What attracts him to an organisation is trouble. Just when people are about to give up. "It is an ideal opportunity to experiment," says Arvind Nair, CEO, Domino's Pizza India, who has always been involved with start-ups or turnarounds. After hopping from a consumer durables company to an engineering major to an information technology start-up, Nair is now working at putting the Domino's house in order. In this candid interview to Sumita Vaid Dixit of agencyfaqs!, he talks about the various challenges Domino's faced when it entered India, where it slipped and how it has faced up to those challenges.
We did some research, but it was more in terms of understanding lifestyle and not so much in terms of whether people wanted to have dinner outside. The focus of the research was the double-income group and tracking its aspirations for international foods and brands. But research can only identify a need if consumers know it and express it. If you were to ask some people whether they would like to listen to music while walking and if they said that they are pretty happy listening to music in the cars, the Walkman would have not been invented.
When Domino's entered Mexico, the closest parallel of India, pizzas were never the local food the way it is in the USA. In India too the concept was unfamiliar when we came in. Pizzas in India were available only in five-star hotels in Delhi, Mumbai and some parts of Gujarat (where they called Pizza as Pijja) and Punjab because of the NRI (non-resident Indians) association.
A major factor that helped create the market was economic liberalisation. Which happened with Manmohan Singh in 1991. The corollary? The economy was booming, taxes were coming down, income levels were going up, lifestyles were changing, software was happening… With greater exposure to television, people started aspirating for international brands.
There were two interesting findings of the research we did before coming in. One, in Delhi income levels were growing higher than in any other metro. Two, the willingness to experiment among consumers was greater in Delhi than any other metro. So we opened the first Domino's outlet in Delhi.
The strategy of Domino's hinges on simplicity and the promise of delivery in 30 minutes.
When you are hungry you cannot wait. If I can peg your expectations at the right time and beat it, chances are you would be more than happy. Not because the food is tasty but because the expectations have been met. Moreover, pizza is not a fried item but a baked one. And the most important element in taste is the temperature. It should be hot. If it is hot then you get the best flavour of the cheese and the crust. We got these two things right. Once we got it right we stuck to it.
When we came to India, the promise of 30-minute delivery involved certain complexities. Usually, when other marketers open their stores the considerations are location, visibility of the brand name, hygiene conditions etc. For Domino's the considerations are a bit different. We have to see whether there is enough parking space. We have to see how far is the parking from the store.
Then the question of finding the correct street and the correct house. Indian cities are not organised at all. Delhi is an exception because the Eicher maps have made it easier to locate addresses. But in some other city, house number 48 is not necessarily after house number 47. In India the favourite occupation of people in power is to rename streets. A resident who has recently moved in in a particular colony uses the current street name, whereas the resident who has been living there for 40 years uses a different street name. The street may be the same...
Everything we do, we shout loud and proud. The notice boards in our outlets read 'Call out time loud and proud'. When a guy takes an order he announces the time of taking the order. While that is happening the guy in the 'make line' tells what pizza is to be made. This guy has already started making the dough, slapping the dough and tossing it. He knows the size but he does not know the toppings yet. All he knows he has to put the sauce and the cheese because that is the standard thing. So by the time the customer is through with placing the order, the pizza is in the oven. It happens concurrently.
Ideally, the time taken for registering the order should be one minute. After that the pizza goes to the guy in the 'make line'. He takes two minutes, and then oven time is five minutes. When the pizza comes out of the oven it is inspected. One minute goes into quality check and packing. Another minute goes in checking the route and confirming the order one last time.
The moment he is leaving, the delivery boy shouts the out-of-the-door time. Which is normally between 10-12 minutes. Then everybody yells out 'drive safe'. When he returns he punches the time in. At the end of the day the average delivery time for all his orders is checked. This helps the manager figure out which orders were not delivered in time. The next day the store manager calls each one of those whose orders got delayed and apologises.
A lot of homework goes into opening stores. First we map the territory. Whenever you step into a Domino's store, you will see a map of the delivery area with house names and numbers written on it. Our guys had to be trained on knowing the locality. When a guy joins us, the first week of his job involves locating houses, not delivering pizzas. He has to understand the locations so that the delivery can be made in 30 minutes.
The other challenge is the route. With one-ways and no-entries, the chances of getting lost are high. Domino's is very strict about adhering to the laws of a city. The problem is these road rules keep changing. The other issue is that of speed limit - which, in most cases, is 40 km per hour or less.
As far as the infrastructure is concerned, internationally there are a lot of issues that we can take for granted. But the same is not true in India. Getting good quality vendors is a problem in India. Initially, when Domino's entered India, we would buy our own vegetable, cut it ourselves, import meat, chicken etc. Even water was bought because the quality was not up to the mark. That meant making contacts with people who can process water. Again the quality of wheat was not good. So for that we would go back to the source and find the miller and procure it from the miller directly. And we could not import wheat; the costs would have shot through the roof. Electricity was another problem.
In short, we had to put the supply chain in order first. In general, in cities like Mumbai the infrastructure is fine. Delhi too is manageable apart from the power cuts. But in the smaller towns, the entire infrastructure has to be created.
And when we feel that delivery cannot be made in 30 minutes, we relocate.
India does not have a history of food chains. You had good quality mom-and-pop stores here, but no quality food chain. Quality requires high levels of standardisation. You cannot move your network fast if you don't have your supply chain in place. The store has to be fed by a cold chain and a commissary. You need a warehouse, a factory, refrigerated trucks etc.
