Ladies and gentlemen, good day, and welcome to the Restaurant Brands Asia Q2 FY24 Conference Call, hosted by Nuvama Wealth Management. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star ten zero on your touchtone phone. I now hand the conference over to Mr. Nihal Jham from Nuvama Wealth Management. Thank you, and over to you, sir.
Yes, thank you, Sagar. On behalf of Nuvama Institutional Equities, I would like to welcome you all to the Q2 FY 2024 annual conference call of Restaurant Brands Asia. From the management today, we have Mr. Rajeev Varman, Whole Time Director and Group CEO; Mr. Sandeep Dey, Brand President, Indonesia; Mr. Sumit Zaveri, Group CFO and Chief Business Officer; Mr. Kapil Grover, Chief Marketing Officer; and Mr. Prashant Desai, Head of Strategy and IR. I would now like to hand over the call to Mr. Rajeev Varman for his opening remarks. Over to you, Raj.
Thank you, Nihal. Really appreciate it. Guys, Happy Diwali to everyone, and thank you for taking this time out, this evening to join us on this call. On the onset, I just wanna, you know, just generally tell you what Burger King India and then Burger King Indonesia, combined under the umbrella of RB, has been doing for the last couple of quarters and how the results of Q2, you know, the summary of the results for Q2. So, you know, the initial strategy as we outlaid, before this year started, FY 2024, was basically to bring in the traffic back, back into the dining, business and back into our, Burger King restaurants. So, you know, we usually don't share traffic numbers, but, I'm gonna take the liberty just to give you directionally what we have done.
So both the quarters that have gone behind us, Q1 and Q2, both these quarters, we have increased our traffic in our restaurants with high single-digit numbers, and not just in India, but also in Indonesia. So that has been basically the way forward for us, is to bring more people into our restaurants to drive SSSG through SSTG, not just through bike check. And I'm very happy to report that, you know, we continue with that strategy into Q3 and Q4, with very similar elements that have given us the results in Q1 and Q2 with traffic increases. This also happens to be one of the great quarters for India. You know, this is a quarter where, you know, we delivered the highest EBITDA we ever delivered in India.
I wanted to thank my team that's out in the field and everyone that's working in the office for all the hard work they have done in producing these numbers. Generally, as we look into Q3, Q4, reflecting back on Q1, Q2, our strategy is no different. We'll continue to drive traffic into our restaurants, and we will continue to build our sales and our same-store sales through traffic. That's the main headline objective moving forward. Now, Q2 results, if I look at the India results, you know, we grew year-over-year 23% on revenues, delivering INR 453 crore in total revenue. This is on the back of SSSG of 3.5, which, as I already said, was led by very good traffic growth, specifically in our restaurants.
So thanks to all the work, Cicily Thomas is doing, leading the India business. If I also look at the ADS, you know, we are, we are- we delivered in Q2, 126,000 INR ADS, which is 6,000 INR above the previous quarter, which is at 120,000 INR. So again, all check marks on sales, on SSSG and ADS, right? Coming to profitability, I already articulated that this has been a good quarter of our restaurant-level EBITDA and company-level EBITDA. So the highest ever EBITDA we delivered, if I give you the post-Ind AS numbers, that is, INR 63.5 crores , which is 51% above the previous quarter.
And if you're interested in the pre-Ind AS 116 numbers, that number was INR 24.3 crores, which is 138% above what we did the previous quarter. So thanks again to the team for delivering that. PBT breakeven, first month that we have breakeven. I know Prashant always asks me: "When are you breaking even on this one?" So Prashant, there you go. That's the number for you. Growth, we built 10 new restaurants in the quarter, and we closed two, so a net result of eight restaurants that are NRG, Net Restaurant Growth, as of September thirtieth. Now, we've got 46 restaurants that are in construction, right?
We are well on our way to deliver more than 450 restaurants by the end of this year, Q3, by December 31st. So that's the key KPIs, and Kapil and Sumit will go through the detailed numbers and so forth, but I just wanted to throw the key highlights here. The other thing that we're doing, and you might have seen this as you go through our restaurants, if you're visiting our restaurants, is we are now going completely digital in all our restaurants. It'll take us a little while to cover all of them, but we'll spend the better half of next year and maybe a little bit more doing this. We are-...
You know, turning away and going towards self-ordering kiosks, ordering at the table, table service. So this new digital parameter that we are, we have already tested, we have, we've got the equipment rolling and, and this will be rolled out into all our restaurants across the country here in India. So a great initiative by Kapil, and Kapil will speak more to that, when, when he comes to the marketing section. So great, revenues. SSSG on top of SSTG, which has been, you know, since I started doing this business many years ago, traffic was always called the blood of the business. If you're growing the sales through traffic, then you're doing a good job. And, and, we have delivered that in the last two quarters, and, and are focused to do this in the next two quarters as well.
On EBITDA front, I told you, we've delivered a fantastic number, and PBT breakeven. So thanks, Sumit, for all the hard work on making sure that we are very effective and efficient on our line items. Now, just coming to Indonesia business, and Sandeep will take the major chunk of the weight on this one, but I will share again with you, the work that he's doing and his team is doing. And frankly, Sumit has spent a lot of time there in putting together a fantastic strategy moving this business forward. So if I look at the Q2 numbers, we delivered 19.1 NIA, and I'm talking IDR numbers now, Indonesian rupiah. IDR 19.1 million, which is, as you remember, from Q2 of FY 2023, that was 16.9.
