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Growth prospects attractive, moats widening

 In this report, we present the key takeaways from Jubilant Foodworks’ (JUBI’s) FY22 Annual Report.

* JUBI continues to build extensively on its three key moats of delivery expertise, supply chain efficiency and technological superiority.

* The emphasis on its ‘value for money’ proposition was also highlighted with the company choosing not to hike the price of its ‘Every Day Value (EDV)’ offering even as it took price increases on other parts of the portfolio.

* Management also indicated a good initial response to Popeyes with medium- term targets of 250-300 stores. We had highlighted in a detailed note earlier this month about: a) how Popeyes has fared globally, b) what JUBI brings to the table and c) why do we believe it is the most scalable among JUBI’s non-Domino’s businesses.

* Quick-service restaurants (QSRs) are our preferred picks to play the discretionary consumption growth story. JUBI, DEVYANI and SAPPHIRE are our top picks in this domain.

Changes impacting the food services industry post Covid-19

* The structural changes to consumer behavior led to a massive shift in the market structure, as the organized market grew more than the unorganized one and online ordering channels as envisaged grew at a much faster pace than offline channels, propelling the growth in delivery and takeaway channels.

* While Dine-In and On-Premise consumption will return, there is growing evidence of incremental occasions and habit-build in favor of the off-premise consumption, which will sustain and endure even in post-Covid period.

* The last two years have also led to non-home food becoming a lot more acceptable outside of special occasions, especially so in the smaller town

How is JUBI reinforcing its already strong moats?

* Store additions and reduction in delivery time: JUBI added a record 230 new stores and entered 48 new cities in FY22. Increasing reach is helping reduce its average delivery time. Now more than 70% of the company’s delivery orders are being delivered under 20 minutes and customer satisfaction scores grew to their highest-ever levels (best-in-class in the industry).

* Value for Money: JUBI has endeavored to improve its value-for-money quotient continuously in an effort to recruit new consumers from the unorganized space (66% of the FSI by value). Through improvement in process efficiencies and other cost improvement measures, the management believes it can offer high-quality meals at an affordable price and even maintain those value price points on a like-to-like product basis.

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