World's Cheapest Pizza: Dominos' Strategy to Combat Inflation in India

How does the greatest pizza brand in the world react to significant inflation in the country with the largest population? A: With the cheapest Domino’s pizza in the world.

According to the CEO of Domino’s franchisee there, the Rs 49 pizza represents the tip of the spear in the company’s battle against rapid inflation that is pinching profitability and pricing out many customers. India is Domino’s No. 1 market outside of America.

Asserting that the basic, seven-inch cheese pizza with a “sprinkle” of basil and parsley is Domino’s lowest offering everywhere, Sameer Khetarpal said the business wants to “own that price point”.

He said that the ideas were endorsed by Domino’s international team. “You are coming to the store or opening the app because there is a 49-rupee callout,” he said. Prices are rising everywhere, therefore customers will dine out less. Existing customers shouldn’t visit a rival restaurant.

According to internet menu pricing, Domino’s lowest savoury pizza costs roughly $3.80 in Shanghai and $12 in San Francisco. To contact a local franchisee in India, contact Domino’s worldwide headquarters.

Six CEOs and 12 shop managers were interviewed by Reuters to see how Domino’s and other international fast-food juggernauts like Pizza Hut and Burger King are being compelled to alter their business strategies in order to combat excessive inflation in the market of 1.4 billion people.

In a country that is crucial to their fortunes and where it is difficult to compete with a street-food culture and a sizzling samosa for as cheap as 10 rupees, the firms are attempting to cling onto market share won during three decades of fast expansion.

Domino’s 1,816 locations are managed by Khetarpal’s Jubilant FoodWorks, and he claims he has a staff meeting the first thing on Mondays to come up with new cost-control measures and combat the “historic high inflation” that caused the company’s profits to decline 70% in the first three months of 2023.

He provided updated information on Domino’s India pivot and its financial benefits, including the removal of lids from all pizza boxes that were sold in shops beginning in December in order to save 0.6 cents each time. Given that 37% of Domino’s Indian business is dine-in, he said that this translates into a sizable reduction in packing costs.

Jubilant, whose Domino’s company generated the majority of its $635 million in revenues last year, also hopes to obtain rent refunds from some shop landlords by making advance payments, according to Khetarpal, who declined to provide further information on the advantages.

EMPTY POCKETS OF CUSTOMERS

Domino’s is not the only company focusing on India’s pricing, a market with a strong sensitivity to price and one that is now experiencing more inflation than many other countries, including the United States. The executives expressed the expectation that reduced prices would entice customers to shops and applications where they can purchase more add-ons or upgrade.

Pizza Hut is actively marketing the pizzas it introduced at a starting price of Rs 79 last year, claiming that it was the brand’s lowest-priced item internationally.

Pizza Hut’s managing director for the Indian subcontinent, Merrill Pereyra, stated that the company was creating goods that “make the brand relevant and easy to access” for budget-conscious Indian consumers and that its low-cost pizzas were popular with youngsters.

In June, McDonald’s introduced half-price meals. According to Akshay Jatia, executive director of Westlife Foodworld (WEST.NS), which has 357 locations throughout western and southern India, they would be the focus of promotion activities in the upcoming weeks. He claimed that the lunches will increase traffic, sales, and profit margins.

According to Reuters trips to retailers across four Indian states, the low-cost items are definitely being backed by a digital and physical marketing blitz across the country, with outlets, and even a fancy New Delhi mall, plastered with banners.

The Rs 49 pizza, which was introduced in February, is Domino’s signature price-cutting item. When compared to its previous lowest offering of Rs 59, Khetarpal claimed that it had been “re-engineered” by lowering the price and adding tomatoes.

Franchisee Jubilant said in May that prices for chicken, paper boxes, and cheese all increased by 30% and by 40% between 2022 and 2023, respectively. More shocks have occurred in recent weeks, with tomato prices increasing over 400% to record highs and people struggling with increased prices for everything from milk to cereals and spices, according to government statistics.

The Industry participants told a story of two customers living in a nation with vast wealth and poverty divides.

While those with higher incomes continue to spend money on items like more expensive cellphones and SUV cars, whose sales are reaching record highs, many low- and middle-income earners who considered dining at international chains as a lifestyle upgrade while the economy was booming are tightening their budgets as inflation hits.