That grew 13% year-over-year, again, on the head of some very good traffic numbers. Q2, again, on the SSSG, they were positive 6.5%. So Sandeep is now giving a run to Kapil and Cicily over here in terms of SSSG. He's climbing at a faster rate there. And listen to this number, 17% increase in traffic in dine-in in Indonesia and Burger King. Fantastic job, Sandeep. Thank you for all the effort over there. So you see those numbers. Coming out to revenue, we did IDR 287 billion, which is 5.5%, or 5.6% actually, year-over-year. Now, this is despite... So we had a higher revenue, like 5% and, 5.6%, despite closing 17 underperforming restaurants.
So we closed these restaurants, and yet we did a higher revenue. So, great job there as well. Continue to generate some healthy ADS. If you look at the ADS, on the Popeyes front, I'm now speaking about Popeyes. We are now kind of stabilized, at about IDR 46.3 million, which is, you know, about, IDR 6 million higher than what the Burger King business is doing. And now, now, Sandeep is tasked to move this from forty-six upwards towards thirty. Total revenues in, these 12 restaurants that we have in Popeyes was IDR 27 billion. And here, as we are moving forward, you know, we are, approximately now at restaurant breakeven. So our, business, the Burger King business and the Popeyes business, does not lose any money at the restaurant level.
So that's the kind of crossroad that we have passed. When I look at the growth bucket, we have 162 restaurants as of September thirtieth in the Burger King business, and 12 Popeyes restaurants in by September thirtieth. So that's the portfolio over there. Now, again, you know, Sandeep will talk about this, but we rolled out the chicken in Burger Kings, and we told you that was a big gap that was there, and we have moved those volumes of chicken by 50% in those restaurants. That is where all that 17% traffic is coming from.
And also on the burger side, because Burger King continues to be a burger business over there, we have moved those volumes up by 35% as well. So Sandeep will talk more about that, and kudos to the entire team in Indonesia to continue moving this in a positive direction. So with that, what I'll do is I'll hand it over to Sumit to kind of go granular on some of these numbers, and then we'll go to Kapil. And that's okay. Over to you, Sumit.
Thank you. Thank you, Raj. So what I'll do is I'll just kind of talk about the key financial numbers, and then also go a little more deeper to explain what we've what we've achieved through this quarter in India, and then also I'll cover Indonesia as well. As far as store counts, as Raj mentioned, we ended the quarter at 404, on our way to get to over 450 by end of this quarter. This was really by design that we did it, where this quarter we grew eight, and we kind of had put as a part of initial plan itself, the growth which was towards quarter three of the year. So that was by design.
We continue to open all our new stores with cafe. We're currently at 297 cafes. It is 75% of our portfolio now has cafes. And Kapil, in his part of his discussion, will take you through what cafes are now contributing as far as overall business is concerned. At the back of strong growth in terms of new stores. We added 70 stores over the last 12-month period. You know, we've been able to sustain the ADS at the portfolio levels in line with what we had achieved last year. If you really look at that quarter two FY 2023, we did an ADS of INR 137.
After effectively adding 70 more stores, we are still at 126 ADS, which effectively reflects that the stores that we've added have come much closer to the portfolio average in terms of ADS. Our overall ADS growth, led by traffic for the quarter, then we could see that over last two quarters itself has been 3.5%. We feel fairly confident of this number, and as we go along and as we get to the later part in terms of what we expect the year to end, you will only see that our positivity towards what we will achieve in especially going forward is only going to be better than what we've done in quarter one and quarter two. As far as overall revenue is concerned, we grew by INR 31 crore quarter-on-quarter.
Moved from INR 422 crore in the previous quarter to INR 453 crore in the current quarter. Gross profit margins or the COGS, as we could call it, whichever way, has always been, honestly, we strongly believe, our strength area. If you would have, if you go back and see last 4-6 quarters of ours, through this entire inflationary pressures that we have that we saw, we maintained the gross margins at 66.4% through that period. And while we were doing that, we also ensured that we are building efficiencies to be able to take our journey to what we have been sharing, as a part of our guidance, that we need to start making that journey towards that.
This quarter is our first step towards that, and we reported or achieved a gross margin of 66.8%. So if you really look at it from the perspective of consistent 66.4 that we've been maintaining over the last 4-6 quarters, we moved the needle now by 0.4% and got to 66.8%. And this is our first step towards achieving the guidance or the target that we've set ourselves for gross, gross margins. Happy to share that, as far as restaurant EBITDA is concerned, we are reporting early double digits for the quarter.
We did get 10.7% in terms of restaurant level EBITDA, and a substantial shift at the company level EBITDA of where we got to INR 24.3 crores, 5.4% at a company level. A shift from INR 10 or 11 crores that we did last quarter or as compared to previous years. So it's a shift of almost around 13, INR 12 crores-INR 13 crores in this quarter, which is that it's, it is effectively a very strong base shift that we've made in our overall company EBITDA numbers at INR 24 crores. With the seasonalities, hopefully in our favor, we should only be able to kind of do better, if not, sustain these numbers. So that's how we really see it.
INR 24.3 crores, as Raj said, is the highest ever company level EBITDA numbers that we've reported so far. But certainly this is not, this is not the end of it. We feel that this is just the beginning of the better quarters as we go along. If I were to just quickly turn to slide seven and talk about the overall numbers as far as India is concerned, we generated revenue of INR 453 crores. Some of these numbers are slightly repetitive, but I'll just kind of summarize these numbers. With the gross margins of 66.8% and a restaurant level only single early double-digit numbers at close to 11% and company EBITDA at 5.4%.
