JUBLFOODNSEQ2 FY23November 15, 2022

Jubilant Foodworks Limited

10,365words

104turns

12analyst exchanges

2executives

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Management on call

Deepak Jajodia

Vice President (Finance), Jubilant

Sameer Khetarpal And Our Cfo

- Mr. Ashish Goenka;.

Key numbers — 40 extracted

nd is driven by food and energy inflation. Notably, the CPI inflation continues to be above RBI’s 6% tolerance level for three consecutive quarters. Within this food inflation continue to be ahead o

7.2 million

received to our loyalty program – Domino’s Cheesy Rewards. The cumulative enrollment grew to over 7.2 million since its national launch in May 2022. During the quarter, we became the first QSR Company to l

Rs. 12,868 million

5 Ashish Goenka: Thankyou Sameer and Good-evening everyone. The Revenue from Operations of Rs. 12,868 million grew 16.9% versus the prior year. In Dominos growth in revenue was driven by Like-for-Like growth

16.9%

8.4%

w 16.9% versus the prior year. In Dominos growth in revenue was driven by Like-for-Like growth of 8.4% along with a healthy contribution coming from our newly opened stores. Our fortressing strategy a

76.2%

ntinue to face high inflation. This had significantly impacted our gross margins which came in at 76.2%, lower by 200 bps year-on-year and 50 bps quarter-on-quarter. We delivered EBITDA of Rs. 3,125 mi

200 bps

igh inflation. This had significantly impacted our gross margins which came in at 76.2%, lower by 200 bps year-on-year and 50 bps quarter-on-quarter. We delivered EBITDA of Rs. 3,125 million, an increase

50 bps

ignificantly impacted our gross margins which came in at 76.2%, lower by 200 bps year-on-year and 50 bps quarter-on-quarter. We delivered EBITDA of Rs. 3,125 million, an increase of 9.2% versus the prio

Rs. 3,125 million

in at 76.2%, lower by 200 bps year-on-year and 50 bps quarter-on-quarter. We delivered EBITDA of Rs. 3,125 million, an increase of 9.2% versus the prior year. The EBITDA came in at 24.3%, lower by 170 bps year-on

9.2%

r-on-year and 50 bps quarter-on-quarter. We delivered EBITDA of Rs. 3,125 million, an increase of 9.2% versus the prior year. The EBITDA came in at 24.3%, lower by 170 bps year-on-year and 30 bps quar

24.3%

red EBITDA of Rs. 3,125 million, an increase of 9.2% versus the prior year. The EBITDA came in at 24.3%, lower by 170 bps year-on-year and 30 bps quarter-on-quarter. Profit After Tax came in at Rs. 1,1

170 bps

. 3,125 million, an increase of 9.2% versus the prior year. The EBITDA came in at 24.3%, lower by 170 bps year-on-year and 30 bps quarter-on-quarter. Profit After Tax came in at Rs. 1,192 million. PAT ma

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Guidance — 20 items

Deepak Jajodia

opening

“After the opening remarks from the management, the forum will be open for the Question-and-Answer Session.”

Hari S. Bhartia

opening

“With this, we have opened 134 new Domino’s stores in the first half and are well on track to achieve the store guidance of opening 250 stores in FY23.”

Hari S. Bhartia

opening

“This has been possible thanks to our high store density across all regions, and therefore, we will continue with such regional menu innovation for different regions going forward.”

Ashish Goenka

“Currently, we are not looking at any further price increase, and we will be looking at absorbing some of these cost increases in our margins.”

Amit Sachdeva

“Just very quickly on Popeyes Sameer, you shared your experience, you said that you visited stores and can you share some real economics and what sort of numbers you've seen so far, and what impressions you've got and how fast the store network rollout will happen in Popeyes, can you share some target for this year and next year, please?”

Sameer Khetarpal

“The guidance we have given is 20 to 30 stores.”

Sameer Khetarpal

“We should meet that guidance, and then reassess as we enter into the next year for rapid scale up.”

Ashish Goenka

“Our focus going forward will be to continue to drive enrollment into the program and overall customer engagement.”

Kunal Vora

“Own app will be how much and what will be the third-party?”

