PIZZA WARS:

UNDERSTANDING CONSUMER PREFERENCES

SUBMITTED TO: PROF. VIKAS MEHRA

SUBMITTED BY: DIXIT KAUSHAL DIVYA VERMA SHOBHIT BHATNAGAR

ADVANCED MARKETING MANAGEMENT SML 615

ACKNOWLEDGMENT

We would like to thank Prof. Vikas Mehra for including a market research project in our course and enabling in us a better sense of the significance for market research in regard to all marketing activities or efforts of any firm. We would also like to thank all the people who would helped us during the pretesting of the questionnaire by giving us their insights and opinions to help us develop a better questionnaire. Finally we would like to express our gratitude towards all our respondents we immensely appreciate their time and effort.

DIXIT KAUSHAL DIVYA VERMA SHOBHIT BHATNAGAR

ABSTRACT

Until 1996, Pizza in India was synonymous only a bready dough base slathered with some ketchup. Since 1996, there was a proliferation of 'high-priced branded' pizzas in the market, with the entry of international pizza chains. Due to rapid entry of these chains, evolving tastes and preferences of the consumers and also the higher spending power has led to a boom in the quick service restaurant industry. The consumers prefer one outlet over another on the basis of several attributes that all the players in the industry try to perform as best as they can and in line with their strategy. However there is ambiguity on the various factors which influence this choice. The purpose of the study was to estimate the significance of various factors which influence the choice of pizza outlets by young Indian consumers. The study applies multivariate statistical tools to estimate importance of various factors affecting the choice of pizza outlets. In addition the consumer patterns and impact of various factors and rating of multiple attributes is also undertaken for Dominos and Pizza Hut. The findings indicate that consumers decision regarding pizza outlets is influenced by three key factors which are product dimension, service delivery dimension and quality dimension. The two main pizza outlets differ significantly on the key attributes that are used to rate pizza and other fast food restaurants. Furthermore more consumers prefer Dominos over Pizza Hut but interestingly more consumers consider Pizza Hut to be excellent in comparison to Dominos. The managerial implications of the findings are that providers need to focus on quality and variety of foods besides other service parameters.

KEY WORDS: QSR, Pizza Segment, India, Perception, Factor Analysis

TABLE OF CONTENTS

ACKNOWLEDGMENT ....................................................................................................................... 2 ABSTRACT ........................................................................................................................................ 3 TABLE OF CONTENTS ....................................................................................................................... 4 LIST OF TABLES ................................................................................................................................ 6 LIST OF FIGURES .............................................................................................................................. 6 1. INTRODUCTION.............................................................................................................. 7 1.1. 1.2. 1.3. 2. BACKGROUND .................................................................................................................. 7 PROBLEM DISCUSSION ..................................................................................................... 8 OUTLINE OF THE REPORT ................................................................................................. 9

LITERATURE REVIEW .................................................................................................... 10 2.1. 2.2. 2.3. INDUSTRY OVERVIEW..................................................................................................... 10 PIZZA SEGMENT.............................................................................................................. 11 FACTORS INFLUENCING DECISION MAKING .................................................................. 20

3.

METHODOLOGY ........................................................................................................... 22 3.1. 3.2. 3.3. 3.4. 3.5. 3.6. OBJECTIVES OF THE RESEARCH ...................................................................................... 22 RESEARCH PURPOSE....................................................................................................... 22 RESEARCH APPROACH .................................................................................................... 23 DATA COLLECTION METHOD .......................................................................................... 23 SAMPLE SELECTION ........................................................................................................ 24 ANALYSIS OF DATA ......................................................................................................... 24

4.

DATA PRESENTATION ................................................................................................... 25 4.1. 4.2. OVERVIEW ...................................................................................................................... 25 PREFERENCES ................................................................................................................. 30

5.

ANALYSIS ..................................................................................................................... 36 5.1. 5.2. FACTOR ANALYSIS .......................................................................................................... 37 COMPARATIVE ANALYSIS ............................................................................................... 39

6.

FINDINGS AND CONCLUSIONS ...................................................................................... 41 6.1. KEY FINDINGS ................................................................................................................. 41 4

6.2. 6.3. 6.4. 7. 8.

CONCLUSION .................................................................................................................. 42 IMPLICATIONS ................................................................................................................ 42 LIMITATIONS OF THE STUDY .......................................................................................... 42

REFERENCES................................................................................................................. 43 APPENDIX ............................................................................ Error! Bookmark not defined.

LIST OF TABLES

Table 2-1: Segments of The Indian Restaurant Industry .............................................................. 10 Table 5-1: Frequency Distribution (Reasons of having pizza & Frequency of having pizza) ........ 36 Table 5-2: Rating of Attributes of Pizza outlets for choosing eating point ................................... 37 Table 5-3: KMO and Bartlett's Test ............................................................................................... 38 Table 5-4: Factor Analysis ............................................................................................................. 38 Table 5-5: Comparative Rating of Dominos & Pizza Hut .............................................................. 39

LIST OF FIGURES
Figure 1-1: Outline of the Report .................................................................................................... 9 Figure 2-1: Size and Growth of Industry Segments ...................................................................... 11 Figure 4-1: Gender of The Respondents ....................................................................................... 25 Figure 4-2: Age & Frequency of Respondents .............................................................................. 26 Figure 4-3: Living Status of the Respondents ............................................................................... 27 Figure 4-4: Education Level ........................................................................................................... 28 Figure 4-5: Occupation.................................................................................................................. 28 Figure 4-6: Monthly Household Income ....................................................................................... 29 Figure 4-7: Leisure Activities ......................................................................................................... 30 Figure 4-8: Favorite Pizza Outlet ................................................................................................... 31 Figure 4-9: Preferred Mode of Buying a Pizza .............................................................................. 32 Figure 4-10: Importance Of Factors Regarding Eating Out........................................................... 33 Figure 4-11: Reasons For Eating Pizza........................................................................................... 34 Figure 4-12: Rating for Pizza Outlets ............................................................................................ 35

