Beacon.Jan 2014

B E A C O N A Newsletter by SIMCON– SIMSREE Consulting Club

Volume : 2

Issue : 3 January 2014

Inside this issue:

CONFLUENCE’14 : The Consulting Conclave

INDUSTRY ANALYSIS : Organized Fast Food Industry

COMPANY ANALYSIS : Jubilant FoodWorks Ltd.

Concept of the Month

Quiz

Did You Know?


Confluence, an annual consulting conclave at Sydenham institute of Management Studies, Research and Entrepreneurship Education

(SIMSREE) is a platform to discuss the current issues plaguing the nation from the viewpoint of a consultant. Confluence ‟14,

sponsored by LIC India in association with Syndicate Bank was held on 25thJanuary, 2014. Organized by SIMCON, the consulting

club of SIMREE, Confluence‟14 saw a plethora of senior professionals from diverse functions and industry discuss the challenges and

possible solutions to the problem that is currently grappling the nation and also the theme of Confluence ‟14 – “ Business

Sustainability in a VUCA (volatile, uncertain, complex and ambiguous) world.

With the line-up of star professionals as speakers and panellists,

quality opinions and discussions on sustainability and an

enthusiastic and an inquisitive audience to complement the above,

the event surely had to be a huge success!

Confluence ‟14 began on a high note with the Chief Guest for the

day Mr. Sridar Iyengar, ex- chairman and CEO, KPMG and

co-Founder, The Sounding Board addressing the batch on the

attributes necessary to achieve stability in times of uncertainty. He

stressed on the importance of an individual needing to connect

different aspects of business viz. human capital, technology, data,

and experience among others.

This was followed by the speech by our Chief Speak

Dr. Nachiket Mor, head of the financial inclusion committee setup

by RBI and the chairman of CARE. Mr. Mor spoke about the need

for financial inclusion in the nation and stressed how banking needs

to spread across the nation covering thoroughly the rural areas of

India. He opined that currently supply side needs to broaden to cater

the banking demand and he suggested serving this need through use

of technology like prepaid payment instruments (PPI) with the help

of mobile service providers ,through appointing business

correspondents who would act on behalf of the banks inter alia.

Volume : 2

Issue : 3

BEACON : Page 1

Jan. 2014

For detailed report and all industry analysis from previous Beacons together, please visit our blog :

http://simconblog.wordpress.com


Post the speeches by the chief guests, panel discussions took place. The first panel had an incredible lineup of speakers coming from

background ranging from management consulting to banking to entrepreneurship. The panel comprised of Mr. Gaurav Bagaria,

Senior Manager at EY, Mr. A. Narayanan, COO Finance, HSBC and Mr. Chandrasekharam Tatapudy, Co-founder, Yasham P2D Life

sciences Pvt. Ltd. The panel was moderated by Mr. Yatrik Vin, Sr. VP, NSE. The panel discussed the opportunities for investment in

India. They concluded the discussion by suggesting on having a balance of inorganic growth (through M&A overseas and within the

nation) and organic growth through correction of policy paralysis resulting in an investment friendly business environment.

The second panel discussion began post the lunch break and this panel comprised of Mr. Anuj Bharagava, CEO, A B Associates,

Mr. Sandeep Kothari, Director, Capgemini Consulting and the very own alumnus of SIMSREE Mr. Parag Risbud, VP, Avalon

Consulting. The path for the discussion was traced by the moderator Mr. Suresh Mhatre, VP, TCS and the President of IMCI. The

topic for the panel was – “Overseas avenues for Indian products and services”. The panel suggested improvement in our trade com-

petitiveness through increased exports is possible through policies that aim at catalyzing them, identifying specialized products and

services which India is capable of offering at a premium price, developing ability to value add and finally tapping the full potential of

Indian consumption.

The speakers were very much impressed with the nature of the questions posed to them by the batch and according to them this

reflected the batch‟s awareness about the recent happenings in the world.

SIMCON is determined to continue its tradition of linking the theoretical management concepts to the real world business problems

by interfacing with the industry and we strive to make sure that the next version of Confluence is bigger than Confluence‟14.

