Last round of price hikes for Quick Service Restaurant (QSR) companies: IIFL Capital Services

19 Jan 2023 , 12:23 PM

Key takeaways include:

• Pizza Hut took price hikes of ~2% (at October end); no price actions by Domino’s. Cumulatively Domino’s/Pizza Hut have taken ~10%/~8% price hike over last 12 months. 
• Cash discounts by Domino’s on its app and third-party platforms have reduced. 
• Domino’s launched Gourmet range of Pizzas- ‘Viva Roma’. 
• No price actions by KFC and Popeyes; KFC premium of low-single digit versus Popeyes stands unchanged. 
• KFC relaunched Chizza 
• Burger King took price hikes of ~8%. 
• McDonald’s launched Chicken Big Mac
• Barbeque took marginal price hikes in Meal Box & Thalis menu. It launched Classic Meal Box, which is at lower price points than Barbeque in a Box.

Pizzas

• Price increases: While Domino’s did not take any price actions since IIFL Capital Services’ last survey in October 2022, Pizza Hut took 1.5-1.7% price hikes at the end of October 2022. Cumulatively, Domino’s has taken ~10% price hike versus ~8% hike taken by Pizza Hut over the last 12 months.
• Price comparison: Based on current delivery price through third-party players, Pizza Hut is at 10-11% premium to Domino’s, same as per IIFL Capital Services’ October survey. Despite price hikes taken by Pizza Hut, the premium did not increase, as cash discount offered by Domino’s was reduced from Rs75 to Rs50 on Zomato.
• Promotions: Cash discounts by Domino’s on its app have reduced from Rs.60 to Rs.50. On Zomato, Pizza Hut is offering cash discount of Rs80 — same as in October.
• New launches: Domino’s launched Gourmet range of pizzas starting at Rs729 for veg variants and Rs879 for non-veg variants.

Fried chicken

• Price increases: Both KFC and Popeyes did not take any price actions since IIFL Capital Services’ last survey in October 2022. Both formats have increased prices by ~10% in the last 6-12 months.
• Price comparison: KFC is now at low-single digit premium to Popeyes compared to low-teens premium during IIFL Capital Services’ July 2022 survey when only KFC had taken price hikes.
• Promotions: On KFC app, minimum order value for free dishes has increased compared to IIFL Capital Services’ October survey.
• New launches: KFC relaunched Chizza, crispy chicken fillets along with pizza sauce starting at Rs299.

Burgers

• Price increases: Compared to IIFL Capital Services’ October survey, Burger King took price hikes of ~8% across its portfolio. McDonalds did not take any price actions.
• Price comparison: Led by distributed pricing structure of McDonalds, it has comparable burgers to Burger King at each price point.
• Promotions: On third-party platforms, both McDonald’s and BK are not offering any cash discounts. On McDonald’s app, cash discounts/free dishes offers are same as IIFL Capital Services’ last survey. Burger King, on its own app, increased minimum order value applicable for free dish compared to IIFL Capital Services’ previous survey. It also increased cash discounts being offered.
• New Launches: McDonald’s launched Chicken Big Mac burger with a new campaign featuring cricketer Virender Sehwag.

Casual dining

• Price increases: Barbeque took marginal price hikes in Meal Box & Thalis menu, since IIFL Capital Services’ previous survey.
• Promotions: On Zomato, Barbeque is offering discount of 50% up to Rs100, on order value above Rs149 and 15% off on minimum order value of Rs700. On its app, Barbeque has cash discount of Rs75/100 on order value of over Rs499/599 versus Rs.75/150 off on order value above Rs499/899 during IIFL Capital Services’ October survey.

• New launches: The company expanded meal variants by launching Classic Meal Box at lower price points than Barbeque in a Box. For instance, Classic Meal Box – non veg (Premium) at Rs849, is cheaper than Barbeque in a Box – non veg (Premium) at Rs1,149.