Good afternoon, everyone. Ladies and gentlemen, good day and welcome to Sapphire Foods India Limited Q1 FY24 Earnings Conference Call, organized by Orient Capital. As a reminder, all participant lines will be in the listen-only mode, and there will be the opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star, then zero on your touchtone phone. Please note that this conference is being recorded. I now hand over the conference to Mr. Bhavya Shah from Orient Capital. Thank you, and over to you, sir. Good evening, everyone. Welcome to the Q1 FY24 earnings con call for Sapphire Foods India Limited. From the management, we have today Mr. Sanjay Purohit, Group CEO and Whole-Time Director, accompanied by Mr. Vijay Jain, CFO. I hope everyone had a chance to go through the results in the investor presentation, which was uploaded on the exchange earlier today. Before we proceed, a reminder that this call may contain some forward-looking statements, which do not guarantee future performance and involve unforeseen risk. A certain disclaimer has also been published in the presentation. I would now like to hand over the call to Mr. Sanjay Purohit. Over to you, sir. Good evening, everybody. Welcome to the Q1 FY24 earning call presentation. Like Bhavya said, I hope you've been able to go through the presentation that has been already uploaded. Let me start off with a summary. As usual, between Vijay Jain and I, we will cover very quickly the highlights of the quarter. Our consolidated restaurant sales grew by 20% despite the consumer demand headwinds. This seems to be, you know, as good as anyone or perhaps better than most players in the industry. Our revenue was INR 652 crore for the quarter. During the quarter, we've seen raw material inflation cooling off, and thereby on both the brands, Pizza Hut and KFC, we have-- our gross margins have improved. Our focus here during the quarter, given the consumer headwinds, is to do what is in our control, which is how can we win consumer trust by delivering both value innovation as well as other product innovation and invest behind strong advertising programs. From a product innovation perspective, I'll talk about KFC Snacker range, the Pizza Hut, and new core pizza that we launched in April. We added 35 restaurants in the quarter, 17 KFCs, 16 Pizza Hut, and 1 KFC and Pizza Hut, each in Maldives, taking our total restaurant count to 778. Our consolidated restaurant EBITDA margin was 17.2%, down 130 basis points, but in absolute terms, it grew by 12% Y on Y. Our consolidated EBITDA, this is post-Ind AS EBITDA of INR 122 crore, is at 18.8% margin. This grew Y on Y by 10%. From a percentage basis, it was down 170 basis points. Our consolidated Adjusted EBITDA, that is pre-Ind AS, was INR 77 crore, or 11.8%, and this grew by 7%. Our consolidated PBT of INR 33.6 crore or 5.2% declined Y on Y by 6%, and PAT was INR 25 million. I want to call out that last year, we did not have tax, and this year, we have had a deferred tax expense, but no cash outflow, and therefore, PAT is INR 25 crore. Let me now cover the business performance of our three verticals, along with Vijay. Let's first take a look at KFC. Despite the macro conditions, Sapphire KFC has delivered a really strong financial performance. We will speak about our restaurant EBITDA, which is our, amongst our highest ever at 20.8%, growing 50 basis points over last year. When I get to slide number 16, we spoke about the six brand priorities to enhance fried chicken category relevance, to enhance our cravable taste, image, provide value options to consumers, both entry value as well as abundant value, deliver a frictionless customer experience, and the work that we do on digital kiosks, the KFC own app, and partnering with our aggregator, friends, Zomato and Swiggy, are the three initiatives under this priority. On operational excellence, the 7 minutes express pickup promise that we give to consumers, and finally, improving accessibility. I'm moving on to the next slide, which is slide number 18, and you can see the new products that were launched during this quarter. I spoke about during the previous... During the previous, or the full year FY23 call, I did speak about Chicken Roll that we had just launched. Along with Chicken Roll at 99, we have launched a range of seven products at 99, and this is really to bolster our menu operations across day part and, including the snacking occasion. This includes the Chicken Roll, Chicken Longer Burger, which is a new product, then a popcorn bag, some beverages, some fries, and also a dessert. This product or this value range, and seven products is very important for us to be able to bring back transactions over a period of time. From an operational excellence perspective, I don't have this in my slide, but I just want to call out that recently we won an award. We were adjudged as, or we were recognized by Yum Global as one of their top three franchisees across the world on food safety scores. Food safety is a important enabler to deliver the right kind of customer experience, so our effort on operational excellence continues. If you go on to slide number 20, you'll see some of the stores that we have opened. The Punjab stores, truly, the brand stands out in that market, the quality of the assets that we have built and the revenue and the brand franchise that we are able to drive. We opened our first store also in Kolhapur, which is really doing well. Let me hand it over to Vijay to take us through the financial details. Thank you, Sanjay. On channel mix, slide number 21, the mix has remained largely stable year-on-year, with 36% coming in from delivery, 19 from takeaway, and 45%-- sorry, 45% from delivery, 36 from dining, and 19 from takeaway. While SSG was flat, ADS moved up sequentially to 138,000. It was 127, in Q4. Overall revenue grew up by 21% year-on-year. As inflation cooled off, we see, we saw gross margin recovery. It was up by 80 basis points year-on-year, and also 130 basis points sequentially. This, combined with tighter cost controls, enabled KFC deliver one of the highest ever restaurant EBITDA of 20 point or at 20.8%. Slide number 24 gives you the 4-year trend and the 5-year quarterly trend. As can be seen, at 20.8%, KFC has delivered the