1. INTRODUCTION

1.1. BACKGROUND
Food sector is one of the largest sectors in India in terms of production, growth, consumption, and export. Indian food industry currently stands at Rs 247,680 crore (US$ 39.71 billion) and is expected to touch Rs 408,040 crore (US$ 65.41 billion) by 2018, registering a growth of 11 per cent, according to a report titled 'India Food Service Report 2013' by National Restaurant Association of India (NRAI). The restaurant industry can be broadly categorized into unorganized and unorganized sector. Quick service restaurants also known as fast food restaurants, are defines as food establishments that have limited service and menu items. Such restaurants rely on a narrow menu, catering to extremely price sensitive consumers. QSR falls under organized sector category and are characterized as having consumer demands for foods served quickly and at the right temperature, accurate orders and clean locations. Indian QSR Industry is emerging very rapidly and it is a reflection of the change in the lifestyle, food habits and consumption pattern of the population. The incidence of Dining out, ordering from home as well as takeaways is rising creating an opportunity to cater to a wide mass of population. What was the domain of upper class, singles or forced bachelors, has percolated to all echelons of society. Although largely an urban phenomenon, the pattern is also emerging in rural. The reasons are areas having better road connectivity, increased vehicle ownership and rise in income levels in rural area. In a country with more than a billion people, opportunities in India are abound. This has led to a rapid growth of the QSR industry. However, simultaneously, it has also created a canvass that has many failures and carcass. Several outlets have been closed, a large number are struggling, and still a large number are just about surviving. There are a lot who are successful, but, more importantly, there is almost complete absence of national chains, except of two cafes, three four international chains and a few regional chains.

So there are a lot of opportunities that need to be harnessed and converted into profitable enterprises. According to a September 2013 study from research firm Crisil, Indias quick-service restaurant business will double in just three years, from Rs. 34 billion (US$550m) in the 2012-13 fiscal year (ending March 31st 2013) to around Rs. 70 billion in 2015-16. And things will only get better. The Economist Intelligence Unit estimates that the number of households with annual earnings over US$5,000 will spike from an already-large 81 million in 2013 to 172 million in 2017, while private consumption per head will almost double from US$918 in 2013 to US$1,743 in 2017. The restaurant industry is divided into organize and unorganized markets. The QSR segment is part of organized markets which includes dine in, home delivery and take away. It is the highest growth segment with maximum footfall due to increasing traffic at airports, railway stations, malls, multiplexes and supermarkets. Besides being a rapidly growing segment, it is also facing the biggest challenge of maintaining consistency in product and quality of service. Pizza currently accounts for the biggest share of the QSR market in India and is the fastest growing segment. Major players in this segment are Dominos, Pizza hut, Papa johns etc.

1.2. PROBLEM DISCUSSION

According to Nielsen in the recent years India due to its burgeoning youth population is one of the top consumers of fast food items in the world. This has led to a shift in the perspective of global companies about India as a location. The Indian consumers have an evolving palate but there are factors which affect an individual consumers decision making process and like the traditional decision making process which starts at need recognition and culminates at whether or not to purchase (purchase decision) several factors external to the consumer influence this process. Most of these factors are in the control of the pizza companies and can be improved and managed to maximize customer satisfaction. The problem however is that due to the changing

demographics and entry of new entrants there is no clear set of factors direct a consumers decision in regard to pizza related decisions. The purpose of the study is to solve the aforementioned problem by collecting data to understand consumers preferences and the factors which govern those preferences.

1.3. OUTLINE OF THE REPORT

The report consists of six key chapters, the first chapter provides an insight to what the report is about and also discusses the problem and identifies the purpose of the study. The second chapter draws on the existing literature on the restaurant industry specifically the pizza segment and its key players. This section also identifies the various factors which have a role in the consumer decision making process related to eating out. The third chapter the key objectives and the methodology used to realize those objectives. The chapter also details about the data collection methods and highlights the various statistical tools used for data analysis. The fourth chapter uses graphs and tables to give a descriptive view of the collected data. Chapter fifth details about the analysis of the collected data and describes the use of factor analysis to identify key factors which influence consumer decision making process. The last chapter details the key finding and conclusions of the study and discusses the implications and limitations of the study.

F IGURE 1-1: OUTLINE OF THE REPORT

2. LITERATURE REVIEW

2.1.

INDUSTRY OVERVIEW

The Indian restaurant is one of the most exciting sectors in the Indian consumer market. Several factors such as nuclearization of families, lack of time, etc. are driving increasing out-of-home food consumption. The trend takes a new meaning when a large proportion of population is young and very receptive to new ideas, products and services. In 2011, Indias GDP reached Rs. 91.7 trillion, per capita disposable income was Rs. 61,591 and per capita spending was Rs. 44,462. According to Smergers1, the industry is currently worth about Rs. 75,000 Crores and it is growing at an annual rate of 7 per cent. The industry can be broadly segregated into two segments viz. organized and unorganized, the country has about 1.5 million eating outlets and only 3,000 of them form the organized segment. The organized segment of the restaurant industry, at approximately Rs. 10,500 Crores, forms 14% of the industry whereas the unorganized segment constitutes about 86% of the industry or about Rs. 64,500 Crores. The size of the industry is expected to be Rs. 62,500 crores by 2015. The organized segment due to the huge investments in the industry is expected to reach about Rs. 22,000 Crores by 2017. The Indian restaurant industry can be broadly categorized into five major segments:

T ABLE 2-1: SEGMENTS OF THE INDIAN RESTAURANT INDUSTRY

Segment Quick Service Restaurants Casual Dining Restaurants Cafs Fine Dining Restaurants Pubs, Bars, Clubs & Lounges

Brand Dominos, KFC, Pizza Hut Yo! China, Sagar Ratna, Haldirams Caf Coffee Day, Costa Coffee, Starbucks Mainland China, Sahib Sindh Sultan, Cooper Chimney Hard Rock Caf, TGIF, Underdoggs

SMergers Website (http://www.smergers.com/industry-watch/indian-restaurant-industry/) 10

Each of the above segment has its own distinct share in the restaurant industry. QSR segment exceeds all other segments in terms of size as well as growth rate (expected). The three smallest segments are cafes, fine dining restaurants and pubs and bars, etc. however these segments are expected to growth at a rate about 12% which is higher than the expected growth rate of the second largest segment viz. casual dining restaurants.