You know, there have always been some discussions on the corporate G&A side, and we've been saying that now we would remain in the region of around INR 23 crore-INR 24 crore. Keeping that trajectory in mind, we were more or less flat at the corporate G&A level at INR 24 crore. With the revenue growth over quarter-on-quarter, we've only got better in terms of percentage of revenue. From 5.6, we've gone down to 5.3%. We believe that this trajectory, again, similar to in line with company EBITDA, will only get better as we kind of get the benefit of the stores that we've opened or we plan to open, plus the growth that we see in the existing portfolio. Quickly going on to the Indonesia part of the business.
We moved, as compared to last year, we grew by from INR 156 crore, in INR terms, to INR 171 crore for the quarter. Our concentration as far as Indonesia is concerned, has always been to kind of make sure that the business gets to start seeing the positive trajectory in sales. We've seen a substantial shift almost by 2.2 IDR million, which would translate to around 10,000 INR odd in Indian terms over last 12 months. These are probably our early successes that we've seen over this six months period. And we feel that we've only created a stronger base on which we will continue to build. We...
At a restaurant level, we, we were close to breakeven at country between both the brands, and at a company EBITDA level, we were at around negative INR 15 crore. But, but we believe that, you know, as we continue to build onto the base that we have, we'll only be able to take this trajectory onto the breakeven side as we go along over next, next few quarters. As we look at the consolidated performance, overall revenue INR 525 crore previous year, last year, we've moved to INR 625 crore. Last year, overall, at a company EBITDA level, we were at a negative INR 15.6 crore. We have reported a positive close to INR 9.5, INR 9.4 crore for the year.
So we've certainly, as Raj said, it has been a good quarter for us. We have shifted the baseline needles practically in all key financial parameters, and we believe that we will only take the journey forward in the positive direction as we go on. With that, I'll request Kapil to take us through the key highlights for the quarter on the marketing side and then on, from there on to Sandeep to take us through the Indonesia journey.
Thanks. Thanks, Sumit, and good evening, everyone. Let me start with reiterating the pillars of our growth that we've aligned at the beginning of the year. Number one being the value strategy. It's a key driver of traffic and growth to our stores, followed by innovation on the core burger platforms, premium offerings, and building adjacent categories like cafe. The fourth-- The third focus area is about building digital experiences for our consumers and growing non-diner sales. And last but not the least, building a strong engaging brand for Gen Z and millennials. Now on slide number 12, our value proposition is focused on a satiating meals platform, the Tasty Meals at INR 99. You heard Raj talk about how we have run that initiative for the last two quarters, and that was the focus area for Q2 as well.
The campaign has clearly helped us drive dine-in traffic growth and offer consumers great value for their money. Again, you heard that we delivered 3.5% same-store sales growth in a very challenging environment, on the back of this program. The next slide showcases a few pictures of the execution, which helped us drive awareness about this program across mall locations, high street locations, and building, you know, traffic to our stores, through this program. The next area I want to talk about is the Whopper. It continues to be a strong part of our portfolio. We continue to build this platform through a consistent string of innovations, which we call the Limited Time Whoppers.
The last quarter was the Mexican Whopper, which had the salsa zing and the nacho chips, and we got a lot of appreciation from our Whopper fans, as they tried this new, new LTO offering. Every year, we launch, you know, 5-6 such new ideas on the Whopper platform to continue to drive our innovation credentials. Slide number 15 is about how we continue to build BK Cafe as a concept and generate trial growth with that concept. With 297 cafes on ground as of 30th September, we continue to build awareness, about the platform through social channels, through digital programs, effective use of influencers. Now, please note here that since cafe is now a standard part of the BK store, every new store, you know, unless there's an exception, opens with a cafe, right?
So we now start reporting a KPI of total sales coming from this business, right? And then you see on the side the number, that INR 16,000 is the contribution to the ADS from BK Cafe range of products, which is all the coffee-based beverages and the thick shakes. Right. So our guests continue to pair this new range of beverages with their favorite burgers and enjoy the taste of very good quality, 100% Arabica coffee at a very affordable prices. The next slide, slide number 16. You know, last quarter, we also, you know, saw the expansion of a very well-thought-through program of making our stores a new digital experience for our guests.
We call this the King's Journey model, where our guests are offered fantastic experience through digital ordering, through the kiosk, app-based ordering from the table, so they don't necessarily need to queue up at the counter. They can either go to the kiosk or take the mobile app, just scan a QR code, which is placed on the table, place their order, and they will be served their food on the table, right? So that's the new convenient digital experience that we're building for our guests in all our stores. And as we speak, we are rolling this experience out in select stores. The intent is that we will cover almost 100% of our estate over the next financial year.
Last but not the least, Burger King social feeds continue to drive very engaging content, whether it's for spreading awareness about our national campaigns like the 99 Tasty Meals, celebrating Indian or international festivals, moment marketing, you know, product stories, and we make an attempt to speak the language of our fans and stay connected with them in their tone and tenor. So that's it from my side. I will hand over to Sandeep to share the Indonesia update.