second highest EBITDA, and the first being Q3 FY22, which was a festive quarter. Really strong performance in the current quarter. On Pizza Hut, the sales trajectory of the brand has remained largely similar over the last three quarters. April to September of last year, 2022, were perhaps the best six months ever in the, you know, in our history of the brand, where we've delivered in the first half, 62 ADS. As we have consistently said, post Diwali of 2022, this has come down, and today we are hovering in the region of about 51, 52 ADS. We have seen a sequential increase in Quarter One versus Quarter Four of FY23, but this is a normal seasonal increase that we see. Like I said earlier, we continue to do what is in our control and focus on those activities. We've invested in higher marketing spends behind the brand. Our Flavor Fun continues to do well. The launch of the 4 of the 10 new core pizzas also, they have done well, but still we have not been able to move the needle on the brand. The brand has shown 12% revenue growth. If you see slide number 26, we talk about the brand priorities. In the brand priorities, I'll focus on operational excellence, and, you know, to many of you, you'll perhaps feel that this is a generic commentary that we you know, we make every time. Now, if you go to slide number 29, we are really happy to say that we've been recognized by Yum! Brands as being the number one franchisee in the world in terms of global experience scores for the first half of calendar year 2023. I'll just repeat: We are the best franchisee in the world on guest experience scores and recognized by Yum! Brands. I think, if we continue to focus on guest experience, on food safety, hygiene, on, on the back-end processes, increase marketing investments, invest behind product innovations, we are quite confident that we will turn around this brand. You can see some of the stores that we have... that we have opened, the Baramati store or the Dabolim store, two Phoenix, new two Phoenix mall stores that have opened out. Vijay will take you through the financial performance. I'm on slide 31. Channel sales contribution. Delivery mix moved up to 50% year-on-year, but it's largely in line with the last quarter. On SSG, while the SSG was negative, we did not see any decline in the transactions, so that's the heartening part. ADS moved up sequentially to INR 52,000 versus last quarter, it was at INR 50,000. Overall revenue for the bank grew by 12%. While gross margin dropped by 20 basis points year-on-year, sequential quarter, we saw improvement of 80 basis points. This is due to the raw material pricing cooling off during the quarter. However, the restaurant impact, restaurant EBITDA was impacted by lower sales, and the EBITDA came at 9%. This is similar to the last quarter. Slide 34 shows the 4-year trend and the 5-quarter trend. As Sanjay mentioned, that we continue to focus on the value, product innovation, and customer experience, and we are confident that this trend will turn around, turn around in the future. On Sri Lanka, there's nothing very different to report. The consumer demand continues to remain quite challenged because of the cumulative impact of both inflation as well as higher tax, direct taxes being imposed on citizens. Operating conditions remain stable. We feel that perhaps demand conditions have bottomed out and progressively, we should start to see an improvement. Inflation in the month of June came to 10% from, if you remember, last year, it peaked in the month of October, November, at 80%-90%. Inflation certainly has cooled off and stabilized. We continue to, like I said, focus on areas that we control. There's a very exciting launch that has happened four days ago, called Pizza Hut Melts. I'll talk about that perhaps in the next earnings call. Again, it's a fantastic product for individual consumption and can drive a snacking occasion. We are using product innovation to be, to help us lift consumer sentiment in the category. On slide 37, as things have stabilized, dining mix, dining has come back and the mix improved to 29%, vis-à-vis year, 27%, which was FY23, and vis-à-vis 22% in Q1 last year. Overall, SSG was flat, however, the revenue grew by 9%. In Sri Lankan rupee terms, due to Forex currency appreciation, in Indian rupee terms, it grew by 27%. Moving on to the gross margin, we saw 170 basis points improvement year-on-year. As Sanjay mentioned, the raw material prices have largely stabilized. We don't see any further increase on the raw material prices. However, due to flat SSG, it impacted the restaurant EBITDA, which has came at 13%. This is largely in range with what has happened over the last 2 quarters. Slide 31 gives you a 4-year trend and a 5-quarter trend. I would like to end by saying, as mentioned previously, we expect recovery to start happening probably 2024 onwards. That's the time we expect probably the GDP to turn flat to positive and inflation to come down in single-digit time for Sri Lanka. Moving on from Sri Lanka, happy to say that in Maldives, we have opened 2 more restaurants, one each KFC and Pizza Hut. This takes our total tally to 4 stores in Maldives. Finally, on slide number 14, on ESG highlights, very happy to say that we released our second ESG report based on GRI, GRI,SASB, and BRSR norm. We are the first in the QSR industry to do this last year, and we continue with our journey. While the slide gives you a few highlights, I would encourage you to, go through our website, look at the detailed report. It will give you a good insight into kind of work we are doing on the ESG front. With this, we can hand over the- Yeah. Just, I'll just summarize. In generally tough conditions, our actions and our results perhaps demonstrate our ability to execute really excellently. Whether it be the KFC financial performance or be the Pizza Hut Yum recognition of being the number one franchisee globally on customer scores, or reflected in the 20% revenue growth that we've been able to deliver. I think we are focused on the right actions, and we believe that, as progressively, results should continue to improve, we remain bullish on both the brands and both the markets. With this, I'll hand it over to you for question answers. For questions. Thank