Domino’s ready to invest heavily in Sri Lanka

Jubilant FoodWorks, the master franchisee of Dominos Pizza for South Asia, last year set up its own subsidiary company in Sri Lanka, moving away from the franchisee partnership which held the fort for the Group for some 10 years in the country.

With a successful set up in India with 439 stores, Jubilant FoodWorks CEO Ajay Kaul has a vision of replicating the same success story here in Sri Lanka. Speaking to Daily FT, Kaul shared his plans for the future and his views on the current business in the country.

By Cheranka Mendis

Q: Since you launched your first store in Colombo last August, what has been the progress that Jubilant FoodWorks and the brand Domino’s have made in Sri Lanka?

A: It has been a tremendous success. Following the extremely positive response we received for our first store in Dehiwala, a second store was opened in Nugegoda last month. Our first store here is doing better than the five stores previously run by our franchisee put together. For me, it has been a roaring success.

The brand itself is doing far better than we initially expected. Our franchisee did an okay job but the brand was not being presented in a form and shape which is presented in India, therefore the same level of success could not be achieved.

Q: Following the initial success, what plans do you have for the next few years?

A: Following the success, we have decided to open five to six stores during this financial year. Locations have already been identified and plans are now underway. We have big plans for the country. We hope to open at least 25 to 30 stores in Sri Lanka in the next four to five years.

When we look at the economy, political stability and consumers, Sri Lanka is an opportunity waiting to happen. All macroeconomic indicators whether its GDP growth, per capita consumption, translates into great opportunity for ‘eating out of home food’ like Dominos Pizza.

Of the 25 to 30 stores that are to be opened, the majority will be in Colombo. But as tourism picks up as we are told it will and improvements in infrastructure are made, we will open up outlets in all major cities in the country.

Q: What kind of an investment are you hoping to make on these projects?

A: We are currently putting up a fairly large factory within Colombo, which will be operational within the next two months. The facility will supply dough balls and all ingredients to Domino’s outlets in the country. The initial investment made last year is close upon Rs. 200 million while the investment for this year is estimated at Rs. 300 million. We are very buoyant and positive about the future in Sri Lanka and will continue investing in our operations here.

Q: What has been the key learning for Domino’s since the launch last year?

A: First is that consumers in Sri Lanka are resilient. You have to give them the right proposition, product and service and they will see it on merit and if it is a good proposition they will take it forward without basing it on the history.

Second is that looking at Sri Lankan consumers as a continuum, they fall in to what we call ‘early adopters’ who are all ready to try out new things. They see a new concept and they jump at it. Seeing that they are doing well and through word of mouth and social media news spread and a buzz is created.

We also realised that localisation of taste is very important in Sri Lanka. From the very beginning, we had a lot of local pizzas on the menu and that has worked well with the customers. The profile of the customers here is the upwardly mobile and young crowd. With them being trendy is important but they still believe in localisation.

Q: The business strategically looks at the home delivery segment. How well has it worked here?

A: Delivery is an important part of our proposition since we have a ’30 minutes or free’ concept. We are the only people in the market with unconditional 30 minutes or free proposition. What we tell the consumer is that from the time you call us, the clock starts ticking. If we do not reach your doorstep in 30 minutes, then we will give it free.

It is not an easy thing to do as we have to have the signs and logistics all well. But we believe that apart from making best quality pizzas we have to have the service dimension. Pizzas when consumed within 30 minutes of being made taste better. The moment there is a delay, the taste portion falls significantly.  This concept, like it has worked world over, works well with the customers here as it gives a sense of predictability.

In Sri Lanka, 35% of our orders are delivery orders which we are confident will keep growing as we along. As traffic gets worse, more women working and the ‘double income, no kids’ situation becomes more commonplace, there will be a pressure to catch up with each other and spend more time together. Given that, we believe there will be more and more reasons to order delivery. When countries move in to a developed stage, they also go through a cycle thanks to which the delivery component of the market increases.

 Q: You said you want to replicate India’s success story here. How do you intend doing this?

A: We really believe we can replicate the same story of India here. In India we are the largest multinational food brand in the country. In terms of stores we are double the size of McDonalds and more than double the size of Pizza Hut. We have a 54% market share in the organised pizza market.

We feel that whatever good we have done in India can be replicated here. Although we know that some of our honourable opposition is already ahead of us here in Sri Lanka, it is not demoralising us. We will catch up with them and beat them within the next few years.

We also have a 70% market share of the delivery business which we believe can be replicated quite well here.

Q: When do you expect the Sri Lankan operations to achieve breakeven and turn profitable?

A: It is still early days and I believe we need at least 10 stores to reach a stage to breakeven on a business level. However, stores have started generating good sales. One of the challenges we face here is that all raw material ingredients are imported except vegetables. We will have to work with the Government to find ways to make this a win-win.

Being a progressive country we hope the Government sees the high cost of food here and come up with an import duty reduction or give enough impetus to the locals to develop high quality ingredients. Sri Lanka’s food cost is currently the highest compared to any other South Asian country.

Q: Since the launch, what have been the key marketing, advertising and promotional initiatives you have undertaken in Colombo?

A: Most of the money we have spent is at the ground level. Such ground level activations includes taking holding places, street kiosks, organising bike rallies (cavalcade of Dominos motor bikes on the street on certain days), pizza men dressed up as pizza boxes and distributing door-hangers. We still haven’t used ‘above the line’ methods such as television and radio because the impact will be too great and we have not expanded to reach that level. When we hit six to seven stores, we will start advertising.

Q: How many people have been employed by Domino’s in Sri Lanka and what sort of training have they undergone?

A: The first store employs around 45/50 people and as we speak we have over 150 people on our payroll in Sri Lanka. Progressively every new store that will open will employ 40 staff. We have consultants coming from India from time to time to assist the local staff but the management team and crew is fully Sri Lankan. I must mention that the local talent here is outstanding.

In terms of training some 50 people were sent to India to get trained last year. The senior management was sent to our corporate office in Delhi for training and the crew underwent a three week training program in Bangalore on pizza making, etc.

Q: Last February Jubilant FoodWorks signed up with Dunkin’ Donuts USA to provide the product in India. Any plans to bring it to Sri Lanka?

A: Sri Lanka is part of our Dunkin’ Donuts agreement. We clearly have it in our minds to bring it down here and introduce it to the market. I cannot give a date but I know it will be successful here. It will soon be launched in India and based on that success Dunkin’ Donuts will definitely come to Sri Lanka.