Indian QSR Operators Devyani International and Jubilant Foodworks Face Profit Decline Amidst Rising Ingredient Costs and Weakened Consumer Sentiment

Indian QSR operators, Devyani International and Jubilant Foodworks, have reported a decline in net profit in the fourth quarter due to increased input costs. The prices of key ingredients like cheese and flour, used in pizzas and burgers, rose by 40% and 21% respectively in the past year. While KFC managed to raise prices by 3.5% to offset the increase in poultry prices, pizza operators have refrained from price hikes due to the high-value nature of the category.

Moreover, discretionary spending by Indians has decreased, further limiting the operators’ ability to increase prices. The weak consumer sentiment during the seasonally weak Q4, influenced by festivals and fasting periods, has also impacted QSRs. Devyani and Jubilant experienced varying same-store sales growth (SSSG) for their Pizza Hut and KFC outlets. Sapphire Foods, another operator of Pizza Hut and KFC, also faced similar challenges and expects a difficult year ahead.

Despite short-term challenges, analysts see long-term opportunities in the QSR sector, particularly for Jubilant Foodworks, as urban demand sentiment improves.

Devyani has observed a slight improvement in demand, and the medium-to-long term outlook for its SSSG is positive. Analysts also believe that the expansion strategies adopted by QSR players, along with the entry of online platforms like Swiggy, Zomato, and Amazon, will contribute to the growth of the overall dining-out and ordering market.