Fast-food chains in India are expected to feel the pressure of an ongoing economic slowdown in Q3FY25, as consumers continue to cut back on discretionary spending, particularly in urban areas, according to analysts.
Despite the festive October-December quarter being crucial for quick-service restaurants (QSRs), Bernstein highlights hat high food inflation and low real wage growth will constrain discretionary spending.
“The bleak demand environment which began in the third quarter of fiscal 2024 has continued in fiscal 2025, leading to decreasing margins,” Bernstein said in its note.
“The bleak demand environment that began in the third quarter of FY24 has persisted into FY25, leading to shrinking margins,” Bernstein noted in a report.
“The shape of consumer demand in India is changing with high inflation, low real wage growth and a reduction in unsecured credit,” it added, saying a turnaround could happen in the second half of FY26.
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Brokerage Motilal Oswal stated in a recent report that it saw no significant sales boost in the December quarter for QSRs as the urban middle class continued to shrink.
“Heightened competition, rapid store expansions, and rising input costs have strained profitability, particularly in the dine-in segment, which has struggled to recover,” Motilal Oswal said.
Most fast-food brands, for perspective, reported a 15-20% drop in average daily sales in the last three quarters, though Jubilant FoodWorks, the master franchisee for Domino’s and Dunkin’, and Devyani International, which operates KFC and Pizza Hut, have benefitted from strong food delivery operations. According to experts, Domino’s Pizza commands a 70% market share in India’s pizza delivery segment due to its efficient delivery model. Devyani International has pushed aggressive offers at Pizza Hut outlets and delivery platforms to maintain growth momentum.
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Elara Capital, in its recent Q3 preview, indicated a sharper recovery in the pizza segment compared to burgers.
Revenue growth for fast-food chains over the last three quarters (Q4FY24, Q1FY25, Q2FY25) falls to 3-9% when excluding Jubilant FoodWorks and Devyani International, compared to 19-24% when they are included. Profit growth across most QSRs remains weak due to rising food and operational costs.
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