Industry - Restaurant
Company - Pizza Hut
Author: Tushar Upadhyay
The Indian restaurant industry amounts to Rs. 75000 crores and has a growth rate of 7% per annum.
There is a high degree of fragmentation in the industry mainly due to diversity in the Indian culture, in other
words, every religion and caste in India has different food preferences and therefore they have their own favorite
The Indian restaurant industry can be divided into mainly 5 subcategories:
-Fast food restaurants: likes of McDonalds, KFC.
-Casual fooding restaurants: Pizza hut, ching’s real Chinese.
-Cafes: cafe coffee day, costa coffee, Barista lavazza,
-Fine dining: Rajdhani, Mainland China, copper chimney
-Pubs, clubs and lounges: Hard rock café, sports bar
As compared to foreign countries Indian eat out less frequently but since population is very high, small increase
in eat out count impacts a lot.
Pizza hut is the subsidiary of the world’s largest restaurant company – Yum! Brands.
Pizza hut opened its first Indian settlement in Bangalore, KA.
From then it has adapted several competitive strategies to service and beat down rivals such as dominoes and
other fast food chains.
Pizza Hut almost has 50% market share in organized pizza restaurant industry.
ETOP ANALYSIS FOR RESTAURANT INDUSTRY
Nature of impact
Impact on each sector
Rising income of the middle class which forms a major part of Indian
Government regulation regarding minimum wage, health and safety
lawsuits, large regional disparity in Indian food habits
Rising health concerns amongst the common consumer can put off the
consumers, however eating out is becoming a fashion trend, this can
help the restaurant industry
As compared to U.S.A and other foreign countries there’s an acute
shortage of suppliers especially for meat and flesh based foods
Majority of restaurant such as pizza hut are of foreign origin therefore
further arrival of international player won’t pose as threat because they
already have strategy to compete with them
Consumers are becoming internet savvy, online and phone deliveries
count for 20% of the revenues of the Indian restaurant industry.
PORTER’S FIVE FORCES ANALYSIS
Threat of new entrants MEDIUM
High startup costs yet large number
of restaurants opening daily,
franchising system makes it easy to
get into competition.
Supplier power- LOW
Plenty of suppliers available in the
market at almost no switching cost,
also they supply common
commodities, no special customised
items, therefore low leverage for
Industry rivalry - HIGH
Limited product differentiation
promotes fierce competition,
competive and differentiating
factors are imperative to survive.
Threat of substitutesMEDIUM
Virtually zero cost to customers for
switching brands hence less loyal
customers, still customer loyalty can
be demanded by introducing
Buyer power- HIGH
Buyers have numerous options to
choose from and several outlets of the
same company to go to all offering
more or less same degree of customer
PIZZA HUT VALUE CHAIN ANALYSIS
General structure of a value chain
Inbound logistics: Pizza hut buys all the raw materials require like pizza dough, mozzarella cheese,
toppings, vegetables, edible oil, chicken etc. from suppliers
Operations: In order to achieve uniformity of quality throughout the different chains the dough is made at
a centralized location and then distributed across outlets
Outbound logistics: Pizza are delivered for the customers at their home, conventional mopeds are used in
order to drive in narrow streets of India
Marketing and sales: Pizza hut sells a brand rather than just food, It targets especially youngsters and
students which is evident from their advertising campaigns who are majorly inclined towards young
population, In order to indianise the restaurant chain they have introduced several items customized for
Indian taste, They have also introduced some pizzas which start from as low as 49 Rs..
Services and Support: Pizza hut’s philosophy is all about making their customers feel delighted, they keep
on introducing things which makes customers happy, for example as a promotion strategy they installed a
bell in their outlet and asked customers to ring whenever they had a good time in the restaurant.
Procurement: Pizza hut is famous for their special flavors of toppings, they could maintain their taste
consistently because they procure their ingredients especially from Australia and Spain.
Technology development: Pizza hut is an innovative company, they have developed their special research
facilities in order to devise new tastes for changing times and consumer preferences.
Human resource management: Pizza hut has a unique employee appraisal and reward program, each
employee is given the amount of incentive according to his quality of work.
The obvious rival of Pizza hut is Dominoes. Let us see how it fares against it.
Both Pizza hut and Dominos entered the Indian market in 1996, both are USA based companies.
Market share in 1999
Market share in 2012
Dominos is more aggressive in its expansion and selling. This is evident by above charts. Following points of
difference further support this fact.
Started with a franchise system
Decided that franchisees will deprecate quality, hence
it is better to own company owned outlets only
Emphasizes on quick service (fast food restaurant
Emphasizes on fine dining experience
Has an economy price for menu items
Has premium prices for menu items
Positioned pizza as a casual snack which can be quick Promoted pizza as an integral part of Italian cuisine
and easy to eat as luncheon or dinner
which can be enjoyed with family and friends
Slashed price significantly when compared to initial
Very less changes to price compared to time period
Entered into home delivery service arena quite early
Entered into home delivery service quite late because
they were unsure of the quality of the pizza delivered.
We clearly see DOMINOS has adapted a more fierce strategy, this is because the profit making belief of the
company. Pizza hut believes in delivering quality to the customers, customers who want quick service and easy
location access can go to dominos, those who want quality in food and service can go to PIZZA hut, it all boils
down to consumer preference, each chain has its own competitive advantage and are more of an indirect
competitor. Pizza hut, in my opinion would have more number of loyal customer.