Many of the guys who started in India did not spend much time in building the cold chain. When the cold chain is not in place, you have to localise everything. When that happens it becomes difficult to spread. To spread you need excellent management, which is difficult to standardise.
Domino's is very focused on what it offers - pizzas in 30 minutes. Therefore the work management is consistent across the country. It takes a week's time to train the guy to start delivering. These guys are tested for various skills and as they keep clearing the test, their salaries keep going up. This way you can manage the supply chain, people and production easily. But if the business is complex and you have many suppliers then it becomes very difficult to manage.
The good thing about pizza is that it is a very universal food. Technically speaking, the combination of bread, cheese, vegetable and non-vegetarian foodstuff is not unfamiliar. The advantage is that a pizza is a baked item and not a fried item.
Now who are the guys who want to experiment? It's the kids and kids generally like bland food. Our food is comparatively bland. So kids take to it like ducks to water. Since our objective it to wow the customer, we try and score over competition. If the customer thinks, "Let me order the pizza and by the time I am through with the shower, the order will arrive," our challenge is to ring the doorbell while he is still in the shower.
When we entered India, we did everything on our own. We even used to make our own sauce. Then we went to the vendors and worked with them to improve the quality of the sauce. We used to cut vegetable. Now we get it done by vendors. Domino's does not want to do anything other than managing the dough. That's what Domino's actually does worldwide. We have started outsourcing most of the other stuff.
We have four commissaries - Delhi, Mumbai, Bangalore and Kolkata. In Delhi and Mumbai we have vendors whereas in Bangalore and Kolkata we are still in the process of developing vendors. Earlier we used to import a lot of meat. Now there are good Indian vendors are who are exporting meat. Earlier cheese was imported too; now we are developing it locally with some vendors.
The issue is not the flavour; the issue is the supply. Initially, we did not launch any Indian flavour because we did not have enough vendors. Our concerns were many: What is the hygiene standard of the vendor? How is it going to be packaged? How is it going to be transported?
Again, we dealt with perishable items. So we needed to have the cold chain in place. As a new entrant, it was easier to stick to the international formulation.
Once things were in place, we started developing Indian flavours like the Chicken Chettinad Pizza. Now Chicken Chettinad was a flavour Domino's headquarters was not even aware of. Before we introduced it, the microbiological properties of the materials had to be tested. So it took us some time.
Why we went for that particular flavour? Because Indians like peppery flavour. Our food technologist actually went to Tamil Nadu and studied the entire cuisine. We studied the formulations and showed it to our international partners. After the feedback, we launched it in Tamil Nadu. And before we knew it Chicken Chettinad became a national flavour. Then we introduced the paneer pizzas. Getting it approved was difficult because paneer is yeast and it is live food. We launched it in Delhi and now it is available in most metros in the north.
Internationally, if you look at any market, 70 per cent of the combos are the universally flavoured pizzas. And about 30 to 40 per cent is regional. If you look at Japan, pizzas have different fish toppings. We also tried to sell fish toppings in Kolkata during particular seasons. But fish is difficult to handle. The industry is not so well organised in India.
Interestingly, about 65 per cent of Domino's sales in India comprise vegetarian pizzas and 35 per cent is non-vegetarian.
We had also launched Pindi Channa. The reason for introducing them had to do with consumer behaviour. We found that people tend to order snacks between three and six in the afternoon. Most consumers saw pizza as a meal rather than a snack. We were not sure if the same pizza given in a different shape would conform to the definition of a snack. So we introduced Hot Sams. But the problem was that since the baked Sams were delivered in aluminium foils, they tended to sweat and did not seem as fresh as the pizzas. So we thought why not offer what we are good at?
I told you about the need for simplicity. In advertising and in branding the challenge is to narrow down your message. The problem is most brands try to be all things for everybody. In the process they end up being nothing for nobody. We focus on 30 minutes. The logic is very simple and makes practical sense. The fact is when the guy is hungry he cannot wait. If your food is lousy he will not order again. On the other hand, he knows if the crust is crunchy, the cheese is stretchy and the vegetable fresh. We do not have to advertise that.
So we focus on the basis of our communication peg. That we deliver best. Of course, if the pizza is there in 30 minutes and it is hot and fresh, there is no doubting the quality. This single-minded focus is something we own.
Tell me, if somebody says 30 minutes who do you remember? Chances are you will remember Domino's. Because Domino's worldwide owns it. There is a lot of difference between promise and delivery. There is a lot of science behind the art of making pizza in 30 minutes. And it is difficult to deliver in a rush. Domino's meets the challenge even in the height of rush-hour traffic.
We expanded rapidly and in trying to be fast we made mistakes in choosing locations. But the advantage of being in the delivery business and not the restaurant business is that most of our investments are modular, they are mobile. We have got air-conditioners, ovens, make tables, cut tables, and these can be moved. The moment we decide this location is not working for us, we shut that store and relocate.
We had to quit some markets because in the great rush we moved into locations where the infrastructure did not support the store. In places the market belief was different from the product we were offering. In places like Meerut or Muradabad, we were not successful.
We have a little over 90 outlets right now. We plan to add 10 to 12 this year. In the next two years we would open 30 more. But we don't plan to enter any new market; the new outlets will be opened in markets we already know.