you, sir. Participants, we will begin the question and answer session now. If you have a question, please press star and 1 on your touchtone phone. If you want to remove yourself from the queue, please press star 2. Participants are requested to use only handsets while asking a question. The first question comes from the line of Nihal Jham from Nuvama. Please go ahead, sir. Yes, thank you. Good evening, Sanjay and Vijay. My first question was on KFC. Just wanted to get a sense that has this quarter seen all the gross margin benefits play in, or there is still some that could play out in the coming quarters? Hi, Nihal. We believe largely it has played out in terms of gross margins. Again, as I said in previous calls, we would typically not focus on gross margin per se. What we maintain at a for KFC as a brand, the kind of growth we are looking at over 3-4 years, how we can maintain the restaurant EBITDA in and around 20% mark, that's the focus area. I would not be too worried about the gross margin levels. Let's see how it moves, especially with the Snackers range coming in. The emphasis is on that 20% kind of a mark at restaurant EBITDA level. Sure, Vijay. Just a related question on KFC. Was there an incremental benefit from the recent value launches, which has helped keep the SSG flat or it has been an overall portfolio performance? I would say while there would have been some benefit, too early to say a big amount of benefit, especially that chicken roll got launched somewhere in April, but the other parts of the snacker range got launched just very recently, a month back. I won't say that full benefit has come in yet. Let's see how it plays out as we move forward. Wouldn't say that the recent launches have, in a way, kept the SSG flat. It is an overall portfolio that is laid out equally well. Yes, correct. Yes. Correct, correct. Final question on Pizza Hut. Whether I look at it, say, absolutely as a KFC and Pizza Hut divergence in SSG or versus some of the other competitors. I see that this quarter's SSG performance, despite the environment, seems a little exaggerated. You mentioned transactions have stayed flat, so is it maybe a case that there is an issue with the... Not, not issue, maybe there is an higher focus towards people taking a Flavor Fun of some of the value range? Or, or what, in your opinion, is leading to the increase in divergence in SSG versus KFC PH, and say, even if I look at some of the other competitors who report? Actually, there's been no divergence between SSSG and SSTG over the last 3 quarters. Typically, there's been a 3%-5% difference between KFC on the negative side, whereas, on Pizza Hut transactions, after we launched Flavor Fun, transactions have been better versus competition, if you look at again, if I just see KFC versus competition, overall revenue growth is 21%. Competition is perhaps lower, where SSSG might be higher, but overall revenue growth is lower because of our addition. When you look at Pizza Hut, I don't think they are apples to apples comparison. What we provide as same store sales growth and say, like for like growth, I'm not too sure whether they are comparable. Again, just to add to that, Nihal, from a trajectory point of view, the trajectory has remained where it is over the last 6 months or so. Our ADS has hovered around INR 50,000-52,000 mark. One of the reasons also is that last year, quarter one, we did really exceedingly well. Quarter one was 40% SSG, quarter two was 23% odd SSG. Yes, when you compare with the base, the SSG drop looks higher, but no further drop has happened compared to the previous quarters, or in fact, the seasonal upliftment, which we experienced during April to June quarter, that has happened. Second part, again, as I said, transaction is an important point over here. SSG has remained flat, whereas, let's say, probably a brand like KFC, or, there would be slight, small amount of negative transaction growth. As Sanjay said, third part, when you're comparing, it's not apple to apple, competition, some give like for like growth, which is not really SSG. If you actually convert that into SSG, the number would be, according to us, significantly higher. I, I'll come back in the queue for this sure. Thank you. Does that answer your question, that question, Nihal? Just the follow-up was that even if you adjust the competition number, it is just that, it is still lower. I was just thinking that, in our effort, other than, say, maybe the sentiment improving the next couple of quarters, what are going to be the incremental steps which will see, say, Pizza Hut improve the SSG and come back to the earlier trajectory? These were the two follow-ups, which maybe are still left open after our conversation. The, the answer is quite. We continue to focus on our ops. If we, let us, not we are trying, we are investing more on advertising. From a product range perspective, we believe we have got the range now to compete both from a pure product perspective as well as from a value perspective. From a delivery perspective, also, we are working to deliver the best customer experience. The building blocks are not. The building blocks are doing, you know, doing things with discipline on an everyday basis. There's no silver bullet, if I were to say so. Point taken. Sure, Sanjay. Thank you so much. Thank you. The next question comes from the line of Arnab Mitra of Goldman Sachs. Please go ahead. Yeah, hi. My first question was on KFC. you've seen a slight dip in SSG despite the price increase that was taken. My question was, do you basically think this is due to the price increase, that there would have been some negative impact due to affordability? Are you seeing that improve because now it's been 4 months since that price increase was taken? Again, as I mentioned for Pizza Hut previously, the kind of upliftment we see in quarter one versus quarter four, that upliftment we had seen both in terms of transaction as well as ADS by way of APC. That has happened, which proves that the price increase has not impacted. The SSG being flat is more of a function of the last year's, probably, growth, which we saw last year in quarter one, which was the first quarter coming out of COVID. Having said that, when you take a 2 or 3% kind