Fast start slows growth for Domino's in India

 
March 28, 2002
NEW DELHI – While Domino's Pizza is posting record numbers in the U.S., the world's second-largest pizza chain has found expansion in India more challenging.

Since opening its first store there in 1996, Domino's has planted 101 others in 29 Indian markets, including 60 stores in the last 18 months.

But it appears that such growth in India, a market not overly familiar with pizza, was case of too much too fast. According to reports in two Indian publications, as store numbers grew, product quality suffered and existing-store sales dropped. The downturn eventually forced a switch at the top late this year, when new chief officer Arvind Nair replaced Pavan Bhatia.

According to a report in the Business Standard, the company now is reducing 2002 store-opening goals, realigning market strategies, looking for ways to cut costs and considering menu tweaks.

"We had expanded quite rapidly earlier ... (but) now, we are in a consolidation phase," said Nair.

The company did not disclose whether any under-performing units will be closed, but it did say it plans to relocate 11 units to stronger markets. Concentrating stores within fewer markets, Nair believes, will allow management to tighten operational and product standards more quickly.

Between 20-25 store openings are planned for 2002, but Domino's said that number will not include stores that were to have been co-branded with Indian Oil Corporation's highway gas stations. Instead, the partner companies will continue growing co-branded units like those already placed in densely populated cities of Delhi and Mumbai.

"We are in the takeaway food business, and we'd like to concentrate more on city locations rather than the highway locations," Nair told Business Standard. (According to the article, about 75 percent of Domino's India's sales come from carryout and delivery, and 25 percent from walk-ins.)

Nair said Domino's will have to work harder on reducing overall costs. Sourcing food products regionally rather than internationally will be a key step in that direction, he said.

To improve customer awareness in 2002, Domino's India will focus more on regional marketing promotions. To make offerings more user-friendly for customers who'd like to share, it also will encourage sales of "half-and-half" pizzas -- two separate toppings on one pizza. Flavor profiles also will get a boost from spicier seasonings, and national standards such as fish and potatoes will become toppings.

Antoine Bakhache, CEO of 40-store Indian chain Pizza Corner, told The Times of India that such micro-marketing strategies work well in his country when customer feedback is sought and store-level efforts are well coordinated chain-wide. He added, however, that a national perspective also should be maintained to ensure a consistent brand identity in a market of 1 billion people.

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