Thank you, Kapil, and a very good evening to all of you from Indonesia. You know, in the beginning, Raj mentioned that we continue to have a laser-sharp focus on our three strategic pillars for Burger King business, and those are, continue to build credibility in chicken, establish and retain our leadership in burgers, and build a comprehensive dessert menu and drive incremental locations through that. So the next few minutes, I'm going to share with you some of the work we have done to, you know, move forward these strategic pillars. As we know, Indonesia is a very, very, very strong fried chicken market, and having a winning product is a key motivator in this category, and we had a gap in our menu both with regard to taste as well as variety.
In the last six months, we addressed those gaps and then launched this product about two quarters back.
... and offered a very aggressive trial price of INR 25,000 for a meal, and also supported that with a comprehensive 360-degree marketing campaign. The results are quite positive. In fact, Raj did mention in the beginning that incidence of chicken improved by 20% and volume grew by almost 50%. But what is more encouraging is that these numbers are not just the initial numbers, but these numbers have sustained for over six months now. I'm now moving to the next slide, which is slide number 21. The next strategic priority is to establish burger leadership, and that we intend to do through taste credibility, flavor innovations, and very importantly, offer strong value propositions across the entire menu layer. Now, for this category, we have a two-pronged strategy. First, we call it value NTO strategy.
Here, we offer some of our flagship and preferred products at very aggressive pricing of INR 17,000 for a burger, where a guest can practically enjoy a discount of as high as almost up to 50%. Now, this is helping us not only drive a massive amount of dine-in traffic back into our restaurant, but also building the local equity. The volume growth of these burgers have increased by more than 35% and an overall increase of 11% in burger incidence. The second part of the strategy on the burger category is on the premium side, where we continue to provide new excitement through taste innovation and branded collaboration every 2-3 months at an alternate basis. The third growth pillar is the dessert category. That's a big business opportunity in this market.
Our strategy was to have indulgent dessert innovation every quarter, which we religiously do, either through branded dessert or local favorites. For the last six months, we are witnessing a sustained volume growth of almost 2.5 x. Finally, I'm going to give a quick update on Popeyes, which is my last slide, slide number 23. It's been 10 months now we launched this brand, and as we speak, we have 15 operating restaurants. We continue to deliver very strong new store launches, and I have already put 10 stores under construction. So by end of December, we should have 25 Popeyes. Our strategy is to build this brand into a chicken destination. See, basically, we are a culinary brand, and we got not only winning products with regard to taste, but also variety to address different need states.
We are actually the only QSR in this category to have a grilled chicken on bone product, and this unique Louisiana Grilled Chicken contributes to almost 30% of our chicken on bone portfolio. We are building this brand with a digital-first experience. All our restaurants are kiosk. Every single restaurant has video walls, which runs brand contents and product videos. All our drive-through menu boards are digital menu boards. Our long-term ambition is to have 100% more diners sales. In quarter one, I did mention that 37% of our dine-in sales was through kiosk, and we continue to encourage that guest behavior, and by end of quarter two, that number has grown up to 70%. That's from the Indonesia side of the business, and now I hand it over to Prashant to share the outlook for the overall business.
Thanks, Sandeep. From an outlook perspective, two changes. One, as you would observe, our SSG guidance given the first six months have been challenging for the industry. We are revising that to 6%, which still means that, you know, given that we are now entering the festive period, we are expecting a great festive season in the first quarter of next calendar year, which will be very high single-digit same-store growth, and hence the overall yearly same-store growth is at around 6%. Nothing, no other changes except the Indonesia business, which, as Sumit mentioned, we are hoping to break even that business closer to the end of this year. So otherwise, all the guidance remains the same. With this, we can open up the floor for Q&A.
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone phone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Dhwanil Desai from Turtle Capital. Please go ahead.
Hi, good evening, everyone, and congratulations for very good numbers. So first thing, if you can give some idea about the economics of a Popeyes store, what is the CapEx? How do you look at the payback? You know, those kind of things. And, you know, since we are on a low base, you know, we need to add a lot of stores, and we need to incur a lot of CapEx. So considering that most of the QSR brands on the early years kind of, you know, spend money to grow, do we need to get capital from Indian business to grow Popeyes? That's my first question.
So Dwanil, we are currently, Popeyes is still very early in the infancy, and hence we are not sharing, you know, the business is still stabilizing, so too early for us to share details with respect to paybacks and breakeven. But the CapEx for the store is approximately $400,000. So that is the data that we can share with you as we speak. As we had explained, you know, when we had acquired the Indonesia business, the capital for Indonesia business will be provided by the Indonesian management. India business grows on its balance sheet, so there is no major, you know, allocation of capital from India business into Indonesia business. It will grow from the strength of its balance sheet and the cash flow that the business will generate.
Okay, got it. And my second question I think is, you know, you know, in the opening remarks, there was a mention that in spite of 70-odd stores getting added, our ADS is almost at the same level. So can you give us some color as to, you know, what kind of ADS growth we have so seen, in more mature stores, which are three years and older, vis-a-vis the newer store? You know, how is the gap? How does the gap look like? And, as the proportion of the newer store reduces and the vintage increases, naturally, the ADS growth has to be significantly higher. So, you know, can you give some insight into that?
So, Anil, I'm presuming you are talking about Indonesia. So, Indonesia, we grew 0.5% in terms of SSSG. That is one. And if I was to look at the same numbers from India perspective, the newer stores, we will see slightly better SSSGs, which is what we are also seeing as they move into SSSG after end of 13-month period that we kind of take. We will see a slightly better SSG with respect to those, and hence, those would also contribute to better SSG at the portfolio level. Secondly, as far as quarter two is concerned, we will also see or H2 is concerned, we'll also see that because there was a baseline effect in H2 last year, a better SSG in H2 as well.
