Indian Pizza market offers a mouth watering opportunity for investors

Five to six years ago, the Italian food format stood third in preference after Indian and Chinese. Within that pizza had the largest share. However, recent studies show that pizza is the biggest and the most profitable segment in Quick Serve Restaurant (QSR) format. The Indian pizza market is dominated by Jubilant Food Works and Yum Brands who own the widely recognisable brands Domino’s and Pizza Hut, respectively. However, brands like Sbarro, Papa John’s and Marco’s Pizza are also competing to spread their base in India. Thus, with the increase in number of players, the market is ripe for investors.

Growing opportunity
There has been a spurt in quick service restaurants in India. Initially, pizza was a difficult sector to enter as entry barriers were high and scaling up in this category was difficult. But now, there are several new brands that are at par with the already established ones and not all can sustain for a span of 10 to 20 years. So, more the number of franchisors, the better for the industry!

For Pizza Hut, India is one of the most important markets. The brand plans to double its store count to over 700 in the next five years. "For long term expansion, India is one of our most sought-after markets. In the medium term, we plan to double the number of outlets. We currently have 360 restaurants across 100 cities. We will double that to over 700 in the next five years," says Unnat Varma, Managing Director, Pizza Hut (India Subcontinent).

The Yum! Restaurants-owned pizza chain runs a franchise model in the country, where investments come from franchise partners, Varma added. "In 2014, we had ramped up aggressively and opened over 80 restaurants. Now, we are in a consolidation phase for our business. Once you had this kind of growth, you need to stabilise the business. Let's not grow ahead of the curve," he explained.

Prospects in smaller cities
Competition in the pizza segment is getting intense as franchisors are significantly ramping up their presence across tier-II and tier-III cities of India. There exists a tremendous growth opportunity for franchisors in these areas as educated middle class population is becoming more sophisticated with respect to standardised food consumption.

Kalpesh Patel, Area Representative, Marco’s Pizza says, “We currently have 400 licenses to open Marco's locations all over India. We are targeting Surat, Rajkot, Anand-Nadiad and Gandhinagar in 2017. We have already established our presence in Vadodara and Ahmadabad.”

Online channel gaining pace
The delivery format, delco, is being tried out by franchisors. These stores occupy an area of 800-1,000 square feet. The format is particularly preferable in heavy traffic destinations, malls, universities, tech parks and railway stations. Pizza Hut is focused on growing its online sales, which has seen a rise since the demonetisation move in November. "More than 35 per cent of our sales take place through home delivery and has grown in the last few years. Two years back, we started online ordering through the website and app. Now, over 60 per cent of home deliveries happen through online channel as compared to call-centres," says Verma.

Impact of the Budget
There has not been any drastic change in eating habits of consumers post the Budget 2017. India has the largest population of youth (under 25 years) in the world and this sector will have more spending power in 2017 and years ahead. So, the growth prospects lie manifold for the franchisors. Looking at the growth potential Patel of Marco’s Pizza adds, “We are also open to tap Mumbai, Pune, Chandigarh, Ambala and New Delhi.”