Online, mobile sales share to improve to 50-60%: Jubilant Food

A 7-8 percent price hike in FY16 marginally impacted sales growth of the company, says Ajay Kaul, CEO of Jubilant FoodWorks. The company’s volume declined in low single digit in last year.The company reported a 6.56 percent decline in standalone net profit to Rs 29.46 crore and a 13.99 percent rise in net sales to Rs 617.83 crore in the fourth quarter.Jubilant opened 150 new Dominos stores and 20 new Dunkin Donuts stores last year which aided growth. Kaul says that consumer sentiment continues to be subdued and is likely to remain so in coming few quarters. However, good monsoon and Seventh Pay Commission pay hikes may boost sentiment.The share of online and mobile orders improved to 40-41 percent in Q4 level from 25 percent year-on-year. This number, Kaul says, is likely to rise to 50-60 percent going forward. Advertisement spends too on digital and online media will increase on back of this. Below is the verbatim transcript of Ajay Kaul’s interview with Sonia Shenoy & Reema Tendulkar on CNBC-TV18.Sonia: It has been a tough year for you. We saw a 14 percent revenue growth in quarter four but can we say a lot of this was owing to the price hikes that you have taken and the new stores starting to contribute?A: If you look at 14 percent system level growth for quarter four, 3 percent out of that is coming out of same stores and specifically if you see in terms of price increase during the course of the full year and that is how we should look at it we have taken almost a 7-8 percent price increase during the course of the year. So, I would reckon around 10-11 percent obviously, is because of all the new stores that we have opened. You are aware that we have opened as many as 150 new Domino’s stores and around 20 Dunkin Donuts stores, so that is leading to the system level growth. 3 percent is because of the same store growth. Reema: Price hikes of what nearly 7 percent in FY16, do you think this in some way has impacted your volumes in hindsight would you consider that these hikes were a tad bit aggressive because in your conference call yesterday we were listening in to it you said that you would consider price hikes of only 2-3 percent in FY17?A: What we did last year as different from what we have been doing in previous years is we had engaged with a Top Notch Consultant and we did realise that in periods prior to last year because of whatever, environmental pressures, food inflation being very high and this was probably an industry phenomena more than a Jubilant Foodworks thing they were hefty price increases we had taken and it had an impact on the consumer perception about these categorises. So, we engaged with this Top Notch Consultant and we did some intricate I would say analysis and studies and research to figure out that which are those stock keeping unit (SKU) categories, product we have where the elasticity is that much more and where we can seamlessly hopefully take the price increase. The study has actually served us right, while we did spend a bit of money on the consultant, but it did give us a clear direction as to which are those SKU’s where price increase should be taken and after we have taken the price increases while 7-8 percent may seem high the impact on volumes is marginal. Which means consumers in their minds has that room for those SKU to pay that kind of price. Having said that while 3 percent may be the same store growth our volume growth is still a low single digit negative and that probably explains to you that despite price increase which may seem high the impact on volumes is not so much but still it is a negative small single digit.Sonia: Quite clearly discretionary demand has not picked up and it is apparent in your same store sales growth as well of just 2.9 percent. From here on we will also be working on a low base can we expect a same store sales growth of at least 5 percent for FY17 and at what point do you think double digit growth will be possible?A: Unfortunately, we still can’t offer great news to you and your viewers, however much we wanting to. It is more of the same, the consumer sentiment based on various kinds of researches, in-depth analysis and so on and so forth that we do is not clearly indicating that there are any statistically significant shifts in the way the consumer is approaching the market place. I would reckon it is going to be more of the same for at least two to three quarters till hopefully all the actions which the government has taken in the last two odd years in terms of creating jobs although not too many. In terms of more money in hands of people, the 7th Pay Commission the aura played, the money in people’s hand all that we believe at an aggregate level and also probably a better monsoon which people are predicting is going to have a waterfall affect also into the semi-urban and urban areas. So, we believe a mix of all that in a few quarters may start showing some signs of recovery. However, as I sit today and kind of extend my vision into the future for the next few quarters we don’t see any statistically significant improvements in the consumer sentiment.Reema: What about your delivery business because that has been growing and your online and mobile sales have been a cheap factor in this. What are your plans in this area how do you see the contribution from your online ordering business compared to the regular customer walks in going forward?A: We have kind of investment and I did speak about investment in stores, we add 170-175 stores over the year. The investment in our commissaries which is our factories again looking at 2020 and beyond, similarly the investments on technology side and specifically online ordering is huge much ahead of the curve. You have noticed that exactly a year back the online contribution to our business or delivery business was in the vicinity of around 25 percent. Exactly a year later it is at around 40-41 percent in the last quarter. We believe going forward this number should get passed 50-55 in not too distant futures. All our investments whether it is from the mobile application site and whether it is all other forms and ways in which the consumer can actually order us we are going to make huge investments. Needless to say that as this number keeps growing and there is lot of inspiration and learning’s we draw from countries where Domino’s is already sitting at 60-70-75 percent of all transactions coming through online ordering we believe that is the direction in which we have to also go in.Needless to say that our advertising spends are also disproportionately increasing on these mediums for example the money which we spend on mobile medium or internet in general is increasing significantly. So, I won’t be surprised that if in a couple of year’s time this number is sitting at around 50-60 percent.