Domino’s (JUBLFOOD), one of India’s largest quick service restaurants (QSR) is perhaps one of the most well-known global food brands, and provider of the world’s favorite comfort food, started 2020 with a stock price of Rs. 1657.25. It closed the year traded at Rs. 2,791.15. That’s up 68%. This is what the stock chart looks like.
This is what its reach Chart looks like. See any similarities?
Companies derive their value from how customers use their products. By measuring this usage, one can model out this ‘value’ of companies; i.e. the ‘investability’ of companies.
Dominos has recovered because it built trust in the minds of customers; in an environment of Covid Fear; people would much rather order food from a brand they know well rather than the local pizza outlet who’s safety standards they can’t trust.
We see the result of this customer confidence in the data. Open rates (the number of times app users open it in a month), and monthly active users (percentage of app users who open the app in a month) are back to pre-lockdown levels. Feeding this recovery may be the fact that ordering in is the favored option for risk-averse foodies unwilling / unable to step out.
Come to think of it, ordering pizza sounds like a great option for a quarantined family!
Product extension
Jubilant FoodWorks, Domino’s Indian master franchisee, is betting aggressively on growth. Apart from the staple diet of pizzas, it is diversifying into biryani (one of the most popular dishes) and Chinese food (one of the most popular cuisines). For now, looking at the share price, investors seem to be betting that both the pie and Jubilant FoodWorks’ share of the pie will only grow.
Product extensions and pivots are not unique to Jubilant FoodWorks though. The aggregator giants Swiggy and Zomato too have seen mixed trends during 2020 and are trying to sweat their assets and networks in pursuit of ever-higher valuations.
Jubilant FoodWorks has long been one of the few ways Indian retail investors could bet on the F&B space.
The Zomato IPO — expected sometime this year — will be a game changer for the OFD (online Food Delivery) Market. Zomato will have to standup to the scrutiny that public markets bring. Not just in terms of compliance but also profitability. Which may in turn affect its ability to offer deals & discounts to keep customer coming back. This will also impact Swiggy; which hasn’t shared any plans to go public — will they have more room to maneuver?
Capital access hasn’t really been a problem for these companies… so by remaining private they can to some extent march to their own beat, make longer term plans rather than live by the quarter.
Amazons entry in to food delivery is a further complication. They don’t have the same pressures. Their investment in the space is hardly a dent in their balance sheet.
This comes on the back of investor interest tilting towards the food segment in a big way, perhaps due to its resilience in the pandemic. Rebel Foods, which runs Faasos and Oven Story Pizza, may now join the Unicorn Club, the stupendous success of the Mrs Bector’s Food Specialities IPO, and the US giant Wendy’s Co.’s plans to set up cloud kitchens in India all point to a wider and larger investor appetite for food businesses.
As always, do share your thoughts / feedback and get in touch for data!
Thanks for your time,
Aman
aman@kalagato.co
www.kalagato.co
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