Ashish Goenka

“So, for example, if there was a high user who would migrate to a medium user over a period of time, we believe that with the help of this loyalty program, we will be able to retain him at a high user level.”

Risks & concerns — 9 flagged

We are witnessing a sustained revival in demand in the foodservice industry after the impact of covid over many quarters in last two years.

— Hari S. Bhartia

In Sri Lanka, despite a very difficult macro-economic backdrop, we delivered system sales growth of 37%.

— Turning to our international markets

For example, if I were to assume that gross margin didn't decline, then PBT would have grown by 13%, all things remaining the same, which is about 4% drag to the overall sales growth.

— Amit Sachdeva

My sense is that this may come from small things ignoring, but coming from two impacts; store split impact, and new stores still catching up to full throughput level, but investment has already been done in rentals, etc., Now, question is that, how much drag are you willing to take in 7 8 aggressively rolling out strategy?

— Amit Sachdeva

Is there a limit or guiding principle you've set in the network rollout that we will not let earning drag coming beyond this level or there is some sort of thought how to strategically think about this network expansion and how we should think about earning growth lagging the revenue growth?

— Amit Sachdeva

So, I think the pressure is largely on account of the unprecedented inflationary environment that we are seeing in the economy, and not really because of store expansion.

— Ashish Goenka

And I have already given the benefit of doubt that say margin did not decline, 200 basis points, the PBT growth would have been 13% in that case.

— Amit Sachdeva

So, it would be difficult to give you a timeframe, but we've already started seeing signs of some level of moderation and some level of stabilization.

— Ashish Goenka

So, just wanted to know where do we stand, is there any pressure from global partner on rethinking on that investment or it continues business as usual for us there?

— Tejas Shah

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Q&A — 12 exchanges

Three questions from my side. The first one was that a lot of raw materials including our co- material cheese is at an all-time high. So, would we look at pricing action in case that sustains?

Ashish Goenka

Thanks, Nihal. As you know we are facing multi-decadal high inflation, and cheese prices also went up in this quarter. We had instituted two rounds of price increases, one earlier this year and one towards the end of last year. Currently, we are not looking at any further price increase, and we will be looking at absorbing some of these cost increases in our margins. We are of course driving productivity initiatives across the organization to mitigate the impact. We have also started seeing stabilization and softening of some of the other commodities, especially on the fuel side and on the oil

Sir, my question is on the network rollout, it has been very impressive, in this demand environment, revenue growth of 17% is great and new vigor in store rollout is indeed very impressive. My question comes from what is the cost you're willing to take in doing so? For example, if I were to assume that gross margin didn't decline, then PBT would have grown by 13%, all things remaining the same, which is about 4% drag to the overall sales growth. My sense is that this may come from small things ignoring, but coming from two impacts; store split impact, and new stores still catching up to full t

Ashish Goenka

So, thanks, Amit, for your question. And I think, as we've said in the past, store expansion is actually not having any negative impact on our overall margin. What is causing an impact on margin and dilution in EBITDA is largely coming from commodity inflation, and we are seeing inflation not just in commodities, but across line, as you would know, we are seeing very high level of inflation in fuel, even in manpower cost as overall inflation has gone up, minimum wages have gone up. So, I think the pressure is largely on account of the unprecedented inflationary environment that we are seeing i

My question is on the loyalty program. You mentioned that you had about 30 million orders this quarter and seven million consumers are on the loyalty program. Just wanted to understand the gap, is it because of multiple orders from same consumers smaller than qualifying order, can you help us understand how to look at the loyalty program enrollment? And also if you can provide some initial feedback on whether you're seeing higher ordering frequency, higher order value from these loyalty program consumers?