of a price increase, the realization does not really flow through from a SSG point of view, because there could be some amount of down trading which may happen. Having said that, while raw material inflation cooled off, there were other inflations on the P&L, which needs to be taken care of. A 2%-3% price increase, we have been taking almost every year at the start of the year for KFC as a brand, and we have not seen any impact on the transactions or the, or the ADS over the last several years, and the quarter one number shows that for us. Understood, Vijay. My second question was on Pizza Hut. Again, just following up on what Nihal had asked in the previous question. Is the environment for the pizza category, so one, we are generally in a weak environment, and the pizza category seems to be doing worse? Is there any thought process on moderating store expansion in Pizza Hut as you go ahead, if the numbers remain similar in terms of negative SSG? Are you comfortable with the absolute level of ADS and profit you are making in the new stores, and therefore you don't think there is any need to moderate the pace of expansion or take any other steps, like reducing advertising or other things? Second parts to that question. The first, as a Sapphire Foods, we've always emphasized the importance of capital allocation and delivering, our ROCE on, on everything which we invest, so that re- remains always in focus. Having said that, it's now 9 months negative SSG. Yes, we would recalibrate approach on Pizza Hut store opening, not in a more dramatic or a drastic manner. The number of stores we are likely to open this year on Pizza Hut would certainly be lower than the number of stores we opened in the previous financial year on the Pizza Hut. Having said that, our 3-4-year horizon remains still same. Our guidance remains the same on both the brands. We believe we could double the count over 3-4 years, over 3-4 years, the count which was there as of December 2021. I understood, understood. On, on your initiative on increasing advertising spends, which you had highlighted last quarter, that continues or there is some thought process of that, whether this is the right time to do it, given the environment that the category is facing? No, no, it, it continues. It continues throughout the year, throughout the rest of the year. Yeah, what is the issue articulation that we believe that, while we have got the product, the pricing, especially value equation on Pizza Hut right, we've got to build the consumer franchise on the brand, and that's really important given the fact that we've not been on television for a long period of time. As we expand into newer geographies and into new trade areas, consumers there must know what the brand is about and what the brand promises. Therefore, they're discovering our omni-channel experience in any case. They're, they discover delivery, they discover takeaway and dine-in. Along with that, greater advertising spends will help the acceleration of consumers, you know, fully appreciating the brand promise. Now, we've got to also play it, you know, reasonably, sensibly from a, you know, from a financial perspective. Therefore, instead of trying to do something only in one quarter, we believe that if we continue to invest over a long period of time, undoubtedly this will, this will help and make a difference. Understood. Thanks. Thanks. That's it from my side. All the best. Thank you, Arnab. Thank you very much. Thank you. The next question comes from the line of Devanshu Bansal of Emkay Global. Please go ahead. Yes, sir. Hi, thanks for the opportunity, and sorry for pressing again on the Pizza Hut side. Despite weak macros, the chicken category is growing at 20%+. Burger is also seeing encouraging 15%-20% growth. Pizza as a category is seeing sort of weaker trends. Just wanted to understand the reasons for this. Has this category matured, there is higher competition, or there have been higher price hikes due to dairy inflation in this category? Again, as I mentioned previously, when macroeconomic conditions get tough, it did not impact maybe all the category in a similar manner. This has impacted across the consumer and the retail industry, and within those, each company or each category will got impacted differently. Yes, we are seeing a slightly more different impact of, for Pizza Hut. Having said that, it's equally true that we are seeing very different impact for Pizza Hut on transaction remaining positive, or flat vis-à-vis, while SSG has gone negative. Yes, it's impacting slightly more from a pizza category. The one of the reason could be, yes, we acknowledge that the competitive intensity in this category and the number of players in this category, both regional players and national players, could be one of the reason, as a result of which you are seeing slightly more, steeper SS, negative SSG in Pizza Hut. Got it. Even from Pizza Hut, this transaction, number of transactions remaining flat, and we have seen a 9% sort of a decline. We have few rounds of price hikes also, of which the benefit should have flown. The average check size also sort of suggests that it, it has seen a significant dip. What are the reasons for that? Is it largely because of introduction of Flavor Fun or there, there are other reasons also for that? I would say three reasons. One, if I again, try and recall the journey which we have taken over last three years on Pizza Hut, from where our APC used to be, the average per check used to be upwards of INR 700, which was more a fine dining check size rather than a QSR check size. There has been a conscious call in terms of the way we have curated our menu over the last three years, introduction of meal options. That's one. It's something by design, which we have been working over three years. Now it's in more reasonable range of INR 450 or so. The second, yes, introduction of Flavor Fun, while it has helped our transaction, and we have seen good transaction growth over the last one year or so, even now, now without, with -9%, transactions are flat. Flavor Fun has certainly helped us, so that's another reason. Third, yes, there, there would be downtrading, certainly by consumers when there is a price increase, inflation as a scenario. All