Some more price hikes likely for QSR companies: IIFL Capital Services

20 Jul 2022 , 11:45 AM

Key highlights from the channel checks across the QSR sector include:

1) In pizzas, Pizza Hut took ~5-6% price hikes over IIFL Capital Services’ 28-April survey, relative to no hike taken by Domino’s. However, Domino’s has taken cumulative ~10-12% price hikes since December 2021, as against ~7-8% by Pizza Hut. Pizza Hut is now at ~10-11% premium to Domino’s. Domino’s has launched a new loyalty program, offering free pizza for every six pizzas ordered on its own platform. Domino’s has higher menu pricing for certain outlets, based on its location and associated rent/logistics costs.

2) In burgers, while McDonald’s took 10% price hikes, Burger King (BK) saw only marginal hikes; but due to price laddering of burgers,
McDonald’s has comparable offerings to BK at each price-point.

3) In casual dining, Barbeque Nation took ~8% price hikes. In terms of new launches, Domino’s strengthened its non-veg portfolio by introducing 4 new chicken pizzas; KFC launched popcorn nachos; and BK launched the Arabic Whopper.

Pizzas

Price comparison: Based on the current delivery price through 3^rd party players, Pizza Hut is at ~10-11% premium to Domino’s.

Price actions: Domino’s did not take any price hike compared with the previous survey on 28 April; however, the cumulative price hike versus 21 December is now 10-12%. Pizza Hut, on the other hand, took price hikes of ~5-6% and cumulative price hikes of ~7-8% over the same periods.

Promotions: Domino’s has started a new loyalty program that offers a free pizza against 600 points or six orders above Rs350 ordered via own platform, over and above the usual discounts. Pizza Hut offers cash discount of Rs80 on Zomato, the same as in April 2022.

New launches: Domino’s has launched four pizzas in its non-veg menu, namely spiced double chicken, indo fusion chicken, chicken maximus, and the 5 chicken feast pizza.

Fried Chicken

Price comparison: KFC continues to be at a low-teen premium to Popeyes, across most product segments.

Price increases: Post the ~9-10% price hikes since the 28-April survey, KFC did not see any price actions in the current quarter.

Promotions: Cash discount on Zomato on KFC orders compared to free dishes above a defined order-value on its own app.

New launches: KFC launched popcorn nachos with popcorn chicken served on crispy nachos.

Burgers

Price comparison: Despite the sharp price increase taken by it, McDonald’s has comparable burgers to BK at each price-point, due to its distributed pricing structure.

Price increases: McDonald’s took ~10-11% price hikes across its menu since IIFL Capital Services’ 28-April survey. BK, however, took marginal pricing actions.

Promotions: For McDonald’s, cash discounts on Zomato compared to free dish on minimum order value on its own app. BK has cash discounts on its own app relative to no discount on Zomato.

New Launches: BK launched the Arabic Whopper in the veg, chicken and mutton options.

Casual dining

Price increases: Barbeque Nation implemented ~8% price hikes since IIFL Capital Services’ previous survey, spread across menu items. Higher increase of ~10% was taken in the ‘barbeque in a box’ category.

Promotions: On its own app, BBQ is offering cash discount of Rs75 and Rs150 on minimum order value of Rs499 and Rs899, respectively. On 3^rd party platforms, it has cash discount of up to Rs75.