Pizza players might turnaround faster than burger chains: Report

Burger chains in the country performed strongly through the first half of FY24, although this trend began with the pizza category which was under extreme pressure, according to a Prabhudas Liladher report

Bengaluru: Pizza chains might achieve a turnaround faster than burger chains, witnessing a growth in the second half of fiscal year (FY) 2024, as per a report by financial services organisation Prabhudas Lilladher.

The report points out that burger chains performed strongly through the first half of FY24, although this trend began with the pizza category which was under extreme pressure. Westlife Food World and Burger King saw good same-store sales growth (SSSG) through the first half of FY24, but Jubilant Food Works and Pizza Hut saw negative growth.

However, beginning in the second half of FY24, burger companies began to suffer pressure from a slowing demand, geopolitical issues, and potential competition from newcomers and other cuisines.

The number of pizza stores of the top three brands has doubled from 1,654 to 3,331, while the growth in major burger chains has seen an upward trend of 50%, from 789 to 1197, over FY20–24. The number of burger shops owned by the top three to four players will rise by 38% between FY24 and FY26, although the number of pizza chains will only rise by 18%.

Burger companies have not yet fully felt the effects of the anticipated increase in competition, although pizza chains may be nearing the bottom of the economic slump. The report predicts that pizza players will likely recover to mid-single digit SSSG faster than burger companies.

Local brands are now challenging the giants like McDonald’s, Domino’s, Burger King, and Pizza Hut with innovative flavours and competitive pricing, leveraging localised supply chains and lower overhead costs. Despite rapid store expansion, major pizza chains have faced declining SSSG and profits in recent years.

Pizza category struggled due to factors such as competition from small chains and regional players like Pizzeria, MojoPizza, and La Pinoz Pizza, which offered competitive pricing, the leading players’ inability to capitalise on the premiumisation, doubling of store counts by major chains over the past five years and consumer downtrading to the sub-Rs 100 segment as two large players vied for a greater market share, the report added.

Following the pressure, profits of both Jubilant FoodWorks and Pizza Hut took a big hit in the second half of FY24. Meanwhile, burger chains like Westlife Food World reported lower earnings before interest, taxes, depreciation, and amortisation (EBITDA) margins in FY24 due to deteriorating SSSG.