these three reasons put together, I would attribute towards the APC drop. Got it. Anything on the promotional front, as in you are giving higher discounts, et cetera? Is that also happening? Nothing that... while we would do rejig our promotions continuously, I don't think the overall promotions, discounts towards overall promotions has gone up or gone down. They remain largely the same across the channel. Got it. Right. It's not, there's no material change. Got it, sir. This quarter, Q2, there's an incremental headwind in terms of Adhik Maas this time around, so which can likely impact KFC, SSG. Any kind of outlook that you can provide will be helpful. We, while we avoid a quarter on quarter outlook, you are right, the quarter 2 is typically a bit more difficult for KFC because of the various festivities, which leads to the vegetarian festival, so-called, where people avoid non-vegetarian. This is a cycle. Every year, this would be the case. Last year, also there was Shravan, Shradh, Janmashtami, Ganesh Chaturthi, part of Navaratri, everything fell in Q2, this is part and parcel. I don't see any material impact compared to what we saw in quarter 2 of last year. Got it, sir. Thanks a lot. That's it. Thank you. The next question comes from the line of Shirish Pardeshi of Centrum Broking. Please go ahead. Hi, good evening, Sanjay and Vijay. Thanks for the opportunity, and congratulations for winning the award and trust. Just 2 question in the beginning. We had a IPL event, and of course, that is also one of the thing which has happened. When I look at some data point, the PH store has grown 28.5%. From 235 stores, we have now 302 stores, and even KFC stores has increased about 27%. When you map this growth against that, and the third angle, which we put it as the SSG, is there drastic change in the consumer behavior? I mean, though, Vijay has given some downtrading angle to it, but can you talk, and I believe, I, I, I respect your thought because you spend a lot of time to rejig the menu and understand consumer behavior. Could you spend a minute or two explaining what consumer trends are now picking? Have the pizza consumption is really going to take challenge or, KFC novelty is going to fade away? Just to clarify on the numbers please, before Sanjay would answer the, the trend please. While you called out 28% store growth and also you spoke about the SSG, one thing to just call out, that when we build the new stores, we always expect the new store to start at 70%-75% of the brand average ADS for KFC, and maybe 75%-80% of the brand average ADS for Pizza Hut. You would never see a revenue growth, which would be beating the store growth per se from the new store per se. And then what you get on top of that is the SSG. Sanjay can take the second part on the trends going forward. Just repeat that question on the trend, Shirish, if you don't mind? Yeah. I was saying that you have won the Consumer Trust Award- Yeah. That's why I'm asking this question. Rather, I'm more excited to ask this question and pick your thought. On one side, we are seeing a consistent depression in terms of demand for pizza. Maybe there are many angles to it. That's why I was saying that the novelty for KFC is also at stake. I'm not saying at stake, sorry, that's not the right word, but I'm saying the consumer has not been picking up, and this is in activation, we also had a very strong IPL event. In that connect, I want to see that what really consumer behavior is telling us. Yeah. First of all, the IPL event existed last year, existed this year, and therefore, you know, we are comping the same event, so that's not a, you know, that's not so much of a problem. I think we continue to remain very bullish on the category itself. We continue to remain very bullish on the category. Having said that, there is some correlation of such industries to overall GDP and how GDP performs. Within GDP, there is a, there's a lovely metric called Private Final Consumption Expenditure, which is a really good barometer for consumer spends across all categories. You will find a considerable dip from April, September 2022 to the last nine months. Significant dip in this PFCE as the government publishes. When overall GDP is impacted, and perhaps GDP is impacted a little bit because of the higher inflation that we saw last year, categories, all discretionary categories will go through some amount of pain, and you can see it in the FMCG results also that are being published. I would not even remotely say that it is a specific brand problem. It is across the industry, across the packaged foods as well as restaurants like us. Within that, if you look at, and I'd love you to do that analysis, Sirish, when you stack rank revenue growth right across all brands, KFC at 21% is perhaps the highest, and Pizza Hut also at 12% has not done too badly. The important thing here is, the finally, new stores add to the overall transactions that, you know, that consumer spends on the brand. New stores are also increasing this entire transaction buck-bucket. If you just see what KFC total transaction growth, including new stores, would have been, is close to 20%. Why do I talk about overall transactions? Normally, we don't, we don't speak about this in our earnings call, but it is indicated that the consumer franchise on both the brands is strong. Now, it is true that on pizza, specifically, competitive intensity has gone up over the last 18 months or so. We are seeing a little bit of the impact of that competitive intensity on our brand. In fact, the market leader has seen perhaps even greater intensity there. I think we are still, I reiterate, I think we are still doing the right things. We've got the product mix right, our value equation right. In fact, if today versus the market leader, our prices are as good or perhaps even more economical, you know, in from a meal bundle perspective. We are doing the right things there. We've got accessibility in many of our large markets. The brand, at least, is accessible. We are working hard on delivery. Our dine-in experience is as, you know, good as, as ever. I think we have to really invest on a long-term basis on building the consumer franchise, which we are trying to do that through higher marketing