Shares of Jubilant FoodWorks, exclusive India franchisee of Domino’s Pizza fell by more than 6% and closed at Rs 1,338 on Wednesday after Deutsche Bank raised concerns on reports of bugs being found in Domino’s Pizza’s seasoning sachets. Earlier this week, Rahul Arora, a resident of Delhi, posted a video on his Facebook page where insects could be seen crawling out of a Domino’s Pizza seasoning packet. He had ordered pizza on September 8 but it was only the next day did he notice live bugs in the oregano packets.
Deutsche Bank says that bugs incidence could potentially be serious for Domino’s franchise in India. The global bank has compared the incident to ‘pesticides in Cola’ faced by Coca-Cola and Pepsi in 2004. Further, Deutsche Bank told CNBC TV18, “Worms in pizza, reminds us of ‘worms in chocolate’ faced by Cadbury in 2003 and ‘lead in noodles’ faced by Maggi.” According to the bank, such issues can snowball into a much bigger problem if not managed effectively.
The shares have returned 67% in the year so far, as against BSE Midcap returns of 34%. Just two weeks back, CLSA had revised its target on the stock to Rs 1,900 from its earlier target of Rs 1,600. The brokerage house raised its same-store sales growth and FY19-20 EPS forecasts for the company by 6-12 per cent, while it raised the target PE multiple for the stock to 60 times from 55 times saying it is convinced that the company’s measures will yield results.
Earlier this month, Jubilant FoodWorks embarked on the most significant product revamp strategy for Domino’s Pizza with an investment of ₹100 crore. Pratik Pota, CEO, Jubilant FoodWorks, said: “This is the largest ever product upgrade of our pizzas and we have made a dramatic shift in terms of improving our product quality. As the pizza category in India has evolved, customer’s expectations from the category have also evolved. So we have to make sure that as the largest pizza company in the country, we stay relevant for driving sustainable and profitable growth.”
Jubilant FoodWorks had reported a 25.53 per cent jump in standalone net profit at Rs 23.84 crore for the first quarter ended June 30. The company operates about 1,125 Domino’s Pizza restaurants and plans to add 40-50 stores this year.
As per the company is concerned, Jubilant FoodWorks has said that a comprehensive inspection across vendors & stores has been conducted by them. The company has stated that all their food ingredients are safe for consumption and that they have not received any other complaint of this nature. Further Jubilant FoodWorks claims that it maintains stringent hygiene and quality standards for its products.