We are guiding the overall full year SSG at 6%. Our expectation is that it will be closer to around, overall portfolio would be closer to around, anywhere between 9%-10% in terms of SSG for H2.
Anil, just to add to what Sumit mentioned, one of the things that we are experiencing, as the brand is getting more and more stronger, as we are opening more stores, both on the high street side as well as spending money on television to kind of build the brand. As your size is increasing, all of us have to spend 5% of our revenue on marketing. As the brand is becoming stronger, one big trend that we have observed is all the new stores that we are opening are doing significantly better year-on-year. So earlier it would take us three years to reach the portfolio average.
Now we are seeing this timeframe shortening as the brand is becoming stronger, and that's the bigger point that Sumit was trying to make, that despite opening 70 new stores, we have seen an increase in ADS.
Okay. And I think in earlier years, you know, interactions, you indicated that the more mature stores have generally 20% higher ADS than the average number. So that, that benchmark remains, or is, is there any change, the more mature stores are growing faster? Any sense on that?
Yeah, we are not sharing cohort-wise data, but by and large, you are on track.
Okay, got it. That's it from my end. Thank you, and another question.
Thanks, Anil.
Thank you. A reminder to all the participants, if you wish to join the question queue, please press star and one now. The next question is from the line of Shirish Pardeshi from Centrum Broking. Please go ahead.
Hi, Sumit and Raj and the team. To start with, I think it's really a good experience that you maintained the SSG at 3%+ in the first half. However, the guidance is revised lower. So two questions. What makes you confident? Because if I see the average of 6%, the second half has to be pretty strong. So could you share what is the confidence level? Is there a lot of innovation which you are planning to launch or already launched? Or is the optimism because of the base, because last quarter three was very weak for the entire QSR industry? And maybe some color how the current World Cup has added the numbers in the month of October.
Personally, I'm not looking specific, but the trend, if you can share.
Yeah, very, very nice question. Thank you very much for that. See, a couple of things. One is obviously the festive season is in front of us, right? Second is, you know, in spite of the fact that, you know, we're sitting at about a 3.5% SSSG, 3.6 in Q1, what I said on the onset of this call is it's driven by some very fantastic traffic numbers. So it's not on the basis of check increases. So we have this year, we have been driving more traffic into our restaurant. And generally, if you look at the burger industry, the word out there is, and most of the experts that have written around this, is that the burger category continues to grow, both in dine-in as well as in delivery.
This category continues to grow, right? So we're just kind of leveraging and working on those numbers of driving more and more traffic. And also, you see there's a whole bunch of restaurants we opened last year in this Q3, which will start to comp. And you know, obviously, as you know, these start at low numbers, and they start going to higher numbers in the following year. So we are, you know, again, we are confident on the traffic because we've got a very good promotion in place, which is driven by Kapil and his team. That continues to drive traffic, and on the head of this traffic number, we think that we will...
And the fact that, you know, the last year, the quarters were kind of a little soft, as you remember, Q3 and Q4. So that's, those are the driving factors in where we think we're going to move this forward.
... It's central, Raj. Just to give a little more clarity on the question was in the beginning, what I asked, you mentioned in the beginning saying that you're seeing a traffic growth, single digit. So I was more curious that this traffic is basically from the dine-in or delivery, maybe some quantitative explanation, if you can be able to help us.
You know, I can tell you that our dine-in traffic is growing. I've not split those numbers. We don't share this. I don't think anyone shares those numbers, and for competitive reason, we want to kind of keep them close to our chest. But I can tell you that both in Indonesia and India, both the strategies have been, and you will see, and if you just look at the strategy, you know, the offer that we have is in dine-in. It's not available in delivery. So you should understand that that's to drive dine-in traffic, not delivery traffic.
Okay. My second question, I'm referring to Slide 6, and I'm trying to do some mix and match of numbers.
Yeah.
Prashant did mention that on a YTD we have added 70 stores in Burger King India. But when I look at, we have added 117 BK Cafe. So if I look at, and again, reference point is that ADS increase from BK Cafe is about INR 16,000. But when I look at the YoY ADS number, 127 and 126, which is now this year, it has remained largely flat. What explains, or maybe if there is qualitative explanation, if you can help us?
Go ahead.
Firstly, so I just take this. One is, yes, we've added all the new stores are coming with cafe, and hence, effectively, you've also seen the total overall cafe count going up from 180 to 297. So that's one part. Secondly, just to kind of clarify the number, as Kapil was mentioning, when we said cafe contributes to INR 16,000, that is a share sale. That is not necessarily incremental sale number. If we refer back to some of our earlier presentations or discussion, you would realize that the incremental sale on the cafe portions have only been around in the region of around INR 7,000-INR 8,000.
So if we kind of do the base effect of those additional 100 stores, then it'll only be affected around INR 1,000-INR 1,500 on the ADS, just to kind of build up the numbers there. Referring back to what Prashant was mentioning, that you know, our newer stores generally would come slightly lower than our portfolio average. We've only been getting better. So if we were to, you know, we've been able to maintain the ADS from 127 - 126, largely because the newer stores that have come, one is SSG of 3.5% that we got over last year, and the newer stores that we opened, plus a marginal increment that we got on account of cafe as an overall portfolio level, we've been able to maintain the ADS at 126.