Volume : 2

Issue : 3

BEACON : Page 2

Jan. 2014



INDUSTRY ANALYSIS : ORGANIZED FAST FOOD INDUSTRY

The Indian fast food industry is largely dominated by

unorganized retail (which is approximately 95%), which

includes stand-alone restaurants, carts and dhabas. The

$12.5billion (approx. ₹776 billion) industry is grew at 36% in

FY13. Out of the organized sector, QSR contribute to ₹34

billion. QSR (quick service restaurant) is a fast food restaurant

with minimal table service and a fixed menu, e.g. McDonald‟s.

The QSR market is dominated by foreign players.

Pizza dominates the fast food industry, accounting for 47 to 50

% of overall fast food revenue, compared to 36 % from

sandwiches and the remaining 14 % is split by other assorted

fast foods. In value terms, pizzas, burgers and sandwiches

account for 83 % of the QSR market. The chicken fast-food

market is forecast to reach ₹13 billion rupees ($207 million) in

2013, while pizza consumers are projected to be worth ₹23

billion in 2013. The pizza market in India was ₹15 billion in

FY12 and grew at a CAGR of 26% in the last 5 year. The

Domino‟s has over 55% market share in organized pizza market

and 70% market share in pizza home delivery segment. Newer

types of fast food are also taking off in India, too, including

Latin American fast food (Taco Bell).

Growth

The Indian QSR industry is expected to grow at a CAGR of 27

% for the period from 2012-16.

Key growth drivers

Higher disposable incomes, changing consumption patterns and

the marketing might of powerful international brands are the

key factors supporting the development of fast food industry in

India. With 65% of India‟s population below 35, many Indians

fall in the 15-35 age bracket (including students and young

working adults), the target audience of fast food industry. As

many as 530 million Indians will reside in urban areas by 2020.

There is growth in disposable incomes with income elasticity of

1.4x. There is also a rise in nuclear families and youth spending. The rising urban middle class is also changing its food habits.

As per FY12 data, Indians are eating outside more often, as

many as 7 times a month. The paucity of time and the wider

penetration of a Western-style culture will further fuel the

growth of fast food in India. Companies are expected to target

not just urban areas but also tier II and tier III cities in a bid to

strengthen their presence. International brands such as

McDonald‟s, KFC and Subway have considerable resources in

terms of spending on marketing and promotional activity, a

factor that will further drive the category‟s development.

New outlets to largely aid growth in QSR market

Growth in the Indian QSR industry is expected to be largely driven by new outlets. We expect outlet additions to continue to

grow at an average annual rate of 16-18 %. The remaining 8-10

% growth is expected to come through an increase in same store

sales. Of the total store additions, we believe that 40-45 % will

take place in tier II and tier III cities. Currently these markets

account for just 25 % of total outlets. For large, established

players who already have a sizeable presence in tier I cities, tier

II and tier III markets are expected to account for roughly 70 %

of store additions over the next three years. Large players have

already established a strong brand and are better-placed to take

advantage of the lower lease rentals and limited competition that smaller cities offer. On the other hand, new entrants and

relatively new Indian QSR brands are expected to focus more

on larger cities and consolidate operations in a single region

before moving on to newer markets.

Same store sales growth to remain subdued in the near term

Same store sales, which have been growing at a robust 20-25 %

over the past few years, are expected to slow down significantly

in the near term. Two factors will cause the decline in growth:

Volume : 2

Issue : 3

BEACON : Page 3

Jan. 2014



Figure 2 : Foreign Brands Market Share Split

Figure 1: Total Market Share

1. An economic slowdown, which will curb discretionary

spending;

2. Cannibalisation due to opening of multiple outlets in the

same catchment area and a resultant increase in competition.

Growth in same store sales is expected to come from a 5-6 %

hike in prices (in line with the typical hikes made every year)

and a 3-5 % increase in the number of transactions at existing

stores. Stores set up in the last couple of years are expected to

see a higher increase in transactions per outlet, as new stores

usually take2-3 years to ramp up operations.

