Will the low-priced pizza invite similar reactions from competitors? Angshuman Paul writes...

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‘30 minutes’ is all it takes to lay your hands on the supremely tasty Domino’s pizza (take you pick)... Well aware of this fact, last Sunday, I walked into one of Domino’s ‘sit & dine’ outlets in one of the prime locations in Delhi. And there I happened to share the table (for lack of empty seats) with one Naina Ahluwalia, an architect by profession and one ‘big’ Domino’s ‘order-at-home’ fan ( I disovered these details later as we conversed). She was already busy with her ‘chicken tikka pizza’ slice by the time I ordered mine, and as the conversation went, I asked her how her experience was so far... “The pizza is one of the best ever I’ve had, anywhere. However, the ambience is far from the best and I am also feeling claustrophobic in here...” “Also, the pizzas were ready almost precisely 30 minutes after we’d placed the order,” she added. That was it! Too much for a huge Domino’s fan. I cancelled my order... and walked away. But as I walked out, I had only one thing in mind – “I have to speak to Ajay Kaul about this...” Clearly, as the lady opined, in the ‘sit & dine’ category, Domino’s still cuts a sorry figure; with Pizza Hut (from the stable of Yum! Brand) being the clear leader in this case.

The next day, I caught up with Ajay Kaul, CEO Domino’s India and after explaining the whole incidence, questioned him as to why Domino’s makes its customers wait for ‘exactly’ 30 minutes?! The Quick Service Resturant (QSR) chief casually gave his explanation, “That’s an exceptional incident and is happening only in those stores that are 2-3 years old. Visit our latest stores and you’ll realise that it’s actually much better...”

What more. He also revealed strategies that Domino’s was mulling over – starting from penetration to pricing – to get ahead in the competitive times. Domino’s had laid out plots to adopt all the ‘Ps’ and was also chalking out big plans for India. Thankfully, this experience wasn’t anywhere similar to the one at the outlet adn I pretty much liked the person I spoke to this time round! :-)

Industry experts estimate that more than 25,000 pizzas are sold per day in the country and in the QSR category, the pizza market is brimming with sizzling hot opportunities. But at the same time there is the pressure of inflation that is hitting their bottom lines hard. Like most players (Yum! Brands for example, which responded to inflation by hiking its prices, both for KFC and Pizza Hut), everybody expected Domino’s to follow the rule of increasing its price. But shockingly, this QSR agent reverted to a strategy of rolling out pizzas that are easy on the pocket! Yes, during August 2008, this pizza-maker unleashed pizzas for just Rs.35 (lowest in the branded pizza segment). It therefore becomes obvious that Domino’s is hoping to rope in even those consumers who could not previously afford pizzas which were priced above Rs.100. However, the million-dollar question here is: when its rivals are battling with market forces, finding ways to reduce costs, how did Domino’s manage to push its price southwards? “The concept was finalised eight months ago and pre-planning enabled us to absorb the increase in ingredients’ costs. This nano model can be a substitute to dosa, chole batore,” replies a belligerent Ajay.

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Source : IIPM Editorial, 2008

An Initiative of IIPM, Malay Chaudhuri and Arindam chaudhuri (Renowned Management Guru and Economist).

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Correction for whom?

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Sources close to Unitech confirm that “the real estate market saw a correction in 1996-1997 when the prices crashed after going up by 1,000%. In India, investment in residential property is considered safe, so prices of residential properties rise but with inflation and bank rates soaring high there’s bound to be some correction.”

If the words of DLF, the largest real estate player in the Indian realty circle are to be believed, the price correction will not affect the conglomerate at all as the spokesperson from the company asserts, “First of all we don’t believe that there is any slump in the Indian real estate industry and if at all there is, we will not be affected by it at all as we are established as a trustworthy brand among the country.” The healthy interest coverage ratio and position of debt on the balance sheet is making the company so optimistic. Though the realty major faced a minute liquidity crunch when it delayed the Singapore REIT listing, PE players are still more than willing to invest in the company, as they consider it to be a good bet even in the midst of the current downfall in the sector.

Moving over to Parsvnath, as per Pradeep Jain, Chairman, Parsvnath Developers, the correction is not a major hurdle in the growth of the company as he avows, “We can expect correction on the projects offered by small developers, who had unreasonably priced their projects at locations, which are not easily accessible and hence not finding customers.” But he feels that the crunch won’t affect them either, since their projects are appropriately priced and in proximity to customers. On the other hand, if we look at the data of land bank of the company it shows that the company has 16% of their project portfolio devoted to residential and only 2% of their portfolio stands for commercial land. Even though residential projects earn high ROEs due to the negative working capital, with the current interest rate scenario and escalating rates of raw materials, investment made in developing residential land seems to be a loss making proposition at least at this point.

“The construction and infrastructure sector is (also) feeling the heat of rising steel and cement costs as a steep increase in the prices of these two primary inputs, as steel contributes about 15-20% of total cost whereas cement contributes about 10-12.5% of total cost,” adds Jain, citing the 10-12%rise in the prices of Cement and 20-25% steel price increase. This is surely going to challenge their ability to cater to the middle and low income groups.

For more articles, Click on IIPM Article.

Source : IIPM Editorial, 2008

An Initiative of IIPM, Malay Chaudhuri and Arindam chaudhuri (Renowned Management Guru and Economist).

For More IIPM Info, Visit below mentioned IIPM articles.
IIPM Programme :- SUPERIOR COURSE CONTENTS
Now IIPM's World-Class Education... for everybody!!
IIPM - Admission Procedure
IIPM, GURGAON
IIPM : EXECUTIVE EDUCATION
IIPM’s 36th Glorious Year of Academic Excellence
IIPM Ranked No. 1 B-School In Global Exposre - Zee...
4Ps Power Brand Awards 2007
When IIPM comes to education, never compromise
IIPM is A World of Career
Why Study Abroad When IIPM Gives You 3 global Advantages!
IIPM Ranked No. 1 B-School In Global Exposre - Zee...