news cycle. Instead, thrice a week on Mondays, Wednesdays and Fridays, will come to you with one business story that is worth understanding and worth your time. Today is Wednesday, the 31st of January.

It's not like people have stopped craving for pizza. It's just that they have a whole range of choices now, thanks to the numerous pizza chains that have popped up everywhere. Take Aksha, a Gurgao-based product manager, for example. He spoke to my colleague Akriti Bhala and said, and I'm quoting, Who eats dominoes anymore? It has completed the transition to cardboard.

But you'll be surprised to know that not long ago, Akshe was a faithful Domino's customer. Now, he says he can get better quality pizza delivered in just about the same time as Domino's. In fact, he doesn't mind paying some extra money if his pizza is delivered hot from a nearby brick oven. He told Akriti that he would pay about $600 on average for a two-people meal at Domino's.

But for 100 or 150 extra, he could actually eat from a gourmet pizza place like Enzo. Why? Because they have fresh ingredients and it was made by the chef especially for him. Ajay Kanna, who is a hospitality consultant, told us that the rise in the number of independent pizza outlets has a lot to do with how easy it has become to source quality equipment like ovens and ingredients like cheese. The market for independent pizza chains is expected to be worth more than $2.5 billion by 2028, which is not the best news for dominoes. According to Ellara capital, the market share of dominoes in the QSR or quick service restaurant space has decreased to 19 in the year that ended in March 22 from 24% five years ago. But the share of other

participants is going up. Another reason for the growth of these niche hyperlocal chains is because they are way more agile compared to Domino's, and this allows them to innovate their menus, prices, and so on. But many analysts and consultants say that Domino's, meanwhile, has become complacent in terms of innovating its offerings. Stay tuned. Food delivery market changed completely after the pandemic. Online food orders became a habit.

we had a whole lot of options beyond pizza. At the same time, aggregators like Swiggy and Zomato solidified their position in the food delivery ecosystem. As of now, the likes of Zomato and Swiggy have more than five times the monthly active users compared to Domino's. Also, Domino's has roughly 22,000 two-wheelers as its fleet. The aggregators, meanwhile, have collectively got a fleet of about 600,000. So now, Zomato's plan is to marry dining and delivery.

It wants to improve delivery as well as revamp the older stores so they look more inviting. The plan is to give 100 stores a facelift by March this year. Domino's also introduced wallet-friendly pizzas at $48 to woo the budget-conscious customers. In an interview a few months ago, Samir Khetarpal, who is the CEO, said, and I'm quoting, India is a $50 billion food services market. Pizza is only a $1 billion market. Our job is to gain share

from dosa samba, vada, pao, samosa, etc. End quote. But here is what Sagar Daryani, who's the vice president of the National Restaurant Association, told us. And I'm quoting him, now anybody's food can reach their doorstep in half an hour. Domino's real rivals are not Pizza Hut or Lapo's,

but it is the act. aggregators. So he said that this is time for Domino's to put its head down and do course corrections and not the time to grow because there is a slowdown. Daybreak is produced from the newsroom of the Ken India's first subscriber-focused business news platform. What you're listening to is just a small sample of our subscriber-only offerings. A full subscription unlocks daily long-form feature stories, newsletters,

subscriber-only apps and podcast extras. Head to the ken.com and click on the red subscribe button on the top of the website. I am Snigda Sharma, your host and today's episode was edited by my colleague Rajiv Sien.