Domino's pulling out of third-party apps but McDonald's is loving it

Two of the country’s biggest food service operators — Jubilant FoodWorks and Westlife Development — are taking contrasting positions when it comes to online food ordering platforms. While Jubilant, the master franchisee of Domino’s Pizza in the country, is opting to cut its presence on platforms such as Swiggy, Zomato and Foodpanda, Westlife, which runs McDonald’s stores in the south and west of India, is ramping its presence there. 

The move, observed analysts, came as Jubilant increasingly viewed third-party platforms as a threat to its in-house delivery model. This, however, does not bother Westlife. 

“Delivery is a big service promise for Jubilant. Its pizza business is predicated on the model. Third-party food aggregators have become a threat (to Jubilant) because online platforms are also into delivery. There is also the issue of staff (from Jubilant) jumping ship, and the costs involved to retain them, not to mention whether quality of service is maintained by third-party operators,” said Naveen Trivedi, research analyst at HDFC Securities.

In a recent analyst call, Jubilant management had indicated that they were getting off third-party food delivery platforms, opting instead to invest on technology to strengthen its in-house delivery model. 

During the company’s second-quarter results, chief executive officer and full-time director Pratik Pota had pointed to the firm’s in-house digital focus. “Growth was driven by a sustained momentum in order delivery. In particular, our digital focus, enabled by the new Domino’s app, showed good results with strong online sales growth,” Pota said. 

For the quarter ended September, online ordering contributed 68 per cent to delivery sales for Jubilant. For the corresponding period a year ago, this number stood at 57 per cent (online ordering contribution to delivery sales). Mobile ordering as a subset of online ordering, too, grew sharply, touching 85 per cent of overall online ordering for the second quarter. It stood at 69 per cent in the year-ago period, analysts tracking the company said.

Westlife does not give a precise break-up of the contribution of online ordering to total delivery sales. In the company’s second quarter results recently, Vice-chairman Amit Jatia said delivery sales (branded as McDelivery) were seeing strong growth momentum. Analysts observed 70-75 per cent of McDonald’s deliveries came via online ordering, including its in-house app and website, as well as third-party food aggregators or platforms.

“McDelivery is significantly contributing to our growth. It has been expanding its footprint through our digital channels — mobile application and website. The strategic partnerships with food aggregators to optimise the delivery process have also expanded our reach significantly,” Jatia said.

Arvind Singhal, chairman of Gurugram-based retail consultancy Technopak, said for most food service operators, online platforms had come as a blessing in disguise. “Barring Domino’s, most other food service brands gained from the incremental reach that these platforms give them,” he said.

Some experts, however, warned that growing clout would invite challenges of listing on platforms. Thanks to higher entry barriers, the platforms will launch private labels (Swiggy already has its own brands such as The Bowl Company and House of Dabbas on its platform) and demand higher commission from restaurants for delivery sales.


Business Standard is now on Telegram.
For insightful reports and views on business, markets, politics and other issues, subscribe to our official Telegram channel