Ashish Goenka

Thanks, Kunal. First of all, I think the program is doing really well, and we have looked at all global benchmarks, and we have also looked at other peers in the industry who have launched similar programs globally. I think our take rate in terms of the overall enrollment into the program, and also the contribution of orders from enrolled customers seems to be tracking very, very well. So, first of all, I think we're very, very excited and happy with what we've seen as an outcome of the launch. The full mix, just to give you a context, went live only in August, while we had launched the progra

My question is on the pace of store network expansion. Now, if I look at your September 2019 quarter revenue, like about 1,265 stores, it was about Rs.988 crores, and then there is a price increase of about 15% including delivery fees. So, compare this quarter versus the September quarter, adjusted for price increase, incremental quarterly revenue run rate is about 125 to 150 crores, which translates into annual run rate of Rs. 600 crores for 400 new stores that you've added. So, is this trajectory in line with your expectations? And if not, would you consider slowing down the pace of network

Ashish Goenka

So, Jay, if I've understood your question, right, you're trying to triangulate store expansion along with price increase to see whether our revenue buildup stack up. If that's the question, let me just sort of give you a bit of a color on our revenue growth. So, of course, our focus has been on driving overall revenue growth through store addition and as well as driving same-store growth. And our LFL has been very strong in this quarter at 8.4%. Now, in terms of the construct of the growth, a large part of our growth is coming from order increases, which again is good news from us, and a signi

So, my question is on store addition again, and I'm restricting myself to store addition in towns, where you are sort of present since a very long time, in large towns where you would have a fairly good penetration of stores. What is the logic of opening new stores in those towns especially when you're not fully utilized on your dine-in capacity, because the delivery can anyways be supplied from any store, it doesn't matter, in fact, the customer doesn't even many times know which store is serving his delivery order? If the only logic is to reduce the delivery time from 30 minutes to 20 minute

Ashish Goenka

So, Percy, thanks for that question. First of all, let me upfront clarify that we are not adding stores to reduce our drive time from 30 minutes to 20 minutes. That's not the reason we are adding stores. And we have been able to achieve that 30 minutes to 20 minutes by doing a lot of process engineering at our end in terms of reducing the time for making the pizza and also defining the polygons more sharply. Are we adding stores to drive 30 min to 20 min? Answer is no. The reason we are opening more stores in the existing town is because of the growth opportunity in the white spaces which are

A few questions. First, Sameer, you did articulate your learnings and where the strengths for Jubilant FoodWorks are. What are the areas that you think requires attention, what are the places where you think there can be a potential for improvement or reasonable improvement to significant?

Sameer Khetarpal

Vivek, I see it more as the opportunities for growth and margin expansion. I think getting the new brands to accelerate faster is definitely a priority. We are making sure we continue double down on Domino's, like I said, I will continue to do that, and lastly, the digital assets that we have is actually unparalleled. And we have an app running in Sri Lanka, Bangladesh on iOS, Android and a progressive web application. I think the opportunity to, to kind of take the physical store footprint plus digital is so immense. If you double down on that, I think that is to me is the real opportunity pl

My first question was on the store expansion. Let's say if you add 250-plus stores this year, any approximate ratio of how much the store splits versus completely new stores? And is the gap between LFL and SSG steady or is it increasing as score split proportion may be increasing, so I just wanted a sense on both of them. 15 16

Ashish Goenka

To answer your question, our split stores are broadly 1/3 of the total stores that we've been opening. So, that ratio is by and large remain consistent, in fact, slightly lower this year than we had reported for the full year last year. And to that extent, I think the LFL and SSG gap is also steady, there is no deviation from what we have seen in the past. So, roughly 1/3 of our stores are split stores this year. My second question was actually that, this quarter like what Amit has earlier asked, your EBITDA has grown by 9%, but your PBT is flat. So, the depreciation increase that we've seen,

I just wanted to understand the CAPEX numbers. So, for the first half, we've done almost close to Rs.400 crores of CAPEX. If you could help explain what has been the reason for sudden increase, it implies that per store CAPEX has risen sharply? And in turn, what would be the number that we should kind of assume for FY'23? 16 17

Ashish Goenka

Thanks, Avi. So, I think overall CAPEX has followed our store our expansion. Our per store CAPEX have seen a marginal increase which is in line with inflation; we have seen about 8% to 10% increase per store. A larger CAPEX outflow has also been because of this of the opening liabilities which has got paid out this year. Overall, I would say we would be close to Rs.650 to 700 crores in terms of overall spend CAPEX this year, because a), as I said earlier, we will continue to invest in store expansion, we are also building commissary and large part of investment about close to Rs.200 crores wil

My first question is for Sameer. In your opening remarks, you mentioned the digital agenda of the company and then you spoke about very entrenched digital assets on the customer side. So, just wanted to understand, obviously, early days, but whatever sense you have, how do you see the role of tech playing on the backend and supply chain customer acquisition improving store efficiency side?

