In a rare example of a multinational brand seeking to terminate a global partnership in India, Jubilant Food-Works (JFL) operated Domino’s Pizza could swap Coca-Cola for PepsiCo, a move that may result in JFL ending its 20-year exclusive deal with Coke in the country, two officials directly aware of the development said.
Domino’s is in active negotiations with rival beverage makers such as PepsiCo as part of a move that industry watchers say is aimed at cost savings.
A JFL spokesperson confirmed the development. “We have enjoyed a strong partnership with Coca-Cola India over the last 20 years. As we look to build our business for the next phase of growth, we have initiated a process to look at various options and identify the right beverage partner who can help strengthen our beverage portfolio and drive growth,” she said.
With a store count of 1,144, Domino’s is the single largest quick service restaurant chain in the country operated by the listed JFL, , and beverage deals are seen as significant opportunities for sampling and consumer connect.
“Large food chains may switch their beverage exclusivity for better commercial terms and stronger advertising and marketing support. Sometimes it may also be to shake up the status quo by injecting a competitive element,” Lloyd Mathias, former senior PepsiCo executive and business consultant said.
One of the two officials ET spoke to said PepsiCo was called to present its contract term to JFL last week. The officials declined to be named. The Michigan-based Domino’s Pizza, which has a global footprint across 85 countries, has historically had exclusive partnership deals with Coca-Cola worldwide, with only a few exceptions such as Australia, New Zealand and Malaysia where it serves PepsiCo brands.
Rivals such as McDonald’s has always been associated with Coca-Cola, while Yum! Brands that operates Pizza Hut, KFC and Taco Bell, has had a long-standing partnership with PepsiCo.
An email sent to Coca-Cola elicited no no response until the publication of this report.
India is a critical market for Domino’s. With accelerating growth in dining out as a habit, JFL is looking at boosting profitability. It reported an over three-fold increase YoY in its net profit for the quarter ended June 30, riding mainly on Domino’s everyday value pricing and menu innovations.
Same store sales in the quarter went up 26% YoY “We will see an acceleration in store expansions from the second quarter onwards. We We are seeing reasonably sustained tailwinds and that is one of the reasons for healthy same store growth numbers,” Pratik Pota, JFL chief executive, said on an earnings call late last month.
Saying that the focus areas would be driving penetration, frequency of existing customers, innovation, technology and superior customer experience, Pota had said on the call that JFL’s attempt would be to drive profitable growth, which is higher than the market growth.
“The quick restaurant space is unprofitable for beverage companies, but deals with restaurant chains help them in sampling and consumer connect,” one of the officials ET spoke to said.