Westlife Development Ltd
NSE:WESTLIFE
Westlife Development Ltd
NSE:WESTLIFE
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Ladies and gentlemen, good day, and welcome to the Westlife Foodworld Limited Q3 FY '25 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded.
We would like to remind you that certain statements made by the management in today's call may be forward-looking statements. These forward-looking statements reflect management's best judgment and analysis as of today. The actual results may differ materially from the current expectations based on a number of factors affecting the business. Please refer to the safe harbor disclosure in the earnings presentation.
I now hand the conference over to Mr. Chintan Jajal. Thank you, and over to you, sir.
Thanks, Govind. Welcome, everyone, and thank you for joining us on Westlife Foodworld earnings conference call for the third quarter ended 31st December 2024. I am Chintan, Lead IRS Westlife. From the management team, I have with me Mr. Saurabh Kalra, Managing Director; Mr. Akshay Jatia, Executive Director; Mr. Hrushit Shah, Chief Financial Officer.
We will kick off today's conversation with Akshay sharing his thoughts on overall progress and outlook. This will be followed by Saurabh taking us through operational, financial and strategic highlights. Post that, we can open the forum for questions and answers. We will be referring to earnings presentation and financial releases available on the BSE, NSE and investors page of our website.
With that, I now request Akshay to commence this session. Thank you, and over to you, Akshay.
Thanks, Chintan. Hello, and good evening, everyone. I'm happy to have you on the call today. I trust you have seen the numbers. Saurabh will take you through the details. But in summary, growth is gradually coming back, and we are encouraged by signs of progress.
Same-store sales were up by 3% year-on-year, moving back in the positive territory. A key highlight here is that it is a guest count-led same-store sales growth, while average check remained stable. I think this reflects our well-rounded strategy focused on enhancing value -- our value proposition while driving customer excitement through product innovation. We have been pioneers of value in the QSR industry with initiatives like the happy price menu launched nearly 20 years ago, democratizing the burger category in India. In fact, the QSR industry globally is built on 2 core pillars of value and convenience.
I'm pleased to report that our sustained efforts with everyday McSaver meals and the McSaver combo programs, has significantly improved our affordability for perception scores and increased customer footfall in our restaurants. Our customers continue to see us as value leaders, which is crucial in a challenging consumption environment where every rupee counts. We remain committed to delivering exceptional food experiences at all price points.
During the quarter, we launched the McCrispy platform with ShordaarCrunch tag line. The product has been very well received by customers and is becoming a favorite for many. McCrispy, along with McCafe has enabled us to drive the premium segment of our portfolio. Our customers are increasingly looking for experiences that offer both affordability and premium options deepening their needs and occasions. Our ability to cater to these diverse preferences is a testament to our robust strategy and deep understanding of consumer behavior.
Lastly, the operating environment remains challenging. We are not yet -- we are yet to see a significant increase in dining out trends. We anticipate that stability and retail inflation and any budgetary measures to boost disposable income and purchasing power could provide the necessary stimulus in the near-term to consumption. Despite these challenges, we continue to execute our strategy and expand our network prudently in line with our Vision 2027 plan with a long-term growth mindset.
We opened a record 46 new restaurants in the calendar year of 2024. Our ambition is to fortify market leadership and deliver differentiated performance in the years to come, supported by a strong foundation and multiple growth levers.
Thank you for your continued confidence in us. I will now hand over to Saurabh to take you through the operational and financial details of the quarter.
Thank you, Akshay. Ladies and gentlemen, good evening. Thank you for joining us for this Q3 results. I'm pleased to report to you that our revenue for the last quarter reached INR 6.54 billion, reflecting our 9% year-on-year growth. Our same-store sales momentum has improved to a positive 3% Y-o-Y from a negative 6.5% in the last quarter.
Our positive shift is driven by increased footfalls and transactions, while our average check remains stable, as Akshay just pointed out.
Our dual strategy of focusing on product innovations at McCrispy -- like McCrispy offering value through McSaver has generated encouraging momentum despite current challenging consumer spending trends. From a channel perspective, our growth has been pretty broad-based, with both on-premise and off-premise growing about 9% Y-o-Y.
