As Indians lean towards quick gourmet, Domino's, Wendy's, Burger King, McDonald's rejig menus

They are increasingly now turning to premium bases and ingredients as competition from high-end gourmet pizza and burger brands shows that there are better profits to be harvested.

The move is also intended to expand clientele by bringing in new, more discerning consumers and upsell premium offerings to the regulars who come for the affordable fare.

In September, Jubilant FoodWorks Ltd which runs Domino’s outlets across India launched sourdough pizzas starting at ₹349 — this at a chain that offers pizzas at prices as low as ₹49. Sourdough is naturally fermented dough without the use of yeast and this gives pizzas and breads a crunchy structure and nutty taste.

“There is a growing opportunity at the premium end of pizzas – more gourmet, wood-fired, sourdough – and I believe the team has done a great job of bringing sourdough pizza into the mix," Sameer Khetarpal, chief executive and managing director, said during Jubilant's September quarter earnings call last Thursday.

The sourdough pizza has quickly become the fastest-growing sub-category within the broader pizza market and is adding to margins. “In fact, we are surprised by the uptake in tier-2 and tier-3 cities for a product like this. We thought it would be more metro-led," Khetarpal added.

The sourdough pizza pulls up margins that get dragged down by aggressively-priced products that come with higher margins. While it was earlier about driving volume growth, now the push is to "towards driving higher ticket sizes," the Jubilant CEO said.

The company has given an Ebitda margin guidance of 200 bps expansion over the next three years on back of cost efficiencies, mix changes, calibrated price hikes etc. (Ebitda, short for earnings before interest, tax, depreciation, and amortisation is a measure of profitability of core operations of a business.)

Profits: fat and juicy

Now, here's the sweet truth for Jubilant and other pizza chains: though it takes more time getting sourdough ready, the cost of making a sourdough pizza is not much different from that of a regular pizza, said an expert. “Authentic sourdough uses only flour, water, salt and a starter – there’s no oil or commercial yeast – so the ingredient cost isn’t high," said Geetha Krishnan, founder at tfk Kitchen, a Bangalore bespoke baker that supplies several restaurants and airport lounges.

The long fermentation and associated labour costs add up but even that won't be much at scale, Krishnan said. The price impact will be even lower with more production volumes.

In other words, much of the mark-up in pricing of a sourdough pizza goes straight into profits.

An analyst said as much. “Jubilant sees strong growth opportunities in the premium and gourmet pizza segment…product innovation and headroom for premiumization are growth drivers, which will prop margin expansion via operating leverage and price hikes," Karan Taurani at brokerage Elara Capital said in a report dated 13 November.

Taurani said gourmet offerings help with an initial spike in demand and drive better same-store sales growth—a metric commonly used in the restaurant industry to measure the performance of existing outlets. The move also helps premiumize the consumer experience, he told Mint.

However, he pointed to the increased competitive intensity in the market for such foods which he said could challenge the long-term success of these launches.

Foodie shift

Consumers are loving it, like Pooja Jain, a Mumbai-based HR executive. “I’m always looking for food that feels more authentic. I’m happy to pay a little more," she said. Her latest fancy is Si Nonna's, a chain started in 2022 and specializing in sourdough pizzas.

The gourmet cue from the likes of Jain and Si Nonna's has been picked up not by Domino's. Other peers are also tilting towards premium options on the menu.

Last month, when American fast food chain Papa John's re-entered India market after eight years, it brought with it a positioning rooted in both product and marketing: 72-hour proofed dough used in its pizza bases and sides. Such dough is left to naturally ferment in controlled temperature for three days. Result: pizzas that are different in structure, texture, and taste.

Its margherita pizza jostles with a chicken ghee roast or Hawaiian variants for your attention at prices from just below ₹400 all the way up to ₹800 without taxes.

Papa John's plans to open 650 outlets in the coming decade. It exited the market on account of poor performance of its brand then, per a news report by Reuters.