Newer stores coming closer to or better ADS than what we've seen as the brand matures. Cafe margin impacting and 3% SSG is why we've been able to maintain the ADS at INR 127-INR 126. Otherwise, in the past, you know, as we were growing rapidly and the base of new stores being higher, we've generally seen that while we would have positive SSGs, the portfolio averages would be equal or negative. So this is literally now with the weight of existing stores increasing, we've been able to sustain it at the INR 127 level. So this is rather a positive shift, is how I would see it, Shirish, rather than saying that why we've not been able to move the needle upwards.
Okay. My last question. On the guidance front, did Prashant mention that we have revised downward the SSG? But I'm more curious because we have already achieved the 66.8, closer to 67%, gross profit margin in India, and you're still holding that guidance. So what is the hesitation? Is the volume growth, the strategy which we are employing, so will not give us the margin lever, or we are being conservative at 67% at this time?
No, we always say 67, right? So it's one of the things that you have mentioned. I think what Sumit was trying to explain in his commentary was that you guys are aware of the inflationary challenge. You guys are aware of the fact that we launched a INR 19 value deal. Despite that, we are retaining our margin guidance of 67%. It's not conservative, it's not optimistic, it's realistic, and we would like to remain at 67%. Couple of things I will still add, Shirish, maybe you were not part of the earlier calls that we did. Our margin, gross margin, or our cost of goods sold includes our primary and secondary distribution cost. So that is one thing you will need to keep in the back of your mind when we talk about 67.
I got that, Prashant, what you're saying, but directionally, the milk and cheese inflation is expected to come down very sharply. That's what at least the other players are indicating.
Shirish, appreciate that. As I said, yeah, we meet you guys every quarter. Should we choose to up the guidance, we will come back to you. As of now, factor 67%, as your gross margin guidance.
All right. Thank you. That's it.
Thanks, Shirish. Appreciate it.
Thank you. Before we take the next question, I would like to remind participants that you may press star and one to join the question queue. The next question is from the line of Mr. Tanmay Gupta from Motilal Oswal. Please go ahead.
Yeah, hi. Thank you for the opportunity. Sir, I'm looking at the slide 22, where I see that we have introduced lot of desserts menu in the Indonesia site. Just wanted to understand what is our, like,
... what is our collaboration or strategy to, you know, launch the Kit Kat or Oreos kind of, desserts in India in order to improve the ADS going forward?
Yeah, Kapil, so I'll take that question. Yeah, that's a very good initiative that the Indonesia market has done, and we obviously will continue to explore similar opportunities in India as well. There is, it's just a matter of time that we strike a good, you know, co-branding opportunity. So we continue to explore. At some point in the calendar, you'll see those innovations in India as well.
Okay. So any other, you know, innovations lined up, like other than desserts or something like, you know, in order to improve ADS?
So, yeah, the India business will continue to launch new products. In fact, if you visit our stores today, we have already introduced a couple of new products. You know, we recently launched nuggets, which is a new addition to our menu. You can, you know, go and try them in all of our stores as of today. And we've also in the last quarter, I shared, introduced premium wraps in our menu. So we continue to find these consumer insights and gaps on our menu and make sure we keep plugging them and offering consumers the products that they need for a good experience at Burger King.
Understood, sir. Thank you very much.
Thank you. Participants who wish to join the question queue, please press star and one now. The next question is from the line of Mr. Mayur Gathani from OHM. Please go ahead.
Hi, team. Thank you for the opportunity. Just wondering on the Indonesia side, do we still see more closures on the Burger King stores, or this is going to be an ongoing thing?
So, Mayur, it will be an ongoing thing. As a part of our current assessment that we went through at the start of the year, wherever we felt that this part of the portfolio, it does not warrant it to be, be part of our going forward portfolio, we've already taken that call there, and we are now at around 162 stores, as we speak to you. We will continue to look at that part of the Indonesia part of the portfolio very closely. But as we speak today, we would take the journey forward from here at 160 stores.
As we continue to review, if we feel like, we may want to prune this, any part of the existing 160-store portfolio, any pruning is further, then we would, we would take that call. But the risk on that side at the moment is still not... We don't see now going forward, a substantial, shift on the downward side on store portfolio in Indonesia. But if there is a need, then we will certainly continue to take that call, to make sure that the portfolio remains healthy out there.
Okay. Quarter-on-quarter, the revenue was down in Indonesia, so is that, I mean, completely the reason, 17 stores closure is the reason that you would give?
Yes, it is. It was probably because of the store closures. If you look at it from the perspective of ADS, then we've been on a quarter-on-quarter. The ADS has been in the range of around INR 19.5. And that is how seemingly a very strong base that we've been able to establish there. And hence, effectively, you know, the number to really look at is the shift that we've been able to do on a year-on-year basis from almost from INR 16.9-INR 19.5 over last year there. Mayur, the other thing is that, you know, what we've seen in terms of seasonality and what we've really been able to beat in Indonesia is quarter one is a very strong holiday seasonality last year as well as this year.
We got to 19.5 odd quarter one last year. And then as soon as the seasonality went off, we had dropped, maybe down to 16.9 last year, quarter two. This year, the same seasonality, but post the seasonality, we've really been able to hold on to, and what Sandip mentioned, initiatives that we took on the menu side and the offer side, we've literally been able to hold on to the ADS is similar to quarter one and to quarter two. So, we believe that we've been able to create a very strong base to build on going forward, there. So the reduction is around our store, store closures, but a much stronger base of INR 19 million for us to build on from here for all the initiatives that Sandip mentioned, Mayur.
