Published on February 16, 2014
Issue : 3 Volume : 2 January 2014 B E A C O N A Newsletter by SIMCON– SIMSREE Consulting Club 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?
Volume : 2 Issue : 3 CONFLUENCE’14 : The Consulting Conclave BEACON : Page 1 Jan. 2014 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. For detailed report and all industry analysis from previous Beacons together, please visit our blog : http://simconblog.wordpress.com
Volume : 2 Issue : 3 CONFLUENCE’14 : The Consulting Conclave BEACON : Page 2 Jan. 2014 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 competitiveness 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. For detailed report and all industry analysis from previous Beacons together, please visit our blog : http://simconblog.wordpress.com
BEACON : Page 3 Jan. 2014 Volume : 2 Issue : 3 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. 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. Figure 1: Total Market Share New outlets to largely aid growth in QSR market Figure 2 : Foreign Brands Market Share Split 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 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. Growth Same store sales growth to remain subdued in the near term The Indian QSR industry is expected to grow at a CAGR of 27 % for the period from 2012-16. 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: For detailed report and all industry analysis from previous Beacons together, please visit our blog : http://simconblog.wordpress.com
BEACON : Page 4 Jan. 2014 Volume : 2 Issue : 3 INDUSTRY ANALYSIS : ORGANIZED FAST FOOD INDUSTRY 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 enormously 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 company that will be headed by the present CEO of its UK operations 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, operators of multinational brands such as McDonald‟s, KFC and Subway 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 required to start up and run a food business. FSSA initiated harmonization of India's food regulations as per international standards. 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 20122016.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. For detailed report and all industry analysis from previous Beacons together, please visit our blog : http://simconblog.wordpress.com
BEACON : Page 5 Jan. 2014 Volume : 2 Issue : 3 COMPANY ANALYSIS : Jubilant FoodWorks Ltd. Introduction Jubilant FoodWorks Limited (the Company) is a Jubilant Bhartia 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 Promoters 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 organized segment of the industry is the Quick Service Restaurants 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 focused on delivering great tasting Pizzas & sides, superior quality, 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 minutes or FREE to a community of loyal customers from all its stores around the country. 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 delighting 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). Dunkin‟ Donuts (DD) in India is positioned as a Food Café, occupying 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 cappuccinos‟ 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 potential growth from both, Dunkin‟ Donuts and Domino‟s Pizza business In veg and non-veg pizza category, Dominos offers four categories starting from simply veg pizza at starting price of Rs. 60/to Feast pizza. With cost till Rs. 500/-. Also there is a categorization based on the size of the pizza with regular, medium, large For detailed report and all company analysis from previous Beacons together, please visit our blog: http://simconblog.wordpress.com
BEACON : Page 6 Jan. 2014 Volume : 2 Issue : 3 COMPANY ANALYSIS : Jubilant FoodWorks Ltd. (Rs. in Million, except otherwise stated) Particulars Total Income (EBIDTA) Add: Other Income Less: Interest Less: Depreciation Less: Exceptional Items Profit Before Tax Provision for Taxation Profit After Tax Earning per Share (EPS) (Rs.) No. of Domino’s Pizza Stores No. of Dunkin’ Donuts Restaurants No. of Cities covered System Sales Growth (%) Same Store Sales Growth (%) Marketing Strategy: Customer Engagement During the year, JFL invested considerably in mapping emotional insights into the evolving and transforming consumer needs. With these insights, 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 better 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. March 31, March 31, March 31, March 31, March 31, 2013 14,153 2,444 78 2012 10,233 1,904 59 2011 6,803 1,201 19 2010 4,243 656 1 2009 2,810 338 1 1 547 376 3 293 83 243 89 169 - 41 - - - 1,974 1,546 924 331 81 623 490 204 1 8 1351 20.7 1056 16.3 720 11.2 330 5.5 73 1.3 Player Dominos 576 465 378 306 241 10 - - - - Yum! (Pizza Hut & KFC) McDonald’s 123 105 90 69 47 38 50 60 51 33 16 30 37 22 6 Competitors: Dominos: Subway Market Share 12.6% Outlets 679 10.71% 444 6.93% 250+ 7.56% 416 Dunkin Donuts: Player Starbucks Barista Lavazza Café Coffee Day Outlets 34 180 1534 (Footprint Leader) Dunkin Donuts The Chocolate Room Gloria Jeans Mad Over Donuts 23 74 18 42 Conclusion: 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 consumers and enhancing operational excellence. These efforts, along with several other initiatives, will increase the profitability of the company. 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, concerted 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-unmetricreport-cafe-coffee-day-reaches-out-to-customers-across-allplatforms For detailed report and all company analysis from previous Beacons together, please visit our blog: http://simconblog.wordpress.com
Volume : 2 Issue : 3 Concept of the Month BEACON : Page 7 Jan. 2014 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 QUIZ OF JANUARY BEACON : Page 8 Jan. 2014 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. Answer To: email@example.com with Subject= simcon_quiz_jan_2014 Winner will be recognized. All Correct Answers will be published in next month’s Edition. ANSWERS : DECEMBER ISSUE 1. Dead Cat Bounce :- A temperary recovery in share prices after substaintial a fall 2. Serge Kampf and Capgemini Winner:- 3. Parle G 4. Kiran Mazumdar-Shaw 5. Karnataka Bank Bhagyashree Masram PGDBM, SIMSREE 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). 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 firstname.lastname@example.org. Best Regards, SIMCON –SIMSREE CONSULTING CLUB Our FB page : https://www.facebook.com/SimCon Mail To: email@example.com
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