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We recently hosted Westlife’s management, represented by executive director Akshay Jatia, for a roadshow in Singapore. Akshay spearheaded the digital journey at Westlife while launching and growing the McDelivery and On-The-Go channels. He played a crucial role in accelerating EOTF format and consolidating brand extensions like McCafé and McBreakfast. Overall, we like Westlife’s strategy of: 1) increased focus on meals (2.5x the market size of snacks) through: a) launch of gourmet range of burgers, b) increasing relevance in South India through fried chicken, and c) driving coffee adoption (target of 100% McCafe penetration in stores vs current 84%); 2) omni-channel strategy of increasing consumer experience across touchpoints (100% stores to be EOTF, focused on own app and drive-thru); 3) accelerated plans of network expansion (40-55 stores per annum vs 23-24 historically); and 4) margin expansion to 18-20% through product mix improvement, cost savings and operating leverage. Westlife today is a result of great execution (a real turnaround compared to ~8 years back). Westlife was not in the top-tier of a ‘great executor’ back then. The journey has been long and it’s all adding up now. Long-term benefits from
expansion of India’s food service market remain intact. We remain constructive on the stock. Maintain ADD.

* Gaining traction in meal category (2.5x bigger than snacking): The popularity of gourmet burgers has significantly improved Westlife's brand image from being associated with snacks to one that also serves meals. We understand that industry
size of the meal category is 2.5x that of the snacking category. Gourmet burgers are now available in all stores of the company.

* Chicken portfolio gaining strength in South: Launch of fried chicken in South India (where 95% of the population is non-vegetarian) has been value-accretive to McDonalds. Further, Westlife has launched (in a few states of South India) chicken wings as an entry level product. Positively, ADS in South stands at 1.8x (vs FY16) and that in West at 1.5x. Westlife has 45% of its total stores located in the South.

* Aiming to become leader in coffee: McCafe is now present in ~84% of Westlife stores (vs 32% in FY16) and is likely to reach ~100%, as per management. We believe, revenue contribution is likely to increase from current ~12% to 15-18% overnext 2-3years.

* Breakfast now available in ~40-45% of stores: McDonald's (the only QSR in listed space) serves breakfast in ~30-40% of its stores. However, stores located in malls (approximately a third of the total) cannot provide breakfast because malls typically openafter 10am. Hence, excluding mall stores, breakfast menu is now available in ~40-45% of Westlife’s stores.

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