Pizza Hut : Operational Strategies in India

Pizza Hut : Operational Strategies in India

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The Indian fast food market has been witnessing rapid growth on the back of positive developments and presence of massive investments. Currently, market growth is largely fuelled by the rising young population, working women, hectic schedules, and increasing disposable income of the middle-class households. Some of the unique properties of fast food like quick served, cost advantage, etc., are making it highly popular among the masses. Thus, India offers
enormous opportunities for both domestic as well as international players. According to a recent research report,
“Indian Fast Food Market Analysis”, the Indian Fast Food Industry is anticipated to grow at a CAGR of around 34% during 2011-2014. Anticipating the future growth, many big international players are entering into the market by making deals with the domestic players. And those already present in the Indian market are expanding their presence in different parts of the country (http://www.rncos.com/Report/IM264.htm). 

The new found interest in the Indian consumer market by Fast Food MNCs is only natural given the substantial size and varied customer base which provides ample business opportunities for these companies. According to a report by Maple Capital Advisors, the middle class which is the largest patron of the food service industry is expected to grow by 67 per cent by 2015, thereby increasing the ‘dining out’ consumer base. The growth of malls and multiplexes has popularised kiosks and food courts as food centres. Flavour innovations used to create variety are an obvious way for players to create excitement in the category, but this needs to be done with care (Khicha, 2011). 

Pizza Hut ventured to start business in India in 1996. The first Pizza Hut restaurant was opened in Bangalore, which was the first international restaurant chain to enter this category. Their operations in India are 100% franchise-based. In 2011, Pizza Hut had 131 outlets in India and plans to double the number outlets in India by 2015.The expansion is expected to happen in tier II and tier III cities. In 2011, it had 27 per cent market share of the eating-out market. (BT Online Bureau: Pizza Hut to double outlets in India by 2015, 2011). 

Among the many challenges Pizza Hut is facing in recent times are:

Constant need and assured supply for adequate manpower to run the outlets, a problem common to all operators in the sector

Challenges of solid supply chain system

Ever-increasing real estate cost

However, there are several drivers which provides opportunities for this sector, such as,

Segmenting the market to make the products more affordable to a varied range of customers

Increasing the number of offerings in the menu at affordable cost from appetizers to pizzas, pastas, and desserts. An example of the above is the introduction of a introduction of the ‘3-course meal for Rs 99’ to recruit more people into the brand by Pizza Hut (http://www.business-standard.com/india/news/pizza-hutwantslarger-pie/460177/&). Another driver to increase the consumption base is affordability. Pizza Hut, for instance introduced less than Rs 100 offerings across its menu, from appetisers, pizzas, pastas and desserts.

Further to enhance its strategic hold and intent in the Indian market, the company has launched a new adverting campaign particularly to celebrate its 15 years in India. The campaign focuses on people who have been visiting the brand-outlets have also grown up over the past 15 years. The campaign highlighted the sweet and sour moments of life, when the “irresistible” taste of Pizza (of Pizza Hut) acted as a catalyst to maintain the emotional bond among people. The campaign has been conceptualised by JWT India. Well-known actors in the campaign include, well-known faces like, Rajat Kapur and Shernaz Patel. Since the beginning, Pizza Hut launched various products (apart
from pizzas), such as, garlic breads and masala lemonades, pastas,skewers, shakes, mojitos, salads, gelatos, cheesecakes, and so on (http://www.retailangle.com/News detail.asp? Newsid=3652& Newstitle=Pizza Hut celebrates 15 years in India). Additionally, Pizza Hut planned to launch a new range of 15 different pizzas, which have
been inspired from regional cuisines and flavours from around the country (http://www.business-standard.com, Dec 19, 2011). 

Pizza, Made for India : Glocalization Strategy 

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A Pizza Hut outlet in India

The major competitor of Pizza Hut is Domino’s Pizza, which believes that, people eat pizzas because they want to enjoy the authentic taste. Considering this view, though Domino’s experimented with flavours like, Chettinad Chicken in the past, it realised regional flavours did well initially due to the novelty factor, but could not sustain
themselves in the long run. Hence, Domino’s answer to innovations are the cheese burst pizza or the three cheese pizza (made only for India) which are exotic, but retain the international influence. Unlike Domino’s Pizza, Pizza Hut wants to focus on more than just pizzas. It has offerings like pasta, appetisers and a larger collection of beverages. This is part of its strategy to make the transition from a quick service restaurant (QSR) to a casual dining restaurant. And the introduction of wine and beer in a few outlets is a part of the strategy. This strategy also acts as a differentiator from their rival Dominos whose core strength has been home delivery (Khicha, 2011).