Our omnichannel strategy is designed to deliver an exceptional customer experience at every touch point. To this end, we continue to invest and enhance our capabilities across dine-in, delivery and drive-thru, while growth may vary across channels, we believe that a broad-based growth approach is far more resilient and value-accretive over medium to long-term, given the evolving customer preferences on channels. Off-premise contribution stood at 42%, consistent with the 2-year average, our average sales per store on a trailing 12-month basis was around INR 60 million.
We are committed to further enhancing consumer experience through digital technology. Our digital journey is actually progressing quite well with increase enrollments in our flagship loyalty program, MyMcDonald's Rewards and the adoption of the self-ordering kiosk across all our restaurants. We engaged with over 3 million monthly active users on our mobile apps and the digital sales that now account for almost 70% of our top line.
Turning to profitability. Our gross margin improved by almost 40 bps sequentially to 70.1% despite heightened inflation in key commodities such as oil, coffee, cocoa, et cetera. We mitigated these inflationary pressure through supply chain and cost initiatives and a 50 bps portfolio level price increase, we expect the gross margin to remain stable at around 70% in the near-term providing a healthy benchmark for reinvestment in strategic growth initiatives.
Restaurant operating margin and operating EBITDA were lower by approximately 200 bps Y-o-Y due to operating deleverage and higher A&P spend for new product launch. However, on a sequential basis, we saw an improvement in profitability due to a better scale and cost management. We anticipate that this trend to continue as average unit volume improves. The cash profit after tax stood at INR 520 million or 8% of sales.
Despite near-term challenges, we are forging ahead with our network expansion plan. We added 15 new restaurants in the quarter and closed 2, bringing our total store count to 421 across 67 cities as of December 31. Approximately 95% of these restaurants feature McCafe, 92% are EOTF and 22% offer drive-thru services. We are on track to achieve our FY '25 target of 45 to 50 new restaurants reinforcing our confidence on the long-term potential of both the industry and our business.
In summary, as I highlighted last quarter, our 3 key pillars to drive profitable growth in the near and medium term are: first, accelerating on the value platform; second, augmenting our menu through product innovation and giving excitement to our customers; and third, robust cost governance. We are seeing promising signs and green shoots of these initiatives taking effect. Guest count momentum is improving, particularly in dining, leading to a broad-based growth. Our breakeven sales have improved by 2% to 2.5% in the past quarter due to systematic cost governance, thereby enhancing like-for-like profitability sequentially.
Thank you for your time. I now hand over the call to the moderator and open the floor for your questions.
[Operator Instructions] We have the first question from the line of Devanshu Bansal from Emkay Global Financial Services.
Congrats on growth revival in the business. So first question is that there are a few important changes that have happened in our business over the last couple of years. One such change is the digital-led sales, which is now about 70% for us versus 50% earlier. These changes specifically are currently being underappreciated due to weak demand environment, but I wanted to check on the positive impact of these changes in terms of top line margin once we return to normality?
So Devanshu, the way we look at it, actually is that we're acquiring a very loyal customer because we view digital touch points as a touch point where we understand the customer a lot better because we get their information, we get their buying trends in a digitized format. And as a result, we're able to reach out to customers regularly and personalize their experience in terms of offerings that we display to them as well as personalized the experience in the restaurants through our self-ordering kiosks, et cetera.
So in the long run, the way we look at it is that it will increase frequency, it allows us to cross sell to our customers, which can eventually have an impact on average ticket size positively. But most importantly, it gives us predictability in our business where we are able to firstly have multiple cohorts who we know how to -- have multiple cohorts whose frequency we know and multiple cohorts whose buying habits we know. So as a result, it helps with predictability. It helps with loyal customer base and eventually sales growth.
So from the -- just adding on to what -- just adding on to what Akshay said, just one point. I think in my commentary also, I talked about it being a journey. I think the question you asked is also around what will happen when it all culminates. I think Akshay gave you a flavor of we can bring predictability. We can control frequency. We will have our loyal customer base with us all the time. So those are all advantages we all know. But to me, we are also approaching it very structurally because there is restaurant and network involved because our digital strategy is also really digital, right? So there is self-ordering kiosk, which are there in the restaurant. So we foresee this journey completing and giving us all the dividends which digital sales gives to the business.