Sir, which is fair and, great job on that side. You had a positive, kind of restaurant EBITDA, just a kind of flat, for, EBITDA on this, Indonesia business, and you're negative, in quarter two. So again, I would relate, are there any closure costs that are added on to this and hence it is lower, negative?
No, we've kept it in. As a part of these numbers, the closure costs, we've kept it out. If you put, we've made that remark as well, in our, on slide eight as well. This is more because, you know, for the really speaking from the perspective of pushing the sales and get more traffic into the business, we have taken, we had to take some calls on the pricing side for the offers that we run. The drop is... purely on account of the gross margins coming down quarter-on-quarter, but not on any other reason for that. We have certain, and I wouldn't be able to share that some of the numbers.
On the cost side, we have certain upsides that are available, which we should be able to see going forward into H2, as far as Indonesia is concerned.
Okay. Seasonality-wise, quarter one is the best for Indonesia, just for our understanding?
We would see quarter one and quarter three, the upcoming quarter, acts very similarly. So one is the local holidays that they have, what they call it as Lebaran. Whereas quarter three will have Christmas as a, as another, positive, seasonality. But one other thing, you know, is that, and just going a little more granular, on this, we have been able to kind of beat the needle in quarter two. Like us in India, August is, their independence month, and we literally kind of did a very, very similar ADAs to what we did during the, the quarter one peak seasonality. So, so that those are some of the positives that have worked in our favor in Indonesia. But seasonality-wise, quarter one and quarter three are the peak seasonalities, to your question.
Okay. On the gross margin side, what is the-
Sorry to interrupt you. May we request you to return to the question queue for any follow-up questions?
Thank you.
Thank you. The next question is from the line of, Mr. Pratik Kotak from Nippon Asset Management Company. Please go ahead.
Yeah, hi. Thanks for the opportunity. Could you guys just double-click on, you know, opening Whopper at INR 129 on dine-in? How should I think about sustainability in quarter three? Maybe you can just spend some time as to help me understand what does this do to your ADA, SSSG, et cetera, as well as margins?
Sorry, could you just repeat the question? You're saying Whopper INR 129, is that what you're saying?
Yeah, yeah. So you have cut down the prices on Whopper, right? On dine-in, it's INR 129 versus INR 199. That's a sharp cut, and that's only on dine-in. I'm just trying to understand what happens to your margins when you take such a sharp price cut, and how does it overall play out sequentially as well as, or from a longer term perspective, as well, as well as from a brand building perspective?
I think exactly the point I was actually trying to make to Shirish, right? When we are guiding 67%, it factors into account all the initiatives that we spoke about, whether it was the INR 99 meal or the new value promotion at Whopper. Or in terms of its performance, very, very, very early days, just launched. We are now-- This is the first weekend of Diwali that we will be entering. So just give us some time to kind of come back to you on that. But, from a margin perspective, when we are guiding 67%, it, it factors that into it.
Got it. Got it. And when you say Indonesia cash break-even would break even on 100 basis, do you mean exit basis in the sense Q4, FY 2024 is where we see Indonesia cash break, cash breaking even? Is that the way to think about it?
Yeah, yeah, you are right, but, what we are trying to communicate, you know, following up on what we said last time, we will see quarter on quarter across Burger King, across Popeyes, we are only making progress. We are feeling reasonably confident about that the worst is behind us. And yes, ideally, we would have wanted to break even this business this quarter, but yes, some of those things are not under your controls. But, directionally, I think we believe by the time we end this year, we should not be losing money, and hopefully make some money for all of you guys next year. So directionally, yes, Q3, Q4, we should hopefully break even at a company level, Pratik.
Okay, great. And last question, I think Sumit was also highlighting this. Just wanted to ask, whatever improvements you have seen in terms of employee costs, other expenses, corporate costs, and the operating leverage playing out, is that something sustainable? So in the sense, in Q3, you are adding a lot of restaurants, I think 45 of those franchises that you're adding. Will we again see a step jump in terms of other expenses, or you believe these margins which we have achieved are kind of sustainable, and we will only build from here on, we will not go back?
So, Pratik, the best way to probably answer this question, for you, would be, despite all the challenges that we saw in the first two quarters, you have seen the operating leverage play out. And we've been consistently mentioning this, right? That you need a base of about 400 restaurants for the size advantage to kick in. You know, whether it's in terms of the brand build and ADS impact, and its impact across line items.
What we would probably want to conclude that if the festive season goes well, which we are all touch wood, hoping for the festive season to go well, all we would say is your next six months will be significantly better compared to the first six months, whether it's on a, at a restaurant level or at a company level for India businesses.
Got it. Thanks, Shashank and Anil.
Thanks. Thanks, Pratik.
Thank you so much. The next question is from the line of Devanshu Bansal from Emkay Global . Please go ahead.
Hi, sir. Thanks, thanks for the opportunity, and congratulations on the great set of numbers. Sorry, I joined the call a bit late, and if my questions are repeated, please don't answer them or go to the transcript. Just wanted to understand from you, you launched this INR 99 meal, so despite that, gross margins have improved both on a sequential as well as on a YoY basis. Just wanted to understand what, what was the... How did you sort of manage the negative impact of this non-food gross margin? So what, what, what was the positive sales in, if you could explain that?
