We will not go for more than 5% price hike this year: Amit Jatia of Westlife Development

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Westlife Development, the master franchisee of McDonald’s in the South and West of India, will not take price hikes beyond 5 percent this financial year despite inflationary pressure on margins, said the company’s vice chairman Amit Jatia.

“We typically take a 2-3 percent hike in a year, and in a really difficult year when inflation is very high, it could go up to 3-5 percent. Last year, we would have taken a 2 percent hike in October and this year the intent is to stay within the 5 percent range,” said Jatia.

Several quick-service restaurant (QSR) brands as well as restaurants and cafes have hiked prices of late, as they battle inflation on several fronts. According to industry stakeholders, the cost of operation for the industry has jumped by 10-12 percent due to inflation. Surging prices of palm oil and other edible oil products, food grains such as wheat and even chicken have dented the margins of these companies.

Several QSRs, such as KFC, Pizza Hut, and Domino’s Pizza, recently hiked their menu prices. Jubilant FoodWorks, the master franchise for Domino’s Pizza in India, increased prices by 5 percent in April after taking a 4-5 percent price hike in December.

Westlife Development’s vice-president Jatia is however unfazed by the price rise and said inflation has become a way of life in India.

According to him, the company has identified three levers that help it mitigate crises like inflation. “The first lever is pricing, the second lever is product mix and the third is cost-saving initiatives.

“We have introduced many categories and that's the advantage of McDonald's as a brand. So when required you can make a push on beverages. Similarly, we have introduced the gourmet burger range which has a significantly higher margin,” he added.

Westlife Development, said Jatia, has worked over the years to build cost-efficiencies into its system which helps it offset inflation. “If you see pre-COVID for consecutively four years, we improved EBITDA by 130 basis points during a very challenging time for QSRs,” he added.

Westlife Development reported over 27 percent year-on-year (YoY) jump in its net profit to Rs 455 crore in the March quarter as compared to Rs 358 crore reported in the corresponding period last year. The company’s net profit for the period jumped over 337 percent to Rs 15.32 crore as compared to Rs 6.46 crore reported in the same period last year. The company reported same-store-sales growth of 26 percent during the period. However, its gross margin contracted by 148 basis points year-on-year to 65 percent.

Westlife added 12 McDonald’s stores in the fourth quarter, increasing its store count to 326 at the end of 4QFY22. Going ahead, the company plans to add 200 more stores in the next three-four years.