5000 4500 4000 3500 3000 2500 2000 1500 1000 500 0 Quick Service Restaurants Casual Dining Restaurants Cafes Fine Dining Restaurants Expected Growth Rate Pubs, Bars, Clubs & Lounges 2365 1265 1045 963 4675 11.90% 12.30% 12.00% 11.00% 21.50%

25.00% 20.00% 15.00% 10.00% 5.00% 0.00%

Market share (INR Cr.)

F IGURE 2-1: SIZE AND G ROWTH OF INDUSTRY SEGMENTS

2.2.

PIZZA SEGMENT

According to an article in a leading newspaper2 currently out of all the QSR brands in the Indian industry 63 percent are foreign brands and rest are Indian brands. According to a new research report, "Indian Pizza Market Analysis" by RNCOS, the Indian quick-service market has experienced robust growth throughout the past few years, mostly in metropolitan and tier-I cities. Tier-II and -III cities are now also emerging as a new opportunity for chains as they largely
2Times

of India (http://timesofindia.indiatimes.com/business/india-business/Tier-II-cities-feaston-quick-service-restaurant-annual-spends-to-surge-150/articleshow/22913776.cms)

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remain underpenetrated. Adding to this opportunity is the Indian consumers' changing food consumption habits. Factors playing into the popularity of pizza and the quick-service segment in general in India include increasing disposable incomes, faster lifestyles, and greater exposure to various global cuisines and a favorable response from younger generations. A RNCOS report estimates that the Indian organized pizza market will surge at a CAGR of more than 27 percent during 2012-2015. Much of that growth will come in tier II and III cities, where the educated middle class population is becoming more sophisticated with their food consumption. There has been plenty of activity in the Indian market recently from major U.S. players. Domino's announced its plans to double its India footprint while marking the 400th store opening there. The chain's growth is in partnership with master franchisee Jubilant Food works Ltd. Also, Yum! Brands created a separate India Division to focus on the growth of its concepts, including Pizza Hut. Shortly after, the company announced major expansion plans in India, from about 130 Pizza Hut locations to 250 by 2015. Pizza Hut is eyeing tier II and III cities specifically. The casual dining chain has had a presence in India for 15 years. Its product offerings will be expanded as it grows throughout the country, and a nationwide marketing and advertising campaign also recently launched to complement the expansion.

1. PIZZA HUT Pizza Hut entered India in 1996, and opened its first restaurant in Bangalore. Since then it has captured a dominant and significant share of the pizza market and has maintained an impressive growth rate of over 40 per cent per annum. Yum! has invested about US$ 25 million in India so far; this is over and above investments made by franchisees. Yum! Brands Inc is the owner of the Pizza Hut chain worldwide. A Fortune 300 company, Yum! Brands own Kentucky Fried Chicken, Pizza Hut, Taco Bell, A&W and Long John Silvers restaurants worldwide. The market size of the pizza segment is around US$ 87 million and currently growing at the rate of 15 per cent to 17 per cent per annum. According to Pizza Hut sources, most of their outlets

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are financially successful, encouraging further expansion. In India, the average investment for each outlet is US$ 275,000-335,000 and is borne by the franchisee. Pizza Hut is on a big expansion spree in India. It plans to almost double the number outlets in the country by 2015. The expansion will mostly happen in tier II and tier III cities. Pizza Hut, which has completed 15 years of operations in India, currently operates 131 outlets in the country. The dining chain is also bulking up its menu. Soon, it will add 15 different pizzas to its menu, inspired from regional cuisines and flavors from around the country. The company will also launch a nationwide campaign to commemorate its 15 years of operations in the country; they also plan to take this count of 131 to 250 by 2015. The expansion would also happen in tier II and tier III markets. At the same time, a new range of 15 different pizzas would be rolled out at stores across the country which is inspired from regional cuisines and flavors from around the country. PIZZA HUT: SWOT ANALYSIS Strengths: Part of the largest restaurant chain in the world- Through pizza hut being the largest restaurant chain in the world, this obviously means they dominate their market, and can invest in new products, e.g. new pizzas. Over 20,000 franchises around the world- they have a wide spread all over the world Innovative range of pizzas under one roof- they offer a variety of options which attracts the pizza lovers most towards pizza hut. Food attracts people of various ranges from young to old- it offers a variety of options which attracts all age groups Sound financial situation and international turnover- it has a huge market segment, attracting more customers meaning a higher percentage in sales, which may lead to greater profits. Pizza Hut sits on top of global full-service restaurant tree

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Weakness: Loyal customers are feeling that the satisfaction of the pizzas is declining- Loyal customers are feeling that the satisfaction of the pizzas is declining. This may lead to low customer satisfaction and a reduction in customers and credibility in the market, this may lead to customers converting to main competitors such as dominos pizza.