spend. This is not, like I said, not a silver bullet. In the face of this consumer headwind, it's not a silver bullet, but it will definitely pay dividends as we go along. It's a slightly long answer, Sirish, but I hope. I got it. That's really helpful. Just to follow up, we last quarter introduced 10 new pizzas. Correct. Will you be able to help us that what is the contribution or is that the segment which is actually driving the footfall, or you're trying to arrest the decline, but despite that, it has just declined 9%? This is a refresh of our existing pizza range. While we, while our core pizzas, while we launched 10 core pizzas, we removed another 12. Really, this is an exercise, the last time this exercise would have been done would have been about 4 years ago, when we would have revamped the range. I think what was the consumer insight that we were trying to address, and through the toppings and through the saucing and through the flavors, we wanted to give both Indian as well as international flavors. That is one. We wanted to make the mouthfeel, far more- I'm, the word is not right, juicier or far more wetter, you know, otherwise, sometimes the pizza can get a little dry. Through the extra saucing and through the toppings. this core range has actually seen, so one has gone out, one has been replaced by, this range, and, and this is part of, like I said, part of our core range itself. Wonderful. Just last question on KFC. I think my experience wherever in the country I've traveled in last 90 days, I see there is a lot of rush at the KFC counter, while competition, I see that deserted. I, I just wanted to pick your real qualitative thought, bringing INR 99 price point and introducing this. Why I'm asking this is that, is it not a fear in the medium to long term that would be a margin dilutive, or is it some specific action which is Yum! has been trying to push, this portfolio? No, not, not at all. It is, not at all to your last statement. It's not Yum! that is pushing it. I think we are pushing it equally hard. One of the important levers of growth is driving accessibility to consumers, and accessibility comes through both distribution, and in our case, in an FMCG, is the number of stores that a product is available in. In our case, it's the number of stores that are present in a particular city, and whether through the omni-channel experience, people are able to therefore access the brand. One is accessibility. Pricing plays a very important role, and pricing is at two levels. KFC, always known as a meal brand, and therefore we did fantastically well from our abundant value options. Our buckets and meal bundles have always been priced very attractively. One of the areas that we said we could do better is entry level, and this opens up newer day parts and newer occasions also of consumption, including snacking occasions, where perhaps the person will spend INR 150, and still want, you know, reasonable amount of gut fill. This range is really intended towards such day parts and such occasions. Overall, it has to expand the base rather than cannibalize the base. The intention is that it has to expand the base, Shirish. Thank you. Thank you, sir, and all the best for winning future awards. All the best. Thank you, Shirish. Thank you. The next question comes from the line of Gaurav Nigam of Tunga Investments. Please go ahead, sir. Yeah, thank you for taking my question, sir. Sir, I have one question on this competitive intensity on pizza that we just talked about. As I can understand that a lot of local city level or regional pizza players have been coming up. This question very specifically on that, because you mentioned competitive intensity a few times to describe this phenomena. How, how is their proposition different from the organized players like Pizza Hut? If it is value, is there a reason or differentiation because of which we are not able to cater to, not to match them? That's first part of the question. Second is, sir, based on your experience in the industry, how is this trend different or similar to the previous inflation cycle? Just wanted to understand your view on both these parts of the question, on the competitive intensity. It's not that competitors play on value and they are offering better value. I don't think that is the case. In many of our-- in such industries, when a new brand comes up, there's always a tendency to try out something new, so that happens. Over a period of time, then consistency in delivery of quality and of food quality, taste, and customer service then becomes the differentiator. When, when you have a spurt in competitive intensity, perhaps in over the short run, it might impact because consumers want to try out something new, but over the medium term, then people revert back to a brand that is able to offer consistency, you know, in food, taste, quality, right across. I think it's a. When, when you have consumer headwinds and overall demand goes down, then the ability of the smaller players to be able to deliver that consistency, I think, comes under question. It's really, if you are well organized, then you're still able to focus on doing the right thing. This happens, Gaurav. Got it. Got it. Sir, just a second part of the question: What do you think is this like, like, I think you've explained to me the like the book way of thinking about it. Is this similar how it happened in the previous inflation cycle, or there is some differences to how it is happening this time, sir? This level of inflation perhaps has not happened. We've not seen it in the last six or seven years, or ever since Sapphire has come into existence, we have not seen this level of inflation. Now, I'm looking at my previous experience and drawing on that. I would say when you've got double-digit inflation, there is impact on consumer demand that perhaps lasts one year or so. Then as things stabilize, and as inflation stabilizes, the demand starts to come back. I, I think, and we've been consistently saying this earlier also, Gaurav. I think we have to just like I said, this is across the country, across industries, and really not a QSR problem or any specific brand problem. Having said that, still, our overall rate of growth has been at 20%. Again, I said this earlier