Recent happenings

In a recent development, Nando, South Africa-based

Afro-Portuguese, global restaurant chain has plans of starting

up around 35 outlets in various parts of India through the

franchise route by 2014. The company expects to expand enor-

mously in the northern parts of India.

Mukesh Ambani-led Reliance Industries Ltd (RIL) plans to

open a quick service restaurant (QSR) chain called 'Chicken

Came First' in India in partnership with a UK-based company,

as per a report in The Times of India. The firm through its retail

venture Reliance Retail has picked 45 % stake in an Indian joint

venture with UK-based food service company 2 Sisters Food

Group Ltd (2SFG). The JV, Two Sisters Foods India Ltd, will

initially be a supplier of chilled and frozen food at its food and

grocery outlets in the country and later set up its own QSR

chain under the brand Chicken Came First, the report said citing

sources.

Burger King, one of the world's top fast-food companies, will

soon enter India through a franchising partnership with a com-

pany that will be headed by the present CEO of its UK opera-

tions and majority-owned by private equity firm Ever stone

Capital. This would be a rare instance where a PE fund would

be partnering with a fast-food chain.

Trends

Indianized offerings

In an effort to appeal to the palates of Indian consumers, opera-

tors of multinational brands such as McDonald‟s, KFC and Sub-

way have changed their food offerings, particularly increasing

the vegetarian options. This is mainly because India has a huge

population of vegetarians. Multinational fast food brands have

long adapted their Indian menus to cater to local tastes, with

plenty of spice and vegetarian options. The first vegetarian

McDonald‟s opened in 2013 in northern India near the famous

Golden Temple in Amritsar. Some of the multinational brands

like Subway have also taken this trend to the next level,

introducing Jain variants in Gujarat targeting the country‟s Jain

community.

Franchising model

On the strategic front, it has been found that the franchising

concept in India is continuously rising with the increase in the

number of international players opening more franchise outlets

in India. The increasing revenue figures from franchise outlets

encourage the players to opt for the concept. As a result, many

international fast food giants are opening up their franchise

outlets in India to grab the huge untapped potential in a fast

emerging market.

Indian fast food chains

To compete effectively with their global peers, Indian players

such as Jumbo King, Kaati Zone and Faaso‟s have adopted the

centralised kitchen model. Investing in centralised cooking and

supply chain facilities is critical to success in the QSR space, as

it ensures quality and consistency across outlets, and helps

players reap the benefits of bulk procurement. Some Indian

players also serve global cuisine laced with Indian spices to

satisfy the local taste.

Laws governing the food industry

The Indian food industry is regulated mainly by the Food Safety

and Standards Act (FSSA), 2006 which govern the aspects of

sanitation, licensing and other necessary permits that are re-

quired to start up and run a food business. FSSA initiated har-

monization of India's food regulations as per international stan-

dards. It established a new national regulatory body, the Food

Safety and Standards Authority of India (FSSAI), to develop

scientific methods &standards for food and to regulate and

monitor the manufacturing, processing, storage, distribution,

sales and import of food so as to ensure the availability of safe

and wholesome food for human consumption.

Conclusion

Increasing inclination of people to eat outside (restaurants) will

be the major driving force behind the projected growth. Besides,

healthy food options and low-price menu will also contribute to

its growth, to attain a CAGR of around 27 % during 2012-

2016.Moreover, continuous economic growth and improving

employment situation will lead to higher personal expenditures

on outside food. Fast food joints will also need to maintain their

stance on pricing because the environment will remain

extremely competitive. Hence, it is believed that the fast food

industry will experience modest improvement in the coming

years.



Volume : 2

Issue : 3

BEACON : Page 4

Jan. 2014

INDUSTRY ANALYSIS : ORGANIZED FAST FOOD INDUSTRY

COMPANY ANALYSIS : Jubilant FoodWorks Ltd. Volume : 2

Issue : 3

For detailed report and all company analysis from previous Beacons together, please visit our blog:


BEACON : Page 5

Jan. 2014

Introduction

Jubilant FoodWorks Limited (the Company) is a Jubilant Bhar-

tia Group Company. The Company was incorporated in 1995

and initiated operations in 1996. The Company got listed on the

Indian bourses in February 2010. Mr. Shyam S. Bhartia, Mr.