The premium tilt at the fast-food chains comes as the proliferation of food ordering apps has widened the range of food choices available to consumers. Diners are no longer restricted to ordering from established brands.

India's market for eating out and ordering in is set to nearly double by the end of the decade to touch ₹9 trillion, from the current ₹5.5 trillion, according to a 2024 report by food aggregator Swiggy and consultancy Bain & Co.

Additionally, the addressable customer base for the Indian food services market is expected to expand by a third growing from the current 320-340 million – about the size of the US population – to approximately 430-450 million by 2030, the report noted.

Quick gourmet

In fact, new restaurant chains are mushrooming across the country, offering gourmet-style food at affordable prices. For instance, new pizza brands have scaled quickly — La Pinoz Pizza that started in 2011, for instance, now counts 700 restaurants in its chain.

On food ordering apps it isn't uncommon to see brands such as Aku's and Good Flippin Burgers in national capital Delhi or Enso by Nomad Pizzas and Burger Seigneur in Bengaluru, India's tech city, or Tossin Pizza and Louis Burger in Mumbai.

Zomato and Swiggy, India's food ordering platforms, did not respond to queries sent by Mint.

As such brands draw custom in droves, incumbents are under pressure to innovate.

Rebel Foods which operates Wendy’s burger chain in India, alongside Faasos and Behrouz Biryani said demand for premium foods began rising since the Covid pandemic when “there was a clear rise in demand for premium and gourmet-style offerings," said its chief marketing officer for India Nishant Kedia.

"In the last year, this has evolved further, with consumers now seeking affordable premium options. They want differentiated flavours and upgraded experiences at accessible price points. We’ve seen strong growth in this ‘value-premium’ space," he said.

Wendy’s has introduced flavours such as chimichurri and Korean-inspired burgers, adding new spice profiles. Kedia said many of the new premium products are already contributing 10-20% of category sales within the first six months.

"They’ve helped lift average order value, improved unit economics, and generated strong customer love and repeat orders. This shows premium cues work well when delivered at the right value," he added without more detail.

Mass to premium

The move comes as fast-food chains are experiencing some tightness in the market due to growing competition and a reluctance among mass-market consumers to spend freely.

Consumers at the upper end of the consumption basket continue to spend, however.

Earlier this year, burger chain Burger King launched its Korean range as a part of its premium offerings. It also upgraded its Kings Collection burger menu with a brioche bun.

To be sure, for most companies, value and mass-market meals priced around ₹100 remain core to business. Burger King, for instance, continues to offer value offers to drive footfalls to its outlets including two burgers for ₹79 and ₹99.

Market survey and research went behind the new items in the Kings Collection, Burger King's top executive said. “We launched the Korean range, which is a limited time offer…the Korean burgers we are selling higher than ₹200, and they really did well," Rajeev Varman, group CEO, Restaurant Brands Asia, that operates Burger King in India and Indonesia, said during the company’s June quarter earnings call in July.

Burger chain operator Westlife Foodworld, which runs market leader McDonald’s restaurants in south and west India, said it is seeing a clear segment of consumers seeking more variety and more sizable bites.

“Consumers today aren’t just eating, they’re exploring. They’re far more willing to try new formats, new textures and fuller flavor combinations, and this is where our premium offerings help us stay in sync with their curiosity while keeping the comfort of McDonald’s India intact," a company spokesperson said.

Many customers look for burgers that are more filling and layered. "…our recently launched Big Yummy Burger range ( ₹349) brings a premium experience for those who enjoy richer, more filling meals," the spokesperson added.

The contrast from the less-pricey end of McDonald's menu couldn't be more start: the McAloo Tikki burger, a simple patty and condiment combo, is priced at ₹58 or a Chicken McGrill at ₹106. At ₹349, the Big Yummy Burger comes with two flame-grilled patties, lettuce, jalapenos, and a double spread of chipotle sauce — and a generous addition to the bottomline.

(The promoters of HT Media Ltd, which publishes Mint, and Jubilant Bhartia Group are closely related. There are, however, no promoter cross-holdings.)