Sameer Khetarpal

There are multiple pieces, Tejas to your question. Firstly, there is an element of our digital applications to acquire new customers, engage them through our loyalty programs, and make sure that they can track their orders - the full fulfillment, acquisition, fulfillment and engagement piece, that is working extremely well, and we'll roll that out to all international geographies which hasn't done and to all brands. So, that's kind of the piece over there. There is of course next 17 18 version of those apps and more modules that will continue, for example, promotions could be another, personal

So, my question is on innovations. So, apart from the couple of regional launches that we have done this quarter, we couldn't really see launches in other part of the country, especially in the current festive and the sporting season. So, what are the plans going forward, are there any big plans in terms of innovations and new launches?

Sameer Khaterpal

I think it's a constant endeavor, Vishal. I think we started with Paratha Pizza. I want to remind all of us, right, that's where our first innovation came this year, and we've taken from there to east, then to west, and I think this quarter itself, we have planned to launch more products. I think you should hear about it very soon in November itself. And secondly, in last quarter we mentioned that the dine-in recovery was very close to the pre- COVID level. So, what kind of growth have you seen for this particular quarter if any? Vishal, in terms of overall revenue, we are seeing fruitful reco

I just had one question. Sameer, my question to you is that during your tenure at Amazon, you have been involved in the incubation and scaling of lot of new businesses, Amazon Fresh Food, and a few others. So, just wanted to understand any learnings from that experience that could help scaling of all the new businesses which Jubilant has forayed into such as Popeyes, Hong's Kitchen and EKDUM?

Sameer Khetarpal

Thanks for that, Sheela. And firstly, I have to build upon the foundation that I am inheriting, right. So, I think I'm very cognizant of that versus purely applying one model on the other. Having said that, there are several learnings and especially three I would like to call out. Firstly, the customer obsession piece. And you would have seen in my narrative, and my initial time 19 20 that I've spent reading about a lot of customer reviews, meeting them, in fact, reading their e- mails, answering to them. So, that's one culture I want to drive, not only in the front end, but in our commissarie

India as a market presents a huge growth opportunity and the kind of macro trend we are seeing is what everyone else is also seeing. So, we're not surprised with the increase in competitive intensity. And therefore, what we are focusing on is building on our strengths as Sameer alluded to, and also stepping up our store expansion, which we have actually stepped up quite well in the last few quarters. So, we will continue to focus on the customer and continue to focus on build on our strengths and continue the pace of store expansion that we have embarked on.

Sameer Khetarpal

Also, competition actually also help in growing the market. But yes, we will double down on our strengths, number one being deeply penetrated store footprint, second is digital and our own assets, and third being world-class supply chain that we have. 20 21 Robert Marshall-Lee: There is an increase in competitive investment overall, but actually potentially helpful in growing the market as well, is that right? That's right.

Speaking time

Ashish Goenka

Moderator

Sameer Khetarpal

Vivek Maheshwari

Percy Panthaki

Arnab Mitra

Nihal Jham

Amit Sachdeva

Kunal Vora

Jaykumar Doshi

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Opening remarks

Deepak Jajodia

Thanks. Good evening, everyone. Welcome to Jubilant FoodWorks Q2 FY'23 Earning Call for Investor and Analyst. We are joined today by senior members of the management team, including our Chairman -- Mr. Shyam S Bhartia; our Co-Chairman -- Mr. Hari S Bhartia; our CEO -- Mr. Sameer Khetarpal and our CFO -- Mr. Ashish Goenka;. We will commence with Key Thoughts from Mr. Hari S. Bhartia; we will then turn to our CEO to share his Initial Impressions; Our CFO, Mr. Ashish Goenka will follow him with the Operational and Financial Update for the Quarter ended 30th September 2022. After the opening remarks from the management, the forum will be open for the Question-and-Answer Session. A cautionary note: Some of the statements made on today's call could be forward-looking in nature and the actual result could vary from the statement. A detailed statement in this regard is available in Jubilant FoodWorks Results Release and Earnings Presentation, both of which are available on the company's websit

