This is hardly surprising, pointed out industry observers. Dhiraj Mistry, an analyst who tracks the quick service restaurant industry for Antique Stock Broking, said the industry continues to be hemmed in by two factors – a high base effect from 2022 and continued inflation that affects both demand and input prices.
“Last year, first time after the Covid, restaurants began opening up without any restrictions. In a way, there was a vengeance consumption. These companies are having a high base of last year, ” he said.
In addition to this, he also points at the inflationary environment that has led to people cutting down their discretionary spending.
“…the inflation has started impacting discretionary spending of consumers and because of that there is a cut in eating out frequency.”
However, it is not all bad news, as delivery continued to remain comparatively strong during the quarter.
“Delivery has become the most preferred channel driven by consumer preference for convenience,” said Akshay Jatia from Westlife.
He pointed out that even when people have been hesitant to step into McDonalds or McCafe, they continue to order from home. Through the various brands and chains operated by the company, the resilience shown by the delivery channel was consistent.
“The channel is significantly ahead of its pre covid performance and this plays to our advantage,” he added.
He also seemed confident that the industry is close to the bottom, and things will soon start looking up.
“We expect the issues to bottom out in a quarter or two…Our latest data and research suggest that demand trends have largely stabilized. Hence we do not expect incremental macro headwinds here onwards,” Jatia said.
He also added that there were also geopolitical issues that were beyond their control. The Israel- Gaza war had led some groups to call for a boycott of brands, such as McDonald’s and Pizza Hut during the quarter.
