International fast-food franchise operators in India have reported substantial profit declines as a vast number of middle-class and low-income consumers grapple with escalating living expenses.
Despite India’s status as the world’s fastest-growing major economy, sustained inflation since the coronavirus pandemic has forced many to cut back on dining out or to opt for more affordable local alternatives.
On Wednesday, Jubilant FoodWorks, the operator of Domino’s and Popeyes in India, concluded a challenging financial year for international fast-food brands by announcing a 46 percent year-on-year decline in profit for the quarter ending in March. Hari Bhartia, co-chair of Jubilant, acknowledged the “challenging demand environment” in the country.
Earlier in May, Devyani International, which franchises KFC and Pizza Hut, reported an 89 percent drop in quarterly profit before an exceptional expense. Billionaire owner Ravi Jaipuria attributed the downturn to a “tough consumption year,” driven in part by “weak disposable income” among customers.
Similarly, Westlife Foodworld, managing nearly 400 McDonald’s outlets across western and southern India, posted a 96 percent decrease in quarterly net income. Sapphire Foods, another franchisee of Pizza Hut and KFC, also reported a significant profit decline, marking its steepest quarterly fall since its late 2021 listing.
This trend mirrors that in the US, where major food and beverage companies have noted that low-income Americans are struggling to cope with rising prices.
Amidst India’s ongoing national election, opposition parties have criticized Prime Minister Narendra Modi’s economic management, particularly the soaring food costs. Although the country’s headline consumer inflation slightly eased to 4.8 percent year-on-year in April, food prices surged by 8.7 percent, remaining a “concern,” according to HSBC economists.
In a nation with a per capita income estimated at $2,700, consumers are highly sensitive to price changes. Goldman Sachs highlights that only about 60 million Indians earn over $10,000 annually.
Many quick-service chains offer budget deals, like McDonald’s McSaver meals priced at around Rs100 ($1.20), but Indians are “still hurting from price hikes they have seen since the pandemic” and are switching to cheaper options such as street food, stated an investment banker in Mumbai.
For over a decade, major food brands have rapidly expanded across India, moving beyond the wealthiest urban centers. Hundreds of new outlets opened in the past year alone, many in smaller cities.
Fast-food, once an aspirational treat, has become “more mass market,” making it susceptible to the economic slowdown, noted Teresa John, lead economist at Mumbai brokerage Nirmal Bang. “Wage growth has not really kept up with inflation.”
Chain operators are hopeful that pressures will ease after the election concludes in early June, with increased consumer spending anticipated during the months-long festival season starting around September.
Despite a “challenging year for the entire industry,” Westlife Foodworld’s managing director, Saurabh Kalra, confirmed in an earnings briefing this month that the company’s expansion plans remain unchanged. Westlife Foodworld aims to open up to 50 more McDonald’s outlets in India this financial year, following a record addition of 41 outlets in the previous 12 months.
“We remain highly optimistic about the long-term structural opportunity,” Kalra stated.