Hari S. Bhartia and Jubilant Enpro Private Ltd. are the Promot-

ers of the Company.

Jubilant FoodWorks Positioning and Product Mix

Quick Service Restaurant (QSR):

Higher levels of disposable income among consumers have led

to more adventurous tastes and a greater appetite for eating out

in many areas of India. The fastest growing segment in the or-

ganized segment of the industry is the Quick Service Restau-

rants segment (QSR‟s). Presently, QSR business is growing at a

fast pace in India. The industry which makes up 42% of the

organized food services market is outpacing most modern food

service formats.

Domino’s pizza:

Jubilant FoodWorks Limited (the company) & its subsidiary

operates Domino‟s Pizza brand with the exclusive rights for

India, Nepal, Bangladesh and Sri Lanka. As of 31st December

2013, Domino‟s Pizza India operates 679 restaurants in India,

covering 142 cities across the Country. As per the Euro monitor

Report 2013, Domino‟s Pizza is largest organized Pizza chain in

India with 67% market share.

Over the period since 1996, Domino‟s Pizza has remained fo-

cused on delivering great tasting Pizzas & sides, superior qual-

ity, exceptional customer service and value for money offerings.

It has endeavored to establish a reputation for being a home

delivery specialist capable of delivering pizzas within 30 min-

utes or FREE to a community of loyal customers from all its

stores around the country.

In veg and non-veg pizza category, Dominos offers four catego-

ries starting from simply veg pizza at starting price of Rs. 60/-

to Feast pizza. With cost till Rs. 500/-. Also there is a categori-

zation based on the size of the pizza with regular, medium, large

and cheese burst added as a newly introduced category to this.

Dominos for the first time in India also introduced Pizza mania

for prices as low as Rs. 39/-. Through its strategy of „Think

global and act local‟, Domino‟s Pizza India has been innovating

with delicious new products such as crusts, toppings and flavors

suitable to the taste buds of Indian Consumers and thereby de-

lighting them. Its initiatives such as Fun Meal and Pizza Mania

have been extremely popular with customers looking for an

affordable and value for money meal option.

Dunkin’ Donuts:

Dunkin‟ Donuts is the world‟s leading Donuts, baked goods and

coffee company with market leadership in Donuts, Regular/

decaf drip coffee, iced coffee, hot flavored coffee, bagels and

muffin categories. The Company launched Dunkin‟ Donuts in

India in April 2012 in Delhi. The Company has 21 Dunkin‟

Donuts restaurants in India (as of 31st December 2013). Dun-

kin‟ Donuts (DD) in India is positioned as a Food Café, occupy-

ing the sweet spot between Cafés and quick service restaurants.

It serves a wide range of Donuts, Dunkin‟ Donuts Original

Blend drip coffee; espresso coffee based beverages such as cap-

puccinos‟ and Lattes, fruit milkshakes, smoothies, tea, as well

as a delectable range of sandwiches made out of artisan breads

such as Foccacia, Croissant, Ciabatta, Bagels.

Though signature Dunkin' Donuts offerings such as Glazed

Donuts and Dunkaccino are part of the India offerings, more

than 60 per cent of the India menu has been altered to suit local

tastes. Their stores in India have more on their plate than the

rest of the world, where Dunkin is known for its doughnuts,

coffee and sandwiches. In India, the company offers a variety of

burgers also. Dunkin' has launched yam patties, bagel buns,

mutton and corn burgers, and a revamped coffee range should

be in stores soon.

