Calories per rupee: Why pizza is a winner in India’s fast-food race

Quick-service restaurants are finding it increasingly difficult to grow same-store sales—or sales at the same number of stores over a period—as Indians scrutinize how much value they get from eating out, Bernstein said in a 17 September note.

Consumers are effectively measuring calories per rupee, it said, and on this yardstick, pizza delivers the best bang for the buck, outperforming burgers, biryani, Chinese food, and Indian snacks.

Bernstein’s analysis of more than 120 dishes, or restaurant combinations, found that an average person could meet daily dietary needs with ₹525 from a pizza chain, compared with 16-126% higher spending across other cuisines.

Pizza’s share of chain restaurants in India is projected to rise from 20% in 2023-24 to 25% in FY30, with the category expanding to $7 billion by 2030, the brokerage said.

“Pizza = naan + curry + protein/veg," the note said, arguing that its versatility and alignment with Indian taste preferences make the Italian-origin dish uniquely scalable in the country.

Affordable good food has been the main draw of fast-food chains and quick-service restaurants in India, but they have slowly priced themselves out of the middle-class consumer’s wallet. Average order values at organised fast-food outlets stand at ₹400-500, far above the ₹118 that consumers typically spend per meal at local eateries, UPI transaction data show.

This affordability gap has slowed expansion, Bernstein said. “To convert the next set of users from local cuisines/unorganised outlets, QSRs need to focus on Calorie/Rs."

Despite its potential, India’s food services industry has grown at a modest 8% compound annual growth rate over the last decade, reflecting affordability constraints.

According to a study by People Research on India’s Consumer Economy (PRICE), India’s middle class is expected to grow from 432 million in 2020-21 to 715 million by 2030-31, and further to 1.02 billion—or 61% of the population—by 2047.

This doubling of the consumer base could make India one of the world’s largest markets for affordable dining, creating a significant growth opportunity for QSRs that can position themselves as value-first.

Winners and losers

“Pizza remains the top category in QSR, largely because it’s affordable, accessible, and easy to share," Satish Meena, founder of research firm Datum Intelligence, told Mint.

“Domino’s has been able to scale faster because of its delivery model and its 30-minute promise. Pizza Hut, on the other hand, has struggled to reposition itself, but we’re seeing smaller chains and independents trying to capture the space as well," he said.

Jubilant FoodWorks Ltd, the largest pizza chain operator in India with more than 2,240 Domino’s franchisee stores as of June, also runs Popeye’s, Hong’s Kitchen, and Dunkin’ Donuts. The company reported a 17.1% year-on-year bump in sales for Domino’s in the April-June quarter, largely due to an over 20% growth in home delivery of pizzas.

Nearly three quarters of Domino’s revenue in India comes from delivery, and those who dine-in come for a pizza during lunch hours, the company said in its latest investor presentation. Jubilant chief executive Sameer Khetarpal said “calibrated pricing" helped the company beat competition, including measures such as a new ₹99 lunch deal.

Rival pizza chain operator Devyani International Ltd closed 12 Pizza Hut stores in June and had 618 outlets of the pizza chain at the end of the financial first quarter. Sapphire Foods India Ltd runs 336 outlets of Pizza Hut, which is owned by US-based Yum! Brands Inc.

Devyani and Sapphire also operate KFC stores in India.

But disagreements between Sapphire and Devyani over brand spending have weighed on their results.

Sapphire Foods’s revenue from its Pizza Hut business fell 6% in the first quarter, with same-store sales down 8% and margins turning negative, Nuvama Wealth said in a note in July.

As for Devyani’s Pizza hut business, first-quarter sales were up just under 3% year-on-year at ₹187.3 crore. About 55% of this was from deliveries, while same-store sales fell 4.2%.

India’s pizza market has a few fast-growing privately held challengers as well, including La Pinoz Pizza with 700 restaurants and Oven Story, a cloud-kitchen brand run by Mumbai-based Rebel Foods.

Bernstein has “Outperform" stock recommendations on Jubilant FoodWorks and Devyani International. For Sapphire Foods, it has a “Perform" rating, seeing value in the company’s KFC business while flagging its Pizza Hut operation as a risk factor.

“To say pizza is naturally doing better than other foods is incorrect," said Sagar Daryani, co-founder and CEO of Wow! Momo, a momo-selling QSR chain. “If that were the case, other brands like Pizza Hut, Sbarro, and more would not be struggling to make money."

According to Daryani, the real measure of profitability for restaurants comes not from what’s on the menu but the gross margins a fast-food chain can pull.

Wow! Momo is at 72% gross margin and reported a 9% growth in same-store sales in the June quarter, Daryani said. “With large, listed fast-food players, the real problem is that before the pandemic, 10-12% of their sales used to come from delivery, but now, it is up to as high as 55-60%. With rising food-delivery costs and a duopoly in this business [between Swiggy and Zomato], their costs [will] rise."

With pizzas, perhaps there is an element of cultural signalling too, suggested Rahul Nijhawan, co-founder of Bengaluru-based coffee chain Bonomi.

“Pizza is more about spending power and kind of also a symbol to show that, yes, I have arrived in life," he said. “As per me, the undisputed leader, and this is data as well, biryani is still the biggest food category in India. Biryani will be an all-time favourite. It is the biggest category, and will continue to be."

Disclaimer: The promoters of Jubilant FoodWorks have interest in HT Media Ltd, the parent firm of Mint.