So Devanshu, you, I know where you are coming from. Honestly speaking, it's a tough question to answer on an open call where, you know, everybody listening. You know, broadly, I can tell you, so this is a marketing strategy to get people in. At INR 99, this offer was available, purely on dining, not on delivery. Then you kind of get customer to add on to cheese. You make people, switch from a Pepsi to a coffee, for which they pay extra. Non-veg part of the business does not come at the same discounted portfolio. There are a lot of levers that you pull, you know, to do that, and hence, you know, I won't go deeper into each of these.
But I would fairly say, and I think Pratik was also coming from that point of view when he asked in terms of the same similar question on the Whopper stuff that we launched. And trust me, there are a lot of things that we do under the hood to kind of ensure that it's not gross margin dilutive for us. Unfortunately, Devanshu, it's tough for us to go further into detail on this for competitive reasons.
Got it. Got it. Second thing which I wanted to understand is your marketing spends are down sequentially. Your other expenses are also down by a similar amount in terms of percentage between Q1 and Q2. Wanted to check is all other expenses that we incur on a store level are all these variable and linked to revenue, or we can get some sort of operating leverage going ahead?
So Devanshu, your marketing spend, if you see, we mentioned this in detail in the first quarter, that, as a brand, as per the agreement that we have signed with Burger King Global, we are mandated to spend 5% of our revenue on marketing, and on a full year basis, this number will remain at 5%. First quarter is normally when you plan for all the shoots and the campaign, and there is a production cost involved in that. As a result of that is high. So marketing spend, as you will move forward, given that we have spent aggressively in the first quarter, you will see this evening out as we kind of move forward.
As far as other expenses are, all other expenses are concerned, you will see, as we have been consistently saying, whether it is rental, whether it is people cost, whether it is utility cost, as you gain and grow your ADS, you will see leverage playing out from there, which is what you are seeing a reflection of that, whether it's in improvement in our restaurant level EBITDA margin or at a company level EBITDA margin. As Sumit was trying to kind of allude to this, with this quarter under our belt, we are feeling reasonably confident that we've now finally reached a base, and hopefully, you know, if things were to go well, quarter on quarter, you will see across the board operating leverage coming out.
Got it. Okay. Thanks a lot for this.
Thank you.
Thank you. The last question is from the line of Mr. Aditya Soman from CLSA. Please go ahead.
Hi, good evening. Just one question from me. Can you give, throw some light on, consumer affordability? So I get a sense that obviously, we are seeing a pickup in footfalls when we drive promotions. Is there, is affordability first part of this is, is affordability similar in smaller towns, compared with like the tenth store in an existing town? Or do you see affordability in smaller towns also being high for the first store and then dropping off as you expand into more neighborhoods? Any sense on consumer affordability, there is?
Very, very good question. Look, here, we were just, you know, chatting here with, with some of the people in the industry this morning, and their belief was very similar to what I articulated in the onset. See, generally, one is, you know, most of the people that have reported any positive, SSSG, have told that this is on the head of traffic, growth in traffic. That's number one. Number two is that, the burger sector, and you can go back and reflect on all the studies, that have been done, have continued to grow even this year. And, and there's a history of 4-5 years of growth of this sector. This is continuing to grow.
Obviously, this is not a planned purchase, it's more an impulse purchase, so it's driven, and when it's driven through traffic, you should feel that that business is on the growth track. The other thing that I learned this morning, and which was also my belief, is volumes are increasing more in Tier 2 and Tier 3 towns. Look at the smaller towns, they continue to... And even during the holiday season, you'll find that if you are building a stronger portfolio, you're getting a bigger portfolio in Tier 2, Tier 3 towns, you're finding that those volumes continue to grow as well. So that's where we are sitting at, and that's what we believe in. And that's what I think the industry literature is on, you know, kind of supporting on the same lines.
Yeah. No, fair enough. Very clear. So, I mean, to summarize it, you're saying that, look, it's key to drive traffic, even if it means it comes at a, say, cost of average order value, that's not as rudimentary traffic over the longer term and more items. That's the right summary, right?
Yeah, I mean, this is a long-term game, right? We have an agreement till 2039 and beyond that, right? So our efforts are not here to, you know, try to hit the ball out of the park. It's about to make a very strong business in the long run, right? To build a clientele that has a repeat business, to build a good value strategy in the long run. To continue building products and innovation to drive those customers that come in for innovation. So these are the platforms that we have put in place. And, you know, being a young company, you know, with a tenure of less than four years, if you take the average of restaurants that have been opened, you know, this will all build.
And if you put the right tools in, if you put the right platforms in, if you support them over the next five years properly, this will become a very strong business. And I've seen this, you know, when I was in Europe, when I was in North America, it was the same thing. If you did the wrong things and you pushed the wrong buttons just to drive a single, you know, quarter or a, a single market, you know, you usually hurt yourself in the long run. So we are just, you know, we have a plan in place. We put it in place in 2014. We strictly continuously to, you know, work on the plan, adjusting for whatever things happen. For example, we had a, you know, bad quarter in Q3 last year.
You know, we weren't expecting it, no one was expecting it, made adjustments, and we keep doing that, right? The fact of the matter is, the effort needs to be about building strong platforms that drive not only new business, but also strong repeat business in the long run. Thank you for your question.
Yeah, no, that's very clear. Thank you so much.
Thank you so much. We will take that as our last question for today. I now would like to hand the conference over to the management for closing comments.
Thank you, everyone. Wish all of you a very, very happy Diwali and a great festive period, and look forward to again, engaging with all of you, with the Q3 numbers. Thank you.
Thank you. On behalf of Nuvama Wealth Management, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.