Financial Health :

Network expansion and innovative menu offerings pushed

EBIDTA to Rs. 2,444 Million, with PAT standing at Rs. 1,351

Million for FY 2013.The decrease in EBIDTA margin from

18.7% in FY 2012 to 17.4% in FY 2013 is largely attributed to

establishing Dunkin‟ Donuts business as well as the opening of

new stores, coupled with increase in service tax. In the long run,

however, the company stands to positively leverage the poten-

tial growth from both, Dunkin‟ Donuts and Domino‟s Pizza

business

COMPANY ANALYSIS : Jubilant FoodWorks Ltd.

Volume : 2

Issue : 3

For detailed report and all company analysis from previous Beacons together, please visit our blog:


BEACON : Page 6

Jan. 2014

(Rs. in Million, except otherwise stated)

Business Strategy: Growth Strategy: Notwithstanding the

current industry dynamics, the potential to grow remains. JFL‟s

focus on expansion will continue, with plans in place to open

125 new Domino‟s Pizza stores next year, while taking the

brand to many more consumers and cities. On the Dunkin‟

Donuts front, JFL has 18 new restaurants on the agenda in the

coming fiscal, coupled with consistent brand development at all

levels. Future agenda is focused on extending the brand in the

market, competing in the industry effectively, streamlining

costs, offering innovative and superior value products to con-

sumers and enhancing operational excellence. These efforts,

along with several other initiatives, will increase the profitabil-

ity of the company.

Marketing Strategy: Customer Engagement During the year,

JFL invested considerably in mapping emotional insights into

the evolving and transforming consumer needs. With these in-

sights, they moved on to evolve our new Domino‟s Pizza India

brand positioning to `Yeh hai rishton ka time‟. And pushing

further towards goal to be the `most emotionally connected

brand‟ in FSI. Consumer centricity extends to our Dunkin‟

Donuts business as well, where they are striving to connect bet-

ter with consumers through a focused marketing campaign.

This positioning is well suited to address the fast-paced young

new generation that seeks speed, value and quality, along with

ambience, music, packaging and designing.

Competitors: Dominos:

Dunkin Donuts:

Conclusion:

Backed by the Company‟s inherent strengths and the overall

favorable market dynamics, the outlook for Jubilant FoodWorks

remains positive. The Company has well accepted brands that

have extremely high recall and brand value, its operations are

well controlled, it has a robust back-end, and its business model

is proven. Given its leadership position in the industry, con-

certed business philosophies, an uptick in the economic activity

will enable it to declare sustainable results in the coming years.

References:

Jubilant FoodWorks Annual Report FY‟13

Jubilant FoodWorks Earnings Presentation Q3 FY‟14

Crisil Report – Organised Fast Food in the Fast LaneI BEF – Fast Food Growth Report April,2010

http://lighthouseinsights.in/indian-qsr-social-media-unmetric-report-cafe-coffee-day-reaches-out-to-customers-across-all-platforms

Particulars

March

31,

2013

March

31,

2012

March

31,

2011

March

31,

2010

March

31,

2009

Total Income 14,153 10,233 6,803 4,243 2,810

(EBIDTA) 2,444 1,904 1,201 656 338

Add: Other

Income

78 59 19 1 1

Less: Interest 1 - 3 83 89

Less: Deprecia-

tion

547 376 293 243 169

Less: Excep-

tional Items

- 41 - - -

Profit Before

Tax

1,974 1,546 924 331 81

Provision for

Taxation

623 490 204 1 8

Profit After Tax 1351 1056 720 330 73

Earning per

Share (EPS)

(Rs.)

20.7 16.3 11.2 5.5 1.3

No. of Domino’s

Pizza Stores

576 465 378 306 241

No. of Dunkin’

Donuts

Restaurants

10 - - - -

No. of Cities

covered

123 105 90 69 47

System Sales

Growth (%)

38 50 60 51 33

Same Store Sales

Growth (%)

16 30 37 22 6

Player Market Share Outlets

Dominos 12.6% 679

Yum! (Pizza Hut &

KFC)

10.71% 444

McDonald’s 6.93% 250+

Subway 7.56% 416

Player Outlets

Starbucks 34

Barista Lavazza 180

Café Coffee Day 1534 (Footprint Leader)

Dunkin Donuts 23

The Chocolate Room 74

Gloria Jeans 18

Mad Over Donuts 42

Concept of the Month

Balanced Scorecard

. Balanced scorecard is a concept originated by Dr. Robert Kaplan and David Norton as a performance

measurement framework that added strategic non-financial performance measures to traditional financial metrics to

give managers and executives a more 'balanced' view of organizational performance. Various organizations use

Balanced Scorecards to align business activities to the vision and strategy of the organization, improve internal and

external communications, and monitor organization performance against strategic goals.

