Sapphire Foods India Limited , the operator of KFC and Pizza Hut restaurants in India and Sri Lanka, has reported a mixed performance for the second quarter, with consolidated revenue growing 7% year-on-year to ₹740.00 crores.

KFC Performance

KFC, the company's flagship brand, saw a 7% revenue growth. However, excluding the impact of Navratri, which shifted from Q3 last year to Q2 this year, KFC would have achieved double-digit growth. The brand maintained flat same-store sales growth (SSSG) excluding the Navratri impact, with positive transaction growth.

Pizza Hut Challenges and Tamil Nadu Success

Pizza Hut faced headwinds with a 6% overall revenue decline. However, the brand showed promising results in Tamil Nadu, Sapphire's exclusive territory, where it achieved double-digit growth. This success in Tamil Nadu provides a potential model for reviving the Pizza Hut brand across India.

Sri Lanka Operations

Sri Lanka operations demonstrated strong performance, growing 18% in local currency terms. The country's business has shown resilience and recovery following economic challenges two years ago.

Store Expansion

Sapphire Foods added 19 KFC restaurants and 2 Pizza Hut outlets in India during the quarter. The company reached a significant milestone by inaugurating its 1000th restaurant, a KFC outlet in Gummidipoondi, Tamil Nadu.

Financial Highlights

All financial figures in crores of Indian Rupees

Strategic Initiatives

Sapphire Foods is focusing on driving penetration and frequency for the KFC brand. The company launched the 'Taste the Epic' campaign to popularize core buckets, offering 9 pieces for ₹299.00. For Pizza Hut, the company introduced innovations such as the Ultimate Cheese Pizza and Cheesy Pocket to satisfy customer demand for additional cheese.

Outlook

While facing challenges in the current market environment, Sapphire Foods remains committed to its growth strategy. The company is optimistic about the potential for recovery, particularly given recent government initiatives such as GST reduction and income tax cuts, which may boost consumer spending.

Sanjay Purohit, Whole-time Director & Group CEO, commented, "We think it was a reasonable quarter. KFC growing at double-digit excluding Navratri. There is a clear way forward for the Pizza Hut brand basis our experience in Tamil Nadu and Sri Lanka."

The company acknowledges that reviving the Pizza Hut brand may require persistent efforts over the next 2-3 years, even in the successful Tamil Nadu market. Sapphire Foods plans to continue investing in marketing and innovation to drive growth across its brands.

As the company navigates through a challenging consumer environment, it remains focused on operational excellence and strategic expansion to capitalize on long-term growth opportunities in the Indian QSR market.

Sapphire Foods India Ltd. , the operator of Pizza Hut in India, has announced a suspension of its expansion plans following weak performance metrics in the second quarter. The company, which manages nearly 1,000 KFC, Pizza Hut, and Taco Bell restaurants across India and Sri Lanka, is facing challenges in its Pizza Hut segment.

Key Performance Indicators

Expansion Plans on Hold

Despite an increase in the number of Pizza Hut outlets from 323 to 338, Sapphire Foods has decided to halt its expansion plans. This decision comes after:

• Opening 20 new Pizza Hut stores in the previous fiscal year
• Recording a net decline of one store in the current fiscal year

Management has stated that expansion will remain suspended until same-store sales growth and profitability show signs of recovery.

Marketing Efforts

In response to lower consumer demand, Sapphire Foods has increased its marketing investments beyond contractually required levels. This move aims to stimulate sales and attract more customers to Pizza Hut outlets.

Outlook

The company faces significant challenges in the competitive fast-food market in India. The decline in same-store sales growth and average daily sales per store indicates a need for strategic reassessment. Sapphire Foods' decision to pause expansion and focus on improving existing store performance demonstrates a cautious approach to navigating the current market conditions.

Investors and industry observers will be closely watching Sapphire Foods' performance in the coming quarters to see if these measures lead to a turnaround in Pizza Hut's sales and profitability in the Indian market.