to Shirish and to others, it's 20% is perhaps highest in the, or at least still of all the companies that have announced their results till now. Yes, definitely, sir. Thank you for sharing the perspective, sir. It's very helpful. Thank you. Thank you, Gaurav. Thank you. The next question comes from the line of Pesi Panthaki from IIFL. Please go ahead, sir. Hi, sir. Again, looking at your Pizza Hut ADS, I just wanted to make sure the basis of the statement where you are saying that we have bottomed out in terms of demand. The reason I am asking this is that basically, sequentially, if you see your ADS, it has grown by about 4%. My understanding is that typically in the pizza category, sequentially in Q1, the ADS grows by about 7%-8%. If I look at Jubilant also historically, their ADS has grown by 7%-9% approximately in Q1, and they also, this time, have grown only at 3%. You also have grown at 4%. Even the sequential growth, which normally happens, this quarter, it is happening lower than that. What is the reason for that, sir? First of all, I think you misunderstood the statement Sanjay made on bottoming out. His statement was meant for Sri Lanka business that we have bottomed out. Okay, my mistake then. That was the first thing. Having said that, let me take the second part of the question. In terms of upliftment of ADS from Q4 to Q1, what do we actually miss out is the number of stores open and the number of new stores which come at, they come in at a lower than the brand average ADS. What's not reflected over there is the like for like upliftment over there. That's also playing a part. Vijay, in one quarter, the number of stores which open versus the total number of stores, as a, overall format, it really doesn't move the needle. On a year-over-year basis, I understand, because in four quarters, cumulatively, the number of stores open are meaningfully large. On a quarter-over-quarter basis, does it really matter? It is a small part. The other part is the larger one, which is that, that you have not seen an SSSG, right? Because you have not seen the SSSG, you have not seen that kind of upliftment or the growth, which you would typically see. Having said that, when you compare with the previous quarters, the last 3 years, previous quarters, every time there has been something different, right? COVID makes all the comparisons, comparisons futile, actually. There is no real past quarter which you can actually draw back on, where you can say this Q1 versus Q4 upliftment should have been 5% or 3% or 7%. What I am doing, Vijay, as a proxy is, I'm looking at Jubilant's sequential growth for the years before COVID, let's say FY 2017, 2018, 2019, 2020. What has been the sequential uplift in those years for Jubilant? Assuming that the seasonality trend should not be very different because it's the same pizza category. It would be difficult to comment based on their numbers. What we are seeing internally over 5-6 years, I think the required seasonal upliftment, which we see, we have seen this year. Last year, as I said, was the year when we came out of the COVID for the first time, and what you saw was, things really going through the roof. At least Sapphire doesn't have a data point in terms of correlating it, and it will be very difficult to comment on somebody else's numbers. Sure, sure. Second question is on KFC. While there is a clear sort of consensus that there is a very real slowdown in the pizza category overall, nothing to do only with Pizza Hut, but there are mixed signals apart from the pizza category. If I look at McDonald's, for example, they have grown this quarter SSG significantly, despite a very, very high base of last year, whereas KFC, the SSG is flat. I'm not able to understand, is there any underlying macro trend in QSR cuisine other than pizza? Pizza, yes, there is a consensus that whatever brand it is, it is seeing a slowdown, but non-pizza QSR, because different companies are showing different results, it doesn't seem to be a macro-led kind of an issue. It seems to be company to company, that whatever company is doing, certain initiatives or measures, they are getting the results of that and, vice versa. Percy, we have to look at two things, or we have to look at three things. One is SSSG, then we have to look at overall sales revenue, and then we've got to look at also if sales revenue is happening with additional stores, has that compromised the quality of earnings? As, clearly on SSSG, KFC SSSG is lower than competition. Overall growth is significantly higher than competition, with this overall growth being significantly higher, yes, it has come out it's come through new stores, but then the quality of the results has not been impacted. Actually, from a restaurant EBITDA margin, it's improved Y on Y. Again, here it is much better than much better than restaurant EBITDA of competition. There is, there is a overall macro headwind. Within that, different brands are reacting differently. Both KFC and Pizza Hut have improved accessibility and therefore opened a significantly larger number of stores than some of the competitors. That will play out in some of our SSSG numbers, but still overall revenue numbers are strong. The, if, per store ADS does drop, it has an impact on perhaps sometimes on it has an impact because of operational deleverage on the store level EBITDA, as we have seen in the case of Pizza Hut. Just to want to add to that, because this is something more strategic, which Safal is trying to play out over here, is how do you balance the SSSG and the new store growth over? If you actually try and plot the numbers for us vis-a-vis the competition over the last three years and how we have built KFC and how we have gone about the KFC new store growth in line with the SSSG, I think we are quite comfortable with 5%-6% SSSG on KFC as a brand. Yes, right now, flattish, which is flat at zero, we are slightly lower than our benchmark, but I don't think we are anyways vying for that 7%, 8%, 10%, 12% kind of a benchmark for KFC, because we know that we want to grow the stores by almost 20%-25%, year-on-year. How do you balance that with the SSSG so that the overall brand grows significantly faster and without any compromise in profit? This is actually a