Threat: Rising competition undermines Pizza Hut as consumers go for greater convenience- this will lower the amount of sales consumed by Pizza Hut as these sales are going to smaller companies who are charging less. Rising cheese costs threaten margins- cheese is essential to the business as it is there primary good, there for they are unable to go without it, this may lead to Pizza Hut eventually buying goods from abroad or buying cheaper brands Threat from Dominos pizza, also from McDonalds who have tried to introduce a new meal that is a Pizza called: Pizza McPuff

Opportunities: New Pizzas with different crust sizes and flavors- Pizza Hut can introduce new Pizzas with different crust sizes and flavours. This may attract new customers with new tastes and this may increase their sales. Pizza Hut expands Indian market menu and looks to old favorite to bolster sales Pizza Hut targets upscale products and a downscale consumer base- Pizza Hut has targeted upscale products and a downscale consumer base; this will attract customers who are more willing to buy these Pizzas

2. DOMINOS Jubilant FoodWorks Limited (the company) & its subsidiary operates Dominos Pizza brand with the exclusive rights for India, Nepal, Bangladesh and Sri Lanka. As of 30th June 2013, Dominos 14

Pizza India operates 602 stores in India located in 26 States and Union Territories, covering 128 cities across the Country. According to India Retail Report 2009, Dominos Pizza is the largest Pizza chain in India and the fastest growing multinational fast food chain between 2006-2007 and 2008-2009 in terms of number of stores. As per the Euro monitor Report 2013, Dominos Pizza is largest organised Pizza chain in India with 67% market share. Over the period since 1996, Dominos Pizza has remained focused on delivering great tasting Pizzas & sides, superior quality, exceptional customer service and value for money offerings. It has endeavored to establish a reputation for being a home delivery specialist capable of delivering pizzas within 30 minutes or FREE to a community of loyal customers from all its stores around the country. Dominos Pizza vision is focused on Exceptional people on a mission to be the best pizza delivery Company in the world! It is committed to bringing fun, happiness and convenience to lives of its consumers by delivering delicious pizzas to their doorstep. Dominos Pizza India constantly strives to develop products that suit the tastes of its customers and hence delighting them. It believes strongly in the strategy of Think global and act local. Thus, time and again it has been innovating with delicious new products such as crusts, toppings and flavors suitable to the taste buds of Indian Consumers. Its initiatives such as Fun Meal and Pizza Mania have been extremely popular with customers looking for an affordable and value for money meal option. India is likely to become the second largest market for Dominos Pizza Inc. in the next few years, as it seeks to add more outlets in the country. In the past two quarters, growth in stores that have been in existence for at least a year has slowed for the countrys largest pizza chain, reflecting a larger dip in consumer sentiment that has slowed discretionary spending. Samestore sales growth slipped significantly in the first quarter of 2013-14 to 6.3% from 22.3% in the same three months last year.

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DOMINOS: SWOT ANALYSIS Strengths: Dominos have strong service facilities like 30 mins NAHI TO FREE (otherwise FREE): dominos were the first to start the trend of 30 minutes otherwise free Low price menu: In India Dominos is trying to attract the middle class and lower middle class people who are interested to spend their money on pizza but in low price. Variety of Pizzas: Dominos Pizza has a lot of varieties like vegetarian and non-vegetarian. In vegetarian lots of pizzas are available as well as non-vegetarian too. Quality of Pizzas: the quality of Dominos Pizza is also very good. More outlets- Even in smaller towns: dominos have its outlets even in the smaller towns its popularity and pizzas are not limited to big cities but small cities also due to which people know it more whether from a metro city or from small city. Quick service at outlets: the service at the outlets of dominos is very fast and customers dont have to wait for long for their order which makes the brand even better because low price along with good service as a very rare combination. Excellent offers: The Dominos pizza franchise constantly keeps on inventing ways through which it can make a greater impact on the fast food market. They are strong presence in the market as a brand name: they have a very strong presence in the market and through its long presence in the market and continuous loyalty toward the customer

Weakness: Dominos just has delivery outlet but does not have an eating outlet, where the consumers could enjoy themselves. This has provided pizza hut with a competitive edge over Dominos They dont have dine-in facility: they dont have the dine in facility in their outlets that gives its competitors advantage over it and because its main competitor pizza hut have this facility and dominos is facing the main competition from pizza hut. 16

Outlets lack space: the outlets lack space which creates the problem of limited sitting space for customers and sometimes customers have to wait for the seats to be vacant for them.

Ambience not up to expectations: it is not so successful in creating an environment which reflects its brand and reputation as dominos being a brand should come up with a different idea which influences the customer.

No option for birthday parties and corporate lunches: instead of being such a big brand in the fast food industry dominos lack the facility of birthday parties or meetings which is a very big weakness as its competitor pizza hut is very good at all these things.

Opportunities: New restaurant at busy places: it should open its new restaurants at busy and crowded places where it can attract more customers. Capturing the new customer through low price menu: it offers a low price menu which is an advantage to it and it should take the proper benefit out of it growing fast food market-scope for expansion. Bigger outlets: it should increase the size of its outlets as its outlets all being smaller than the competitors hence giving less space for customers to sit and enjoy the meal. Take away counters: it should include take away counters to its outlets so that people feel more comfortable and easy to bring back

Threats: From their competitors: it is facing a very tough competition from the existing competitor pizza hut as pizza hut have some of the better facilities with it is regarded better than dominos and hence really affects the market of it distributing the consumers.

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Pizza huts main competitive advantage over dominos is dine-in facility: the main competitor pizza hut has a unique dine in facility that makes it different and much better than dominos.

Emergence of Papa Johns and other new entrants in the market are coming as a big threat for Dominos as it is facing a hyper competition situation from pizza hut and it this scenario a new entrant can make the situation worse and make it loose market.

Better quality and variety of competitors: dominos being a low price pizza seller than its competitors that gives it an advantage but at the same time the difference in quality can be seen and that makes the difference.

No take away counters for pizzas: doesnt have any take away counters which in turn harms its own market and the consumers coming to it

3. OTHER PLAYERS Pizza Hut and Dominos clearly hold the major market share in pizza segment of QSR industry. Some other pizza outlets trying to gain a market share in this competitive environment are Papa Johns, Pizza Square and Chicago Pizza etc.

3.1.

Papa Johns

Papa John's, the world's third-largest pizza company with close to 3,000 outlets in 22 countries, is the latest entrant in the Rs 2-bn Indian pizza market. Om Pizza Eats India, master franchise in north India for the US-based pizza chain, opened the first Papa John's store in Noida on Tuesday as part of its 100-store development agreement over 11 years. Om Pizza Eats already operates a Papa John's outlet in Gurgaon as a test store. It is also considering three other sites to open new stores, with plans to open five stores out of the planned 100 in '06. In a market where Pizza Hut and Dominoes have established their presence, Papa John's International CEO Nigel Travis said he's confident the US-based pizza chain's USP of 'better ingredients, better pizza' will help it make its mark. As to why the pizza chain was focusing on only the Northern region, given the pizza consumption pattern in India. 18

3.2.