Hari S. Bhartia

Thank you, Deepak, and good evening, everyone. Welcome to our Earnings Call. Thank you, Deepak, and Good Evening, everyone. Welcome to our earnings call. Let me start by highlighting some observations around the sense we are deriving from the current environment. On the demand side, economic activity remains resilient. We are witnessing a sustained revival in demand in the foodservice industry after the impact of covid over many quarters in last two years. The growth for us was equitable across all town classes. It has got further impetus with the onset of festive season. The Dine-in and Takeaway sales has shown strong recovery and we continue to see further opportunity for growth in this channel. The Delivery channel has continued to grow on a strong base of last year. 2 3 On the cost side, the inflationary headwinds continue to persist and is driven by food and energy inflation. Notably, the CPI inflation continues to be above RBI’s 6% tolerance level for three consecutive quarters.

Sameer Khetarpal

Thank you, Mr. Bhartia. Good evening, everyone on the call today and thank you for making today on an auspicious day of Gurpurab. As you know, I joined Jubilant FoodWorks as a CEO on 5th of September. So, I am here for the last three weeks in the quarter and total of eight weeks, I'm pleased to inform you that my 3 4 4 learning and my transition is on track. I am receiving tremendous support from my team and all of the stakeholders. In the last eight weeks, I have been traveling across India and visited almost 100 stores, spoken with and read reviews of more than 1,000 customers and met more than 1,000 of our frontline teams, serving customers inside the stores and delivering to customers. I also visited our food tech factories and was very deeply involved in launching the East range and no onion, no garlic range in Gujarat. My focus has been to learn fast, ensure execution and continuity in our strategy.

JFL strength stems from

1) A culture of customer-led hustle inside the store, 2) Deep domain expertise in data sciences and a very strong digital team, 3) Unparalleled physical footprint, especially not only in tier-one, tier-two cities but also in tier- three, tier-four cities 4) World-class food tech factories that manage very complex forward and reverse supply chain which is multi-temperature, and an awesome team that I have inherited. On the back of these strengths, the team at JFL delivered a very strong quarter, serving more than three crore customer orders in this quarter. Despite a very tough challenging environment, we delivered strong like-for-like growth, very consistent and industry-beating EBITDA margin, digitally acquiring customers at a new pace and loyalty is a big hit. We also added the highest ever net new stores in this quarter, and internationally teams in Bangladesh and Sri Lanka have delivered a strong quarter despite severe headwinds. On new and emerging brand fronts, I was there for ma

Ashish Goenka

Thankyou Sameer and Good-evening everyone. The Revenue from Operations of Rs. 12,868 million grew 16.9% versus the prior year. In Dominos growth in revenue was driven by Like-for-Like growth of 8.4% along with a healthy contribution coming from our newly opened stores. Our fortressing strategy also continue to work well for us. We continue to face high inflation. This had significantly impacted our gross margins which came in at 76.2%, lower by 200 bps year-on-year and 50 bps quarter-on-quarter. We delivered EBITDA of Rs. 3,125 million, an increase of 9.2% versus the prior year. The EBITDA came in at 24.3%, lower by 170 bps year-on-year and 30 bps quarter-on-quarter. Profit After Tax came in at Rs. 1,192 million. PAT margin was at 9.3%. We added 76 new Domino’s stores and entered 22 new cities during the quarter. We now serve our guests through 1,701 Domino’s stores across 371 cities in India. We have started with the journey of launching regional menu based innovation dedicated to the

Turning to our international markets

In Sri Lanka, despite a very difficult macro-economic backdrop, we delivered system sales growth of 37%. The growth was driven by Dine-in and Takeaway channel. The Own app contribution to Delivery Sales was 71%, an increase of 7% points year-on-year. We opened four new stores taking the network strength to 40. In Bangladesh, system sales grew by 42%, and we opened one new store taking our store count to 11. The Own app contribution to Delivery Sales was 75%, an increase of 11% points year-on-year. Turning to the updates on our sustainability front, I am happy to share with you that EV penetration in our delivery fleet has reached 31% as against 19% by end of March 2022. We have also started a program – Women on Wheels where we are facilitating driver training for women from marginalized section of the society with an intent to help them become breadwinners for their families. In closing, we are pleased with the delivery of balanced quarterly performance in the backdrop of significant i

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