KFC, Pizza Hut, and Costa Coffee: Ravi Jaipuria's Devyani International and its insatiable appetite for growth

Jaipuria, though, is delighted with the warm reception by the public market to the second listing after Varun Beverages. “The initial public offering (IPO) was as good as it could be,” he beams, adding that the issue was subscribed 117 times.

From ₹1,310.6 crore in operating revenue in FY19, Devyani International leapfrogged to ₹2,997.7 crore in FY23. The bottom line too has scripted a similar tale: From a loss of ₹59.3 crore to a PAT (profit after tax) of ₹262.5 crore during the same period. The growth momentum continues in the nine months of FY24. Burgers, chicken, pizza, coffee—KFC, Pizza Hut and Costa—as well as idli, dosa and food courts—Vaango and The Food Street—and the international business have been clocking a furious pace of growth over the last few years.  

The biggest growth driver, however, has been an aggressive store expansion strategy weaved by Jaipuria. Despite the first wave of the pandemic, the net new units (NNUs) almost doubled from 44 in FY20 to 82 in FY21. The numbers were 246 in FY22, 305 in FY23, and 209 in YTD (year-to-date) FY24. From 1,177 stores (KFC, Pizza Hut, Costa, Vaango, others) in 2022, the number of stores increased to 1,452 in 2023. During the same period, the India count increased from 1,120 to 1,387.

Also read: Fried & tested: KFC tops the pecking order

The secret sauce behind Devyani’s fairy-tale is KFC. For years, the burger and fried chicken brand played second fiddle to Pizza Hut in terms of store count. But the game changed in 2023, when KFC overtook its pizza sibling to become the biggest under Devyani’s portfolio. In 2022, KFC and Pizza Hut’s India numbers were at 461 and 483, respectively. In 2023, the numbers tilted in favour of KFC with 590 stores as against 565 of Pizza Hut.

Jaipuria credits the power of brand KFC for its successful run. “KFC is a powerful brand all over the world,” he says. In contrast, if one looks at the pizza category, the market is dotted with countless players—big foreign players, as well as countless homegrown ones. “But if you look at the chicken category, there is only KFC. There are a few players but there’s no second to KFC,” he says, adding that the company continued with its aggressive expansion during the third quarter of FY24, and added 94 net new stores across its brand portfolio. “With the Thailand acquisition, our total store count now stands at 1,735 stores,” he says.

But what about the muted consumer sentiments over the last few quarters? “The weak consumer sentiment and depressed consumer spending is temporary and short-lived,” says Jaipuria. The operating and financial performance, he adds, are stable.

Devyani had set a target of 2,000 stores by 2026, but it is on track to achieve the milestone in 2024. “Our store addition strategy stands as a testament to our belief in the long-term potential of our Indian QSR industry,” he says.

Market observers and industry analysts are impressed with Devyani’s aggressive play. In its equity note in February, Nuvama Institutional Equities pointed out how core brands Pizza Hut and Costa are well poised to drive growth. Devyani International, it noted, has embarked on a three-pronged approach to realise KFC’s full potential. The first lever revolves around improving store economics. This means smaller-size stores, which can achieve at-par store productivity. The second is improving delivery share: From 10 percent pre-Covid to over 35 percent. And the last crucial plan is to ramp up stores. While KFC was the fastest-growing QSR format between FY11 and FY15, growth slowed over the next five fiscals till FY20. “However, with ownership consolidated, Devyani International is now aiming at stepping up expansion again,” it noted.

On the Pizza Hut front, Devyani has rejigged its strategy. “It is shifting focus to delivery. More than 75 percent of its network is delivery-focussed stores versus 50 percent earlier,” Nuvama underlined. Devyani, it added, is improving store economics. In FY23, new net units of Pizza Hut stood at 93, and in the nine months of FY24, the numbers were at 59.

Jaipuria, meanwhile, adds two smaller but powerful engines of growth in the Devyani story: Costa Coffee and Vaango, a South Indian cuisine brand. “Costa has been growing at a heady pace. We are doubling the number of stores,” he adds. From 103 stores in 2022, Costa increased its count to 154 in 2023, and in nine months of FY24, the brand added 42 net new units. From taking a Covid hit—from ₹82 crore in operating revenue in FY20 to ₹21.4 crore in FY21—the brand bounced back handsomely in FY22 and posted ₹41.1 crore. Over the next two fiscals, it pole-vaulted to ₹101.8 crore in FY23 and ₹106.7 crore in the nine months of FY24. Vaango too has steadily expanded its reach to 54 stores by the end of 2023.

The secret sauce behind Devyani’s fairy-tale is KFC, which overtook its pizza sibling (Pizza Hut) in 2023 to become the biggest under the brand’s portfolio Image: Shutterstock

Jaipuria, reckon marketing and branding experts, has meticulously crafted his QSR empire, which is now the biggest in the country. There are not many who would have successfully managed to tango with PepsiCo and Coca-Cola. While Varun Beverages is the second-largest franchisee of PepsiCo outside the US, Devyani International is the only India franchisee for Costa Coffee, a brand owned by Coca-Cola. “The name (Ravi Jaipuria) is the backbone of Devyani, and stands for a lot,” says Harish Bijoor. Jaipuria, underlines the marketing and branding guru, has a deep understanding of the grassroots realities, the key ability to manage people, and the food and supply chain. The founder has been in the business for decades, and in the QSR space, there is no substitute for experience and ruthless execution. “He has been at the peak of his game for so many years, and continues to do so,” he says.

The challenge for the brand is to ensure that it does a balancing act when it comes to its house of brands and expansion strategy. “It is tempting to keep expanding KFC as it’s the main engine of growth but one has to get the act together for Pizza Hut,” says Ashita Aggarwal, professor of marketing at SP Jain Institute of Management and Research. For decades, Pizza Hut has been a distant second to Domino’s, and over the last few years, a rash of smaller homegrown pizza brands have been chipping at the market share of the big boys. “Pizza Hut has to fire on all cylinders so that KFC doesn’t end up doing all the heavy lifting,” she adds.

Jaipuria contends that Pizza Hut, along with KFC, Costa and Vaango, are growing in sync. “There are challenges and competition, but Pizza Hut is a great brand and a product to have,” he says. Does seeing two IPOs—Varun Beverages and Devyani International—make it easier to navigate market turmoil during rough times? Jaipuria believes in two mantras: Patience and deep pockets.

“How will you survive rough times such as Covid if you don’t have deep pockets,” he asks, sharing one of his key learnings. “India is a great place to be. Look at the turmoil across the world. We are lucky,” he says. The economy has been growing, the consumption story remains intact, and the headroom for growth is massive. “What happened in the last 20 years and what will happen over the next five years will be drastically different,” he says, adding that the opportunities are endless. “QSR is a great business to be if one can manage it right,” he signs off.