difference in strategy, which we are playing out for KFC. You try and plot the numbers for 3 years, it has played out really well for us. Even going forward, there may be a case where you may see a slightly lower SSSG compared to competition who may not want to grow as fast. I don't think that has to do anything with the brand performance. It's more to do with the strategy on how fast you want to grow and balance the SSSG. Got it. Got it, Vijay and Sanjay, that was very useful. Last question is on the store openings. Like, Pizza Hut now, since the last several quarters, has been talking about cannibalization, and they are giving actually LFL, SSSG, which is LFL growth, which is different from SSSG, because there is. Not Pizza Hut, Percy. Sorry? You said Pizza Hut is giving LFL- Sorry, not Pizza Hut. Sorry, not Pizza Hut. I meant Domino's. Are we seeing any kind of such cannibalization? Are we opening stores in the vicinity of an existing store, where the store is getting split, so to say, either in KFC or in Pizza Hut? If so, what is the quantum of that sort of happening right now? Our Pizza Hut densification is still nowhere close to the leading market player, so I don't think we are cannibalizing our own sales from another store. Having said that, again, even if we get into densification, we'll continue to report SSSG. This split store strategy and like for like, we don't really understand. Our reporting would continue to be on SSSG, so there is no point in trying to figure out what could be the impact of this. First of all, there is no impact because there is no split store theory, which we are right now deploying. We continue to expand in new trade areas where we don't impact our existing stores. Do you think that this phenomenon will play out in the coming 2, 3 years if you're growing at 25% kind of thing? Do you think that we will sort of saturate in terms of existing, in terms of being able to go into completely new areas? If so, when is that likely to happen? 2 years, 4 years, 7 years? Okay, it's a completely hypothetical one. I'll still try and answer. What we have said out is doubling the store count over 3-4 years, which would translate to a 17%-18% store growth. There could be a year with 25%, there could be a year with 10% store additions. For this particular data point, 3-4 years, I think we are completely confident and comfortable that we can open stores without cannibalization of each other. That's very helpful. Sir, I would like to interrupt. If you have further questions, you may come back in the queue. No, that's all. That's all from me. Thank you very much. Thank you. The next question comes from the line of Manish Sharma. He's an individual investor. Sir, your line has been unmuted. All right, we see Mr. Manish Sharma has dropped. We have the next question coming from the line of Aliasgar Shakir from Motilal Oswal. Please go ahead, sir. Yeah, thanks for the opportunity. Just extension of what, you know, Percy's question was on the like to like SSSG, you know, split store having an impact. I understand that, you know, you said that you are not seeing that impact, you know, because of the store expansion in our, you know, network. Given that, you know, I mean, your peer, Devyani, you know, has the ability to open, you know, smaller size delivery-based stores, maybe not in very close vicinity, but in your region. You think that has had any bearing or, you know, that could have a bearing, you know, in the coming years because of the deepening of their network in your locations? Yeah, previously I would have clarified this one. While Devyani has rights to open in our territory, we cannot open it in each other's trade area. There is a trade area protection clause, as per the agreement with Yum, whereby, 8-minute drive time of our existing restaurant, 360 degree of that, you cannot open another store. Why 8-minute drive time? It's from order taking time to the getting the pizza ready out of the oven and handing over to a rider. Rider would require 8-10 minutes to deliver the pizza in 30 minutes time. Effectively, you don't cannibalize the customer. No two restaurants would actually be serving the same customer. Hence, even if Devyani would have opened the store in our territory, but they would not be in our trade area. Okay, I understand that part, but, you know, because of the third-party guys who can, you know, cater to that, customer, and, you know, I mean, that kind of... I don't know if, does, does that restrict your, capability to grow beyond, you know? Even if you consider the third-party riders, the aggregators, the customer would actually, when we search for Pizza Hut, the nearest option would come up first. There could be another option, which is, let's say, 40 minutes or 45 minutes. Typically, consumer would go for the, the nearest one, which is your trade area, unless the ratings are really poor and the ratings of the alternate stores are really good, that would be the only differential point. Hence, hence the entire app emphasis on customer experience, helps us. That even if there's an impact, it would be very marginal or minimal. Got it. You don't, you don't think that has had any bearing on your SSGs in these quarters, last few quarters? Not really. Okay, got it. Thank you. This is very useful. Thank you. The next question comes from the line of Manish Sharma. He's an individual investor. Please go ahead, sir. Mr. Sharma, do you have any question? Yeah. It seems no question from him. If we can conclude the call in that case. As there are no further questions, I would like to hand the conference over to the management for the closing comments. Yeah. Thank you everybody, for taking part in this earnings call presentation. Like I said, in a tough environment, I think we have demonstrated our ability to execute well. KFC financial performance, Pizza Hut, global recognition as being the best franchisee in the world. I think while current macroeconomic headwinds might last for a couple of quarters, the long-term prospects on this industry and on our two brands continue to be very strong. With that, thank you very much. I hope to see you all again next quarter. Thank you. On behalf of Sapphire Foods India Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.