How Domino's Is Poised to Benefit From India

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India is quickly becoming one of the fastest-growing markets for pizza makers, including Domino's Pizza  (NYSE: DPZ  ) , Yum Brands' (NYSE: YUM  ) Pizza Hut, and Papa John's  (NASDAQ: PZZA  ) . While all of the "big three" pizza makers enjoy market presences in India, Domino's is poised to expand its position as the largest pizza maker in India. Domino's CEO J. Patrick Doyle, in an interview with The Economic Times, recently called India "one of the fastest growing markets in the world" for Domino's. 

India: an unique market for pizza
Pizza Hut opened its first outlet in India in 1996, one year behind the entry of KFC, its Yum! Brands counterpart, into the Indian market. Domino's followed suit and opened its first location in India in 1998. Papa John's opened its first outlet in India in 2006, and today it remains the smallest competitor with only 36 locations in India. 

Asian pizza markets, including India, require "recipe localization" from pizza makers to a greater extent than many other markets such as Latin America and Europe. Indian pizzas tend to be spicier and more veggie-oriented than those in other countries. For instance, oregano spice packs are included with your typical pizza order in India instead of Parmesan cheese.

Patrick Doyle attributes much of Domino's success in India to developing and maintaining a relationship with local partners, through Jubilant FoodWorks, since day one.  Jubilant FoodWorks, Domino's master franchisee in India since 1996, was recognized by the Economic Times as "Emerging Food Group of the Year" in 2012. 

A global innovator 
In 2011, India served as Domino's fifth-largest market. Within two years, India has climbed to Domino's third-largest market, falling only behind the United States and United Kingdom. Doyle expects India to overtake the U.K. as Domino's largest international market within the "next few years." 

As of 2012, Pizza Hut had 310 locations in India. Papa John's, as mentioned above, has only 36 locations in India, while Domino's had 619 stores in India as of September 30. Domino's U.K. locations number 742 in total; 123 units more than India. Considering Domino's opened 113 stores in India in 2012 alone, versus 50 new openings in the U.K., by 2016 India should surpass the U.K. as the company's largest international market. 

A unique component of Domino's innovative nature is the company's Global Market Council, a virtual global team consisting of leaders from Domino's largest global markets. Doyle explains that this Council, which convenes on a quarterly basis, enables "relationships between the markets," encouraging successful menu items and practices to be shared across the company's many global regions. Doyle gives an example of a dessert that was developed in Turkey and, after gaining in popularity, it quickly spread across the globe to the rest of Domino's markets. Additionally, some of Domino's Indian pizzas (such as the paneer pizza) are now offered in the U.K. 

Social media and technology
In a previous article I explored how Domino's is heavily focused on technological innovation; the story is similar for Domino's in India. In an October study from Unmetric, Domino's was found to be the most successful pizza maker in India in terms of social media followers and activity. Of the 15 quick-service restaurants, or QSRs, surveyed in India, Domino's was one of only two QSRs to have a presence on Facebook, Twitter, YouTube, and Pinterest. Domino's has more followers than Pizza Hut on all four social media outlets in India. 

Domino's India introduced online ordering in 2011, with online orders now making up approximately 18% of total sales. As Domino's appeals to an expanding digital audience in India (as with the rest of the world), coupled with an increasing base of stores, expect increasing market penetration and rising same-store sales in India to offer healthy growth for Domino's in the coming years.

Foolish bottom line
Domino's has led the charge into the Indian pizza frontier, teaming with local partners since the very beginning of the company's entrance into India in 1998. Domino's focus on adding digital components to its pizza business should help the company build customer loyalty, which will be all the more beneficial as the company expands its base of Indian stores. Domino's cumulative global stores, as of 2012, outnumber its U.S. base of stores. With India poised to become Domino's largest international market within three years, the global future for Domino's looks bright. 

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David Kretzmann

David started investing in stocks when he was 12 years old and has been a Fool ever since. He is a graduate of Berea College as well as the Motley Fool's Analyst Development Program, currently serving as an analyst in Rule Breakers and Supernova. Follow David on Twitter @David_Kretzmann.

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