Burger over Pizza or Pizza over Burger has always been a hot topic of debate. Intense competition from regional players and larger number of stores are eating into profit. Prabhudas Lilladher says inability of brands to cash in on premiumisation is another area of concern.
What’s pulling profit away from pizza?
Prabhudas Lilladher (PL) in its latest report on consumer trends in Quick Service Restaurant space highlighted the growing differences in demand for pizza and burgers. According to them, the pizza category first witnessed sluggish demand amidst intense competition from regional players and smaller chains. Burgers continued to perform well until the first half of FY24.
Burgers bagging more buyers?
Burger sales were robust in the first half of FY24, despite the fact that the pizza category was facing pressure at the time.
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Pizza Hut and Domino’s operator Jubilant Food Works experienced a negative increase in same-store sales, while Burger King and McDonald’s operator Westlife Food World witnessed positive growth. In contrast, burger companies are facing pressure from a slowing market, geopolitical difficulties, and potential competition as the second half of FY24 gets underway.
A number of these chains have recently started to aim for a regional or national level, according to PL’s report. The number of locations for the top three brands of pizza has actually doubled, from 1654 to 3331. In the meantime, over FY20–24, there was a 50 per cent increase in the expansion of big burger chains, from 789 to 1197. Additionally, it is anticipated that between FY24 and FY26, the number of burger shops owned by the top three–four players will increase by 38 per cent, whereas the number of pizza chains will only increase by 18 per cent.
Are burger chains following the pizza industry?
Such a question cannot be answered, but over the last few quarters, the pizza category has seen a considerable slowdown and pressure on demand. Up to the second half of FY24, the burger category outperformed the pizza category in terms of growth and resilience. Furthermore, there is a growing number of domestic chains entering the category, especially in the north, like Burger Singh, Burgrill, and Hello Burger. These chains also have aspirations to enter the south and west.
However, the factors why the pizza category struggled are as follows:
1) Due to intense competition from small chains and regional players such as Pizzeria, MojoPizza and La Pino’z Pizza, which offer pizzas at lower or more competitive rates
2) The inability of leading players to capitalise on the premiumisation trend seen with gourmet pizza brands
3) Doubling of store counts by major chains over the past five years
4) Consumer downtrading to the sub-Rs100 segment as two large players vied for a greater market share
Who owns the market?
While MNCs such as McDonald’s, Domino’s, Burger King and Pizza Hut continue to dominate the quick service restaurant (QSR) sector in India, these companies are recognised as the pioneers of the category. The top brands, nonetheless, only reach 425 cities.
It’s interesting to note that domestic brands are gaining popularity. For instance, Burger Singh is now the third-biggest burger chain in the nation, behind McDonald’s and Burger King. Next on the list is Burgrill, which prides itself on offering healthier burgers at affordable pricing. Furthermore, the pressure in the burger market is probably going to continue due to growing competition from regional companies. As such, it becomes increasingly plausible that burgers will eventually adopt the pizza chain’s style.
From: financialexpress
Financial News