Chicago pizza

Chicago's Pizza is fast growing take- away pizza chain in Delhi-NCR regionChicago Pizza is the first Indian pizzeria to develop the concept of selling huge single slice pizza. Customers have the choice of ordering individual slices of pizza with the flexibility of customizing their slice with an assortment of fabulous tasting toppings. This is a great idea for families or large groups with divergent topping tastes as each member gets to choose as many slices of whatever topping type they wanted, whilst being economical. It is a unique idea that offers slices of pizzas freshly assembled and cooked, served hot with the convenience of having it on the spot, takeaways and home deliveries. The concept focuses on great taste, diversity of products and convenient delivery, distinguishing it against all other pizza convenient delivery, concepts. Another great innovation of the pizzeria is the localization of the menu to suit local tastes, adaption to Indian palate has been its forte for success. Along with great tasting pizza slices, the menu also offers Pastas, Panini, Sandwiches, Beverages and is in the process of adding salads, low calories food options, cake slices, in order to cater to a more diverse clientele.

3.3.

Pizza Corner

Pizza Corner is an international franchise of pizzeria chains that offers a wide range of pizzas, pastas and side dishes from chicken wings to salads. Pizza Corner was established in 1996 by Global Franchise Architects India Pvt Ltd. (GFA). This winning idea is one among the several supported by GFA, a builder of specialty retail Quick Service Restaurants since 1996. Its current portfolio consists of four self-created, unique, distinctive brands: Pizza Corner, Cream and Fudge, Donut Baker and Coffee World. Its service formats include: large dine-in restaurants, delivery outlets, express dine-ins, and express kiosks. Pizza Corner, which has 60 outlets in South India and Kolkata, has been growing at 20-25 per cent in the last couple of years. It is scouting for master franchisees in the north and west.

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2.3.

FACTORS INFLUENCING DECISION MAKING

According to the findings of the recent online survey from AC Nielson, India being at the seventh place, is among the top ten markets for weekly fast food consumption among the countries of Asia-Pacific region. Over 70 per cent of urban Indians consume food from takeaway restaurants once a month or more frequently. Survey indicates that Pizza Hut is the most preferred fast food outlet in India. Identifying the drivers for preference of one-brand over another, the survey results indicate that Indians (66 per cent) are amongst the consumers who consider hygiene and cleanliness their most important criterion for selection. A total of 24 per cent of Indians use the quality of service as a decision making criterion to purchase a fast food brands offering and 22 per cent rely on their perception of whether a take-away brand offers them healthy food options. In Indian context, there is high concern towards health in twentyfirst century. There are health related articles in daily newspapers, and health shows on television. There are special health related magazines that are now very popular. Health related articles do mention to consume more fruits, vegetables, water and to consume less or nil of junk food including fast food being high on fat and calories. The food habits of youngsters are influenced by many factors such as environment at home, educational environment, availability and accessibility to fast food providers, and social environment in their surroundings. In addition, emergence of traits of independence in their eating habits, nutritional education, divergence of food preferences at home and at fast food outlets and ambience of place for socializing affects their visit and liking of fast food outlets. There can be many factors which contribute to decision making for a pizza outlet for a consumer. Some of them are as follows:

Hygiene conditions, hygiene conditions in and around the kitchen of an outlet, eating areas play an important role in decision making of a consumer. Hygiene factors of an eating outlet include personal hygiene; cleanliness of equipment, surfaces and premises; and the temperature control of food, these all are of paramount importance.

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Location of restaurant, the accessibility and reach of an outlet is also important for a consumer. The outlets should be opened at strategic locations where the footfall is expected to be maximum.

Value for money, consumers always look out for options in menu which are value for money meals. Variety of the menu, consumers want a host of options when dining out and the restaurant offering the most number of varied options tend to be favored by a consumer. However there are such consumers as well which get put-off by too many choices, thus a company or operator needs to focus on managing the choices that it offers.

Speed of service, consumers today are weary of waiting too much for their food and thus the speed at which a restaurant serves the food influences the consumers overall experience and affects repeat purchase as well as word of mouth.

Politeness of staff, consumers tend rate the quality of a restaurant on the impression they form of the staff. The staff in a restaurant is the one of the key dimensions of a service based business which counters intangibility and thus polite and courteous staff influences a customers decision making.

Offers and schemes, many operators offer schemes based on season or to promote a new offering. Many consumers take into account these offers to make their decision.

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3. METHODOLOGY

3.1.

OBJECTIVES OF THE RESEARCH

The key objectives of the study can be stated as follows: The research seeks to estimate importance of various factors affecting the choice of pizza outlets by young Indian consumer. To identify the factors affecting the choice of consumers (Indian youth) for specific fast food category viz. pizza. To study the consumption pattern towards fast foods particularly with respect to the frequency of visits and choice of fast food outlets. To identify the impact of several factors regarding eating out on consumer purchase decision. To study consumer perception about two popular pizza outlets in National Capital Region (NCR), New Delhi.

3.2.

RESEARCH PURPOSE

According to Yin (1994), research can be classified into one of the following three different purposes: i. Exploratory research, aims to formulate and define a problem, often expressed as a hypothesis. ii. iii. Descriptive research, used when the problem is relatively clear and structured. Causal research, employed to analyze causes and effect relationships.

In this study, the purpose was exploratory as it aims to collect as much as information as possible about a specific problem. And also as in an exploratory research the researcher gains a

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better understanding of the research area (Reynolds, 1971), the study was conducted to get a better insight into the quick service restaurant industry.

3.3.

RESEARCH APPROACH

The research approach refers to the chosen way of treating and analyzing the selected data and is generally classified as either quantitative or qualitative. A quantitative approach is formalized and structured and the results are measurable and presentable in figures. Whereas a qualitative approach draws conclusion from non-quantifiable data. In this study, the approach was quantitative as quantifiable data was used for exploratory analysis with an aim to gain better understanding into consumer preferences.

