Sapphire Foods India, the company that runs KFC and Pizza Hut restaurants, reported a 57 percent drop in earnings for the fourth quarter on Friday. The decline was driven by higher expenses and intense competition, as well as a decrease in discretionary spending by consumers during this time.
According to an exchange filing, the franchisee of Yum Brands based in the United States reported that their profit before tax dropped to INR 122.8 million (equivalent to USD 1.50 million) in the quarter ended March 31, down from INR 285.9 million from the same period a year ago.
Consumers in the world’s most populous country have been feeling the inflation pinch in the last few quarters, as prices of essentials have shot up, leaving them with little money to spend on clothing and dining out.
During the fourth quarter, Sapphire Foods’ Pizza Hut restaurants experienced a 4 percent decline in same-store sales.
Jubilant FoodWorks, which operates Domino’s Pizza in India, is among the local players that Sapphire Foods’ pizza chain has been facing stiff competition from, similar to other countries.
To increase sales, Sapphire is ramping up its marketing efforts for Pizza Hut in the April-June quarter, which includes the launch of 10 new pizza varieties.
Sapphire witnessed success in its KFC business by increasing marketing efforts, which resulted in a 2 percent growth. The introduction of new menu items like popcorn-nachos, a bigger advertising budget, and partnerships with multiple celebrities in recent months contributed to this growth. As a result, Sapphire is now looking to replicate this success with Pizza Hut by launching new menu items and increasing marketing efforts.
As a result of Sapphire’s initiatives such as introducing new menu items and boosting marketing, the company saw a revenue from operations increase of almost 13 percent in the quarter, reaching INR 5.6 billion. Furthermore, Sapphire has been opening new restaurants to expand its business.
Despite the increase in revenue, Sapphire could not offset the impact of a 17 percent surge in total expenses.
Westlife Foodworld, a rival company that manages the McDonald’s fast-food chain in west and south India, announced a fourth-quarter profit increase that was lower than anticipated due to inflation earlier this week.
Sapphire’s shares, which operate restaurants not only in India but also in Sri Lanka and the Maldives, fell slightly and have declined almost 4 percent this year.
