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Feb 09, 2012, 01.50 PM IST
Speaking to CNBC-TV18, Jubilant Foodworks' CEO Ajay Kaul said the company had gone in for a 12% price hike in 2011 to beat rising food prices.
Speaking to CNBC-TV18, Jubilant Foodworks' CEO Ajay Kaul said the company's margins were boosted by a 12% price hike in product prices, which helped it more than offset rising input prices. He ruled out further hike in its prices, and is wary of sustaining 30% same store sales growth. The company's plan to launch Dunkin Donut is progressing on schedule, he said.
Below is the edited transcript. Also watch the accompanying video.
Q: Your numbers have beaten expectations. First take us through the margin performance which is now almost nudging 19%. What led to that increase and do you have any headroom there?
A: We have had a good quarter. Coming out of the previous quarter our same store growth after many quarters had slide to 27%, which in itself is not a bad number, but lot of eyebrows got raised. We did 30% same store growth in a big quarter because December is always a big month. I think that helps and the good news also was that the food inflation which was playing a villain for long time for most of the industry and even outside. I think we were able to manage that finely in discussion with our business partners, and I am quite confident that we have seen a tail of that food inflation piece. While challenges will always be there, it should not trouble us as much. So a mix of both these, the high same-store growth back to 30% levels and a bit of control on food inflation clearly has been a good contributor on margins climbing to around 18.9-19%.
Q: You also had a price hike that you undertook in November; how much did that aid the margin performance and from here on would you say this is probably the kind of plateau level you would work at with margins or is there some upside potential as we were asking?
A: Last year was a bit unusual. We normally take two price increases and these are nominal 2-3%, it doesn’t hurt the customers because at the end of the day, we are in the consumer business. Last year unusually, we took as much as three price increases, all adding up to around 12%. It was an unusual year and we hate it, honestly. Yes, it has contributed a little bit to the margins no doubt. What its fall out on our customer off-take is concerned, it is for us to watch but if same store numbers are anything to go by, we haven’t seen consumers off take reducing because 30% in itself is a very good number for same store growth.
Going forward, we do believe that there are still some leverage able items in our P&L. The moment you go past our pure variable like the food which is pure variable and a few others, marketing, G&A, there are a few places where we can still leverage and get a bit of upside on margin. Beyond that I can't comment or quantify it as to how much it can add up to or what is the upside over a 2-3 year period.
Q: Do you think this pace of 30% same store sales growth is sustainable from the kind of traction that you are seeing in the market?
A: We have been doing 22-23% same store growth from 3-5 years. Year before last, we did 37% which was whooping and to some extent, it has surprised us also. On top of that, we have in the first nine months done more than 30%. So is it sustainable? To my mind if we get our act right, if we are able to do our marketing, new product developments, store opening and all those acts right, we are putting lot of money in online ordering as a new tool; 30% I can't talk about but to give a number which is an excessive 20% to me is doable over the next 2-3 year period.
Q: Can you update us on where things stand with Dunkin' Donuts and how soon you think that may start contributing to the revenue?
A: Dunkin' Donuts is going as per our plan, after having announced our alliance last year sometime, we immediately embarked upon creating the basic wherewithal, the infrastructure, then knowhow to launch it. All this time has gone into building one factory which is already almost completion, we have also identified few locations for stores where some action is already happening, some construction is already happening, in terms of developing the basic supply chain with regards to ingredients, menu finalization, all that is almost in closing stages.
We do hope that in the first half of 2012 we have been saying, which means in the first quarter of FY2012-13, we should be opening our first store in and around Delhi. So it is as per track.
Having said that, Dunkin' Donuts, if you look at our five-year plan, we believe that in that time we should have 80-100 stores in India. When you compare that with where Dominos will be in five years time, and how significantly or otherwise will it contribute to our overall Jubilant Foodworks P&L, you will realize that for a lot of time it's going to play like a very small brother to Dominos. So it will start contributing, it will start playing the role but I would say still a small and insignificant even when you look at the next five years or so.
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