3.4.

DATA COLLECTION METHOD

Data were collected from three sources: i. ii. iii. Students of ITM University3, Gurgaon (email) Customers/shoppers at Ansal Plaza mall4, Gurgaon (on the spot) Friends & family (email and on the spot)

Due care has been taken to reduce possible biases in selecting the young customers for the purpose of data collection by way of asking few questions to them in relation with their eating habits and demographic profile. The questionnaire had the following dimensions: Demographics of the respondent such as age, qualification and status; Factors affecting selection of pizza outlets;

3 4

Approximate total number of students = 3000 Chosen because it has both the key pizza outlets viz. Dominos and Pizza Hut 23

Comparisons between fast food outlets on various parameters such as service, speed, price, hygiene, variety, and ambience etc.;

The respondents, especially those who were filing the questionnaire online were also asked to indicate whether they ate pizza or not so as to judge whether or not they would qualify for the survey.

3.5.

SAMPLE SELECTION

Sample of the study consisted of youth segment in the age group of 18 to 29 years. Convenience samples were drawn from Gurgaon & NCR region. However convenience samples include only one dimension that is easy access to the sample units otherwise it was random selection of individuals from customers at the pizza outlets and a large number of email questionnaire to all ITM University students. This segment of population was selected due to their adoption of modern lifestyle pattern inclined towards eating outside and socializing with friends. Since this was an exploratory study a sample of 125 was thought to be appropriate however due to limited resources and time a total of 108 responses could be collected. Out of 108 respondents 98 were valid as some of respondents were above the age of 29 years or did not consumer pizza or there was missing data.

3.6.

ANALYSIS OF DATA

The data were subject to statistical analysis such as descriptive statistical analysis and frequency distribution. This analysis was however only applicable to categorical data, for scaled data, analysis was conducted by testing mean difference using t-test, and carrying out factor analysis. To make comparisons of ratings, t-test was applied to mean scores of two major pizza outlets that are Dominos and Pizza Hut. 24

4. DATA PRESENTATION

4.1.

OVERVIEW

From the data for all the valid respondents 59.18% were males whereas 40.82% were females, indicating a male dominance in the dataset.

40.82%

59.18%

Female

Male

F IGURE 4-1: GENDER OF THE RESPONDENTS

The average age of the respondents was about 21.55 years, maximum respondents i.e. 18 were of 22 years of age. The median age of the respondents was 23.5 years, indicating a fairly young sample.

25

18 16 14 13

Frequency

11

7 6 4 2 2 1 18 19 20 21 22 23 24 25 Age of Respondents 26 27 28 29 4

F IGURE 4-2: AGE & FREQUENCY OF RESPONDENTS

The living status of the respondents indicating that about 60% of all respondents were single and living at home with their parents, whereas only one respondent was staying in a joint family. Another relevant group was respondents who were living alone or sharing with friends and these represent about 33% of all the respondents.

26

1.02% 5.10%

33.67%

60.20%

Living in Joint Family Married / Living with Partner Single & Living Alone / Sharing with Friends

Single & Living at Home with Parents

F IGURE 4-3: LIVING STATUS OF THE RESPONDENTS

The education level indicated that about 31 respondents had finished school and according to further analysis 30 of them were currently students as well. About 40% total respondents had completed under-graduation. In regard to occupation maximum respondents 81 were students.

27

Undergraduate

39

School

31

Post-Graduate

27

PhD

F IGURE 4-4: E DUCATION LEVEL

Student

81

Private Service

Professional

Self Employed

Other

Business

F IGURE 4-5: OCCUPATION

28

The income of the respondents was also of interest to the survey and about 60% of the respondents indicated their monthly household income to be above INR 50,000 per month.

8.16%

6.12%

3.06% 5.10% 8.16%

10.20%

59.18%

Less Than Rs. 10,000 Rs. 20,001 Rs. 30,000 Rs. 40,001 Rs. 50,000 Rather Not Say

Rs. 10,001 Rs. 20,000 Rs. 30,001 Rs. 40,000 More Than Rs. 50,000

F IGURE 4-6: M ONTHLY HOUSEHOLD INCOME

Among the leisure activities, the most favorite activities were watching movies and spending time with friends whereas visiting historical places was the lowest among the leisure activities. Eating out was the third most chosen activity by the respondents.

29

Watching movies Spending time with friends Eating out Spending time with family/relatives Watching TV Playing outdoor sports Going for long drive Playing indoor sports Visting historical places Other 0 1 2 4 6 8 10 12 14 16 18 3 4 8 8 11 13 15 17

18

20

F IGURE 4-7: LEISURE A CTIVITIES

4.2.

PREFERENCES

As to the most favorite pizza outlet maximum i.e. about 54% respondents chose Dominos as their favorite and Pizza hut came in next with 39% people choosing it as their favorite outlet. Pizza Vito the newest entrant in the pizza segment was not chosen by any of the respondents as their favorite outlet and only two people chose Papa Johns. Five people chose to give their own favorite outlet and from that Chicago Pizza was favored by three. As the results for Papa Johns, etc. were very miniscule they are clubbed together as Others.

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5.10%

40.82% 54.08%

Dominos

Pizza Hut

Others

F IGURE 4-8: FAVORITE PIZZA OUTLET

To understand how majority of people prefer to consume their pizzas the respondents were asked to give their preference in regard to whether they like to get their pizza home delivered or they like to dine-in at the outlet or pick up their order from the outlet. Majority of people viz. about 54% indicated that they like to use home delivery when they want to have a pizza and about 33% respondents chose to dine-in at the outlet.

31

3.06% 1.02% 8.16%

54.08% 33.67%

Home delivery Pick up / Take out

Dine - in Can't say

No preference

F IGURE 4-9: PREFERRED M ODE OF BUYING A PIZZA

To measure the importance of key components of eating out question regarding the importance of hygiene conditions, variety of the menu, politeness of the staff, among other were asked. The following graph summarizes the outcomes from all the respondents.

