India KFC operator Devyani International posts 43% drop in Q2 profit

BENGALURU (Reuters) – India’s Devyani International reported a 43.2% fall in quarterly profit on Tuesday as a rise in raw material costs at the KFC and Pizza Hut operator overshadowed a bump in promotions-led demand at its fast-food chains.

Consolidated net profit fell to 333.5 million rupees ($4.01 million) for the second quarter ended September 30, from 587.6 million rupees a year ago.

“High inflation across industries and categories from a macro-economic perspective has led to a short-term impact on consumer sentiment and depressed consumer spending in the last few quarters,” Chairman Ravi Kant Jaipuria said in a statement.

However, Devyani’s revenue from operations rose 9.6% to 8.19 billion rupees, driven in part by its “Wednesday offers” at KFC and a one-plus-one deal at Pizza Hut.

The September quarter saw prices of several ingredients, including cheese and vegetables, rising, prompting many restaurants to even take tomatoes off the table.

Devyani, which is also the Indian franchisee for the Costa Coffee chain, said its total expenses jumped nearly 16.3% from a year earlier.

Indian food companies have also been battling slowing customer footfall as high inflation keeps consumers from discretionary spending. Retail inflation during the second quarter was between 5.02%-7.44%, driven by high vegetable prices.

Rival Sapphire Foods India, which also operates Pizza Hut in India, reported a 20% fall in quarterly same-store sales last week, saying it was “cautious” about opening more outlets.

McDonald’s operator Westlife Foodworld also posted a drop in profit in late October, blaming a slowdown in consumer spending and demand.

Shares of Devyani were up 2.3% at 194 rupees at 12:45 p.m. IST.

($1 = 83.2575 Indian rupees)

(Reporting by Ashna Teresa Britto in Bengaluru; Editing by Nivedita Bhattacharjee)