The most recent offering by Pizza Hut in India is an extended menu of 15 localised pizzas derived from regional tastes including Sev puri, Chettinadu paneer, Chicken achari, Nimbu mirchi. The new product line, marketed heavily through a 360 degree campaign, celebrates the Kansas based chain’s 15 year anniversary in India. It also reflects
the brand’s aggression in a market where several new brands have entered the fray.

Pricing Strategy

In this recessionary times, the basic strategies of fast food businesses (including Pizza Hut) is on making consumers try new products and gradually move them over to high price points. Therefore, the strategy rests upon a simple dictum – hook the customer, make him get used to a product, so that he becomes a habitual buyer.

In general, the pricing strategy in the market seems to be concentrated on providing and enticing Indian customers with rock bottom prices in order to drive volumes and higher sales in an inflationary economic environment (Bhushan & Jacob, 2012).

Further, the emphasis has also been on creating and offering ‘snacking option’ rather than a full-meal by Pizza Hut. It piloted the project in Chennai in recent past and is taking the product nationally across 30 cities as Pizza Hut Delivery ( PHD) outlets. Currently, the organized pizza market stands at INR 1800 crores and is growing at 20-25%.

Home Delivery of Pizza 

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Pizza Hut Delivery

A recent innovation by Pizza Hut has been to cater to the home delivery of pizzas, and this has been done by the company by aggressively focussing on their sub-brand PHD. The firm launched the first PHD in 2008, in Bangalore on a trial basis and is now looking to aggressively expand in the delivery format. By 2015, the company aims to gain turnover of $100 million only from the delivery segment and has plan to set up 300 stand-alone PHD outlets. The new outlets planned will be franchisee operated like the existing ones.

Thus the current strategy of the company is to focus on both home delivery and dine-in as concepts to cater to the differentiated needs of the Indian customers (http://www.livemint.com/2011/06/22164005/Pizza-Hut-to-intensify-focus-o.html).

Management Structure at Pizza Hut

(http://www.pizzahut.co.uk/assets/redroof/files/student_pack.pdf)

Pizza Hut has a fairly well led out organizational structure which at once is both tidy and functional in nature. Each of the functionaries has clear-cut role definition with their key result areas in place. Typically speaking, there are four functionaries who manage the administration and business domain at Pizza Hut. They are as follows:

Support manager : The Support Manager is part of the management team and will help run their business by either managing shifts or working as a key team member. The key skills required for this role include, flexibility, communication, leadership, and team work and customer service.

Deputy designate manager : This is the role in which most new recruits start their careers with Pizza Hut. After completing the initial training, they take responsibility for the key areas of the business, assisting the management on a day-to-day basis. They will look to get trainees involved in customer service, team training and development and business controls.

Deputy manager : The Deputy Manager works as part of the management team to ensure that the restaurant operates effectively, meeting sales and profit targets and quality standards. The role is also to assist the manager in ensuring that all the team members are recruited and trained to meet all quality and product standards. The
Deputy Manager will take responsibility for the restaurant on the shifts that they run and will assist the manager on financial reporting and analysis of the business.

Restaurant general manager : The Restaurant General Manager has a responsibility for the running of the restaurant, managing the business with full ownership and responsibility. They take care of the following functions in this role:
Managing the financial side
Product ordering,
Production,
Quality monitoring,
Customer service, and
Training and development of staff.

Pizza Hut has an efficient talent management and succession planning in place and as such, the same is ensured through a promotional policy of mobility of their employees to higher levels of the organizational hierarchy on satisfactory performance at lower levels. For example, Restaurant General Managers can progress on to become Area
Managers who manage ten restaurants or more. They can also work on secondments at the Restaurant Support Centre in IT, Training, Marketing and Human Resources.

Pizza Hut is committed to recruiting and developing the very best people. They have a strong track record of developing their very best people at every level. Most of the Managers and half of their Area Managers started working as trainees. Promotion is on merit and ability and they have an excellent training programme to assist in people development.

This is an excerpt from  “A Case Study on Pizza Hut:Competitors’ Envy, Consumers’ Choice

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