32

0.00% 20.41%

7.14%

6.12%

1.02% 30.61%

5.10% 37.76%

2.04% 31.63%

1.02% 43.88%

8.16%

60.20% 79.59% 32.65%

66.33%

47.96%

68.37%
27.55%

57.14%

66.33%

55.10%

43.88%

Hygiene Location of Interior / Value for Conditions the Ambience Money Restaurant of the Restaurant Most Important

Variety of the Menu

Speed of Service

Politeness Offers and of Staff Schemes

Important

Least Important

F IGURE 4-10: I MPORTANCE OF FACTORS REGARDING E ATING OUT

Hygiene conditions at a restaurant are the most important factor for about 80% of the respondents followed by value for money (71.3% or 77). About 10 people consider offers & schemes as the least important factor also location and ambience is least important for about 7 people. The respondents were also asked to indicate their key reasons for eating a pizza and more than one reason was acceptable.

33

To eat something different (than usual)

42

For a get-together / party

28

As a snack

17

As a complete meal

11

10

15

20

25

30

35

40

45

F IGURE 4-11: REASONS FOR E ATING PIZZA

Most of the respondents chose to eat something different than usual as their key reason for consuming pizza. The second most chosen reason was for a party or get-together. This also aligns with the general consumption patterns of fast food as observed in others studies. The graph below indicates what the respondents opine about the different pizza outlets in the immediate geographic region.

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44.90% 41.84%

44.90% 42.86% 34.69% 27.55% 24.49%

45.92%

33.67%

11.22% 0.00% 0.00% 2.04% Dominos Excellent

9.18% 1.02% 1.02% 1.02% Pizza Hut Good Ok

9.18% 4.08% 0.00% Papa John's Bad Poor

9.18% 6.12% 4.08% 1.02% Pizza Vito Can't say

F IGURE 4-12: RATING FOR P IZZA O UTLETS

Maximum number of respondents considers Pizza hut to be excellent. Interestingly about 46% of the respondents were unable to comment on Pizza Vito indicating that either they had not heard of it or they had heard of it but not yet visited it or they had visited but have not been able to form an opinion about it, either way it indicates a gap in the companys communication strategy.

35

5. ANALYSIS

Behavior of consumers with respect to reasons of having a pizza and the frequency of having a pizza. The frequency distribution shown in the table below indicates that the most common reason for having a pizza is to eat something different than usual and also about 71% people have pizza 1 3 times a month.

T ABLE 5-1: FREQUENCY DISTRIBUTION (REASONS OF HAVING PIZZA & F REQUENCY OF HAVING PIZZA )

Reason for having a pizza To eat something As a complete meal No. of 1 - 3 Frequency % 4-6 Frequency % 7 - 10 Frequency % More than 10 Frequency % 7 7.1% 2 2.0% 1 1.0% 1 1.0% As a snack 11 11.2% 5 5.1% 1 1.0% 0 0.0% For a gettogether / party 22 22.4% 4 4.1% 1 1.0% 1 1.0% different (than usual) 30 30.6% 9 9.2% 3 3.1% 0 0.0% Total 70 71.4% 20 20.4% 6 6.1% 2 2.0%

times (in one month)

Maximum number of people chose having pizza to have something different than usual. Out of all the respondents two persons chose having pizza more than 10 times a month, this group (1%) highlights the big spender on pizzas. The reason for having pizza for these individuals was as a complete meal and to have something different than usual. 36

Some other inferences drawn from the data are that for each individuals favorite pizza outlet it was observed from the data that about 60% of the respondents considered promotional offers significant in making a purchase decision. About 60% people also indicated that they regularly eat pizza at outlets others than their favorite outlet. On the promotional front, about 70% of the respondent were able to recall an advertisement about their favorite outlet. Also among the respondents 30% indicated that they do not eat any other type of fast food expect for pizza, suggesting that about 1/3rd of the sample has high affinity towards pizza.

5.1.

FACTOR ANALYSIS

With a view to identify major attributes for choosing pizza outlets, data were collected on seven key attributes of pizza outlets. These are: i. iii. v. vii. Quality Variety Price Service ii. iv. vi. Promotional Combos Hygiene

Data were collected using 5 point Likert type scale regarding each outlet. For the purpose of ranking mean scores along with standard error and mode values are were calculated, these are presented in the table below.

T ABLE 5-2: RATING OF ATTRIBUTES OF PIZZA OUTLETS FOR CHOOSING EATING POINT

Rating Scores (Mean Standard Error) Quality Variety Price Service 3.96 0.032 3.88 0.033 3.55 0.068 3.52 0.068

Mode 4 4 4 4

37

Promotions Combos Hygiene

3.54 0.071 3.59 0.058 3.86 0.038

4 4 4

The most frequent response for each of the attribute was Important (4) indicated by the mode of each attribute, this suggests that for maximum number of people each of these attribute is Important. The data were also subjected to factor analysis, the Kaiser-Meyer-Olkin (or KMO) or the measure of sampling adequacy was calculated at 0.628 and the chi-square value of Bartletts test for Sphericity is 126.676 with 21 degrees of freedom and significance value of 0.000.

T ABLE 5-3: KMO AND BARTLETT ' S TEST

Kaiser-Meyer-Olkin Measure of Sampling Adequacy Approx. Chi-Square Bartlett's Test of Sphericity df Sig.

.628 126.676 21 .000

Based on factor analysis three factors/components emerged to explain 69.261% of variation as shown in the table below. The total variance explained by component 1 was 33.188%, followed by component 2 with 21.493% and then 14.580% by component 3.