Balanced scorecard transforms an organization‟s strategic plan from an attractive but passive document into the

"marching orders" for the organization on a daily basis. It provides a framework that not only provides performance

measurements, but helps planners identify what should be done and measured.

Design:

As per Kaplan and Norton, four steps are required to

design a balanced scorecard:

1. Translating the vision into operational goals;

2. Communicating the vision and link it to individual

performance;

3. Business planning; index setting

4. Feedback and learning, and adjusting the strategy

accordingly.

These steps go far beyond the simple task of identifying a

small number of financial and non-financial measures, but

illustrate the requirement for whatever design process is

used to fit within broader thinking about how the resulting

Balanced Scorecard will integrate with the wider business

management process

Perspectives:

The balanced scorecard suggests that we view the organization from four perspectives, and to develop metrics, collect

data and analyze it relative to each of these perspectives:

Financial: encourages the identification of a few relevant high-level financial measures. In particular, designers were

encouraged to choose measures that helped inform the answer to the question "How do we look to shareholders?"

Customer: encourages the identification of measures that answer the question "How do customers see us?"

Internal business processes: encourages the identification of measures that answer the question "What must

we excel at?"

Learning and growth: encourages the identification of measures that answer the question "How can we continue to

improve, create value and innovate?"

Volume : 2

Issue : 3

BEACON : Page 7

Jan. 2014

http://en.wikipedia.org/wiki/Innovation

Monte dei Paschi di Siena is the oldest surviving bank in the world, founded

in 1472 by in Siena, Italy.

The three-pointed star in Mercedez logo symbolizes Daimler‟s ambition of

universal motorization – “on land, on water and in the air”.

Revenue of Walmart is almost equal to GDP of Taiwan. If Walmart was a

country it would have made 28th biggest country (by GDP as per IMF).

QUIZ OF JANUARY

1. Dead Cat Bounce :- A temperary recovery in share prices after substain-tial a fall

2. Serge Kampf and Capgemini

3. Parle G

4. Kiran Mazumdar-Shaw

5. Karnataka Bank

1. He is CEO of a company founded in 1975. He led his

company in development of one of the largest cloud

computing infrastructure. Identify him.

2. One of the co-founders of this company holds 1093 US

patents. The company operates in different subsidiaries

including aviation, oil and gas ,capital, energy

management. Imagine a little and work out the name of

company.

3. Company X was acquired by company Y in 2013.

Company Y gave X $ 1.1 billion and a promise “not to

screw up “ . Identify X.

4. Identify the country with the images.

5. This iconic car was designed on basis of need and objectives stated by Adolf Hitler. This car is

longest running and most manufactured car of the single design. Identify the model of the car.

ANSWERS : DECEMBER ISSUE

Answer To: [email protected] with Subject= simcon_quiz_jan_2014

Winner will be recognized.

All Correct Answers will be published in next month’s Edition.

Contributions invited:

To make this feature a successful effort, we seek continued involvement and contribution from our readers,

that is YOU. We invite articles and trivia on themes related to consulting. Be it industry news, consulting trends, a

joke, a cartoon or feedback, we are eager to hear from you. So go ahead, do your research, pen down your thoughts

and mail your entries to [email protected].

Best Regards, Our FB page : https://www.facebook.com/SimCon

SIMCON –SIMSREE CONSULTING CLUB Mail To: [email protected]

Volume : 2

Issue : 3

BEACON : Page 8

Jan. 2014

Bhagyashree Masram

PGDBM, SIMSREE

Winner:-

Beacon.Jan 2014

Education

Transcript of Beacon.Jan 2014