Is the pizza losing its fan base in India?

While there has been a general decrease in the frequency of dining out, contributing to the overall slowdown in the market, analysts maintained that consumers are diversifying their preferences beyond pizza.

Analysts predict that pizza, as a category for quick service restaurants (QSR), will not perform well in the upcoming quarters due to tough competition from other categories such as biryani, burger, and fried chicken. Changing consumer preferences also play a role in this shift. While dining out frequency has decreased, consumers are also diversifying their food preferences beyond traditional pizza, which has long been considered comfort food in many parts of the world.

Platforms like Zomato offer a wide range of food options, including biryani and other diverse choices, which is why there is a shift from traditional pizza and burger choices. According to Karan Taurani, Senior Vice President at Elara Capital, this trend is expected to continue.

Biryani in particular stands out from the perspective of a consumer because, unlike burgers and pizzas, it maintains its texture well and doesn't become soggy during transit. Analysts noted that cloud kitchens often provide greater margins to delivery partners compared to traditional brick-and-mortar restaurants. By operating from central locations with optimised costs and focusing primarily on delivery, cloud kitchens can enhance profitability.

A case in point is Rebel Foods, a leading Indian food tech company that manages over 45 brands, including Faasos, Behrouz Biryani, and Oven Story, which is fast gaining market share from the QSRs. As of April 2022, it stood out as the world's largest cloud kitchen restaurant chain, with over 450 cloud kitchens spanning 10 countries. Biryani by Kilo, another food tech start-up that has gained popularity has added 38 outlets in FY23 entering Bengaluru and Hyderabad resulting in 95 outlets across 45 cities in India.

“The pressure from the food tech companies is due to people getting a lot of options from other cafes and chains which have opened in the post-Covid era. The customer mindset is also changing, they are no longer just loyal to the global QSR chains, and they are open to exploring other brands,” said Taurani.

India is also seeing a rise in other cuisines like Mexican and Lebanese. Burman Hospitality Pvt. Ltd. the franchise holder of Taco Bell restaurant aims to increase the total store count from the current 130 outlets to 600 by the year 2030. Analysts noted that all types of cuisines are opening up but they still have a small base. Burgers, Pizzas, Fried Chicken and biryani are still dominating. Taco Bell could do better but based on a low base, because they will expand and have better sales on Same Store Sales Growth (SSG), said analysts.

“The pizza category faces robust local competition in comparison with the fried chicken or burger category, which will lead pizzas to underperform over the next three quarters,” said Karan Taurani, Senior Vice President, Elara Capital. Taurani noted that when examining market share trends in the past 3-4 years, pizza has experienced a decline in its market share within the broader QSR chain category. Consequently, this presents a favourable scenario for the burger and fried chicken segments in the short to medium term in a shrinking market.

Amid heightened competition in the pizza segment, Dominos, a well-known pizza chain, had implemented a substantial reduction, nearly halving the prices of their large pizzas in October. Jubilant Foodworks Ltd. the franchisee holder of Dominos reported a consolidated net profit of Rs 97.20 crore for the September quarter of FY24, down 26 percent from Rs 131.52 crore in the same quarter last year. The company witnessed a contraction of SSG by 1.3 percent versus 8.4 percent growth YoY. SSG is how much growth a retailer has seen from its existing stores (existing stores are commonly defined as stores which are less than a year old).

The surge in competitiveness is also attributed to the presence of smaller and newer rivals in the market, including Tossin, GoPizza, Leo's Pizzeria, MojoPizza, Ovenstory, and La Pino'z. The pizza market has become stagnant with too many players and fewer orders, according to analysts. “The key challenge for brands like Jubilant is to significantly enhance their formats beyond Dominos, which is now a mature brand. There are already 2,000 stores, and after 4-5 years, there will be 3,000 stores with no significant growth” said Vishal Gutka, analyst at Philips Capital.