T ABLE 5-4: FACTOR ANALYSIS

Component 1 Quality Variety Price 38 .441 .219 .631 2 .728 -.139 -.355 3 -.118 .927 -.060

Service Promotions Combos Hygiene Total Variance Explained (%) Cumulative Variance Explained (%)

.705 .655 .683 .538 33.188 33.188

.295 -.539 -.342 .578 21.493 54.681

.249 -.132 -.248 -.062 14.580 69.261

The proportion of variance in each variable/attribute is not same as, the factor loading indicates that Price, Service, Promotions and Combos correlate or load high on factor 1 indicating a product dimension. Factor/component 2 is high on Quality and Hygiene suggesting a quality dimension. Variety and Hygiene loads high on factor 3 indicating a service delivery dimension.

5.2.

COMPARATIVE ANALYSIS

To perform a comparative analysis of the major two pizza outlets which are Dominos and Pizza Hut, comparative rating was done on the data regarding these specific outlets. The results are tabulated below with mean and standard error and the mode is indicated in the bracket.

T ABLE 5-5: C OMPARATIVE RATING OF D OMINOS & PIZZA HUT

Dominos Quality Variety Price Service Promotions Combos Hygiene 3.94 0.057 (4) 3.89 0.044 (4) 3.75 0.060 (4) 3.45 0.106 (4) 3.66 0.089 (4) 3.72 0.062 (4) 3.77 0.064 (4)

Pizza Hut 3.98 0.025 (4) 3.88 0.053 (4) 3.33 0.131 (4) 3.60 0.086 (4) 3.50 0.107 (4) 3.53 0.088 (4) 3.95 0.035 (4)

t-values 116.753 115.292 51.699 49.468 52.217 69.245 95.531

Sig. (2-tailed) .000 .000 .000 .000 .000 .000 .000

39

The t-value shows that the mean value for each variable for Dominos and Pizza Hut differs significantly (as significance < 0.05). This concludes that there is a statistically significant difference in the score for each of the variables between the two outlets. As evident both the outlet score high on quality, however there is a high statically significant difference in the means as indicated by the t-values. It is also apparent that people consider Dominos to be more pocket friendly than Pizza hut as Dominos scores better on the price variable. Pizza hut on the other hand is better in terms of hygiene as compared to Dominos. In regard to offering combos, etc. Dominos scores better than Pizza Hut and in terms of better promotions both the outlets do equally well. On the basis of service quality and staff Pizza Hut fares better than Dominos. Both the outlets have equal scores on variety offered in their menus.

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6. FINDINGS AND CONCLUSIONS

6.1.

KEY FINDINGS

The study led to some very essential findings regarding consumer preferences and also highlighted the key factors which influence these preferences. The study also highlighted the ratings of the two most prominent players in the Indian pizza segment. Following are the key findings of the study: Dominos is preferred by more number of people as compared to Pizza Hut but the difference is rather low and due to the different dining formats used by both the outlets this difference can be further explained. However more people consider Pizza Hut to be excellent overall in comparison to Dominos. Hygiene conditions is the most important factor for people while visiting a pizza outlet. Value for money and speed of service are also important for consumers which is in line with a customers expectation from a fast food outlet. Most people prefer to consume pizza by home delivery most probably because it is more convenient than dining-in. The most influential reason for having pizza for maximum is to eat something different than usual as having a pizza gives a consumer a change from their everyday meals. Using factor analysis on basis of attributes product dimension, quality dimension and service delivery dimension were identified which influence a consumers behavior towards a pizza outlet. Using comparative analysis it was found that Dominos and Pizza Hut rate quite high but differently on key attributes of pizza outlets. Pizza Hut is rated higher on quality and hygiene whereas Dominos is higher than Pizza Hut on affordability and the schemes and combos offered.

41

6.2.

CONCLUSION

Consumer acceptance of food served by pizza outlets is critically important for the future growth of fast food outlets in any economy. Though the rating of pizza outlets attributes under study based on mean score is very high but still consumers eat pizza from outlets to eat something different than usual so as to experience a change. Comparison of Dominos and Pizza Hut indicates a clear difference in their mean score of their attributes and each outlet has its own strong footing on different attributes. Based on the analysis and results, we can say that with more and more acceptability of pizza outlets, changes in life style and competition among the outlets with respect to product (or food) quality, price and service are most essential.

6.3.

IMPLICATIONS

The study highlights multiple managerial implications for the pizza outlets, the most important being that consumer preferences are influenced by three key dimensions (product dimension, service delivery dimension and quality dimension). This objectifies that pizza outlets should focus on the quality and variety of food besides other service parameters. Study clearly shows that consumers eat pizza primarily to experience something different than usual therefore the operators need to focus on providing variety of options to their intended customers. This is an important parameter to drive sustainable growth.

6.4.

LIMITATIONS OF THE STUDY

The responses were collected on the basis of convenience sampling however the sample used aptly represents the key demographic for pizza outlets. Due to time constraint further statistically models could not be build and only limited analysis could be performed.

42

7. REFERENCES

Books and Journals: 1. Yin. R K (1993). Applications of Case Study Research. Thousand Oaks, CA: Sage Publications Inc. 2. Yin. R K (1994). Case Study Research Design and Methods. (2nd ed.) Thousand Oaks, CA: Sage Publications Inc. 3. Goyal A., Singh N P (2007). Consumer perception about fast food in India: an exploratory study. British Food Journal, Vol. 109, No. 2 4. Sinha. P K (2012). Indian QSR Industry Opportunities and Strategies to Harness Them. Unpublished.

Reports: DEssence, Quick Service Restaurants in India, 2011 Jubilant FoodWorks, Annual Report, 2012 National Restaurant Association of India (NRAI), India Food Services, 2013 RNCOS, Indian Pizza Market Analysis, 2012

Websites: Times of India website, accessed in October 2013, <timesofindia.indiatimes.com> SMergers website, accessed in November 2013, <www.smergers.com> Economist Intelligence Unit website, accessed in November 2013, <www.eiu.com>

Other resources: R Core Team (2013). R: A language and environment for statistical computing. R Foundation for Statistical Computing, Vienna, Austria. URL http://www.R-project.org/. IBM SPSS Statistics, Version 19 Microsoft Office 2013

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8. QUESTIONNAIRE

44