Understood. Saurabh, Akshay, any margin benefits also that should accrue apart from operating leverage because of better throughput. So any cost savings that can be there with these digital initiatives?
So we don't look at it like that today. Right now, I think we'd rather focus on the throughput advantages we can get. And I think as we get more control in terms of the buying journey, we can definitely obviously tactically intervene with upselling, but most importantly, giving the customers what they want. So I think throughput is what I would focus on.
Understood, Akshay. Second strategic question is, we are sticking to our 5-year vision of delivering INR 40 million, INR 45 billion of sales by FY '28, right? So '24 and '25 in between, our 2 years that have been impacted because of the environment as well as some global actions. So is it fair to assume that now lower end of the guidance seems more likely versus the upper end of the guidance that may not be achieved?
So the guidance, obviously, that is the reason why the guidance is a range. I don't know what we'll achieve because honestly, we are putting our best foot forward. We went through a certain crisis where our new base got established. We have finally got momentum of starting to beat that base. We would like to do far more than what we have done already. But I would not say we should change, not change because when COVID came in, our current guidance looked highly unlikely for us to achieve Vision 2022 but we did it.
So I would rather say there are demand challenges. There is a volatile world out there. There is -- the consumer demand is not as -- what it should have been, but that could change, right? That could change in the next 1 year, and you could see, okay, all of a sudden, you've got a high single-digit growth. So things happen in business. I think there are times when you protect your base. There are times you improve your profitability. There are times you actually don't change. The good news for us is we know our business is linked to a lot of momentum. Finally, we've broken the negative momentum. Last time when this had happened, it has had taken us 2.5 years to get out of the negative momentum. This year, we've been able to do in 4 quarters. So we are taking a little bit of heart out of our history and saying, what is the art of possible other than saying what could be the barriers is where we are. Now there is a range, we are still fairly committed to achieve that range.
Understood. Last question from my end. We are likely going to be anywhere around 13.5% post-INDAS EBITDA margin in FY '25. So we -- in the PPT, we have indicated that we are making higher investments in terms of marketing, otherwise to come over the community-based challenges and as well as the demand environment. So I just wanted to check what are the one-off kind of investments that we have made in FY '25, which may not be repeated in FY '26?
So while I will not give you the answer directly for FY '25 versus FY '26, obviously, it is -- we have to reach what we have committed in FY -- in the Vision 2027 over the next 2 years. Now good news is if you look at it sequentially, we did see a significant improvement over the previous quarter, and our intent is to maintain this quarterly improvement and show it to us and through results that we will be able to make the EBITDA improvement sequentially going closer to what we have laid down into our Vision 2027. And you will see improvement over the last 1 year -- over the next 1 year because there are multiple parts to it, right? So the multiple parts include what is the product mix, what is the pricing strategy, then there is what are the cost governance initiative. What are you doing on the bottom store, stop stores.
So there is multiple work which is happening right now. I think we are fairly confident that we will be able to grow EBITDA percentage consistently sequentially.
We have the next question from the line of Saurabh Kundan from Goldman Sachs.
It's actually very similar to the previous participant, but I was looking at your AUV currently, you're at INR 60 million. And to reach the lower end I think rough cut calculation shows that you have to increase the AUV by 15% over the next 3 years. And that if -- and correct me if I'm wrong, but that should translate to a high single-digit SSSG on average over the next 3 years. So if you could just help us how you expect to get a high single-digit SSSG that will really help, whether -- if you could just break it down into maybe transactions, footfall or new product introduction that will really help get some confidence.
Okay. So I'll give you a little bit of flavor on it. So obviously, when you look at the average unit volume and you compare it to the comparative store sales, which actually means that all our restaurants, which were present last year have done 3% better. So their AUV is higher. The AUV on a totality basis is lower because of some of the new store additions and for some stores, which might have shut down 1 or 2 stores, which we would have shut down. So if you look at it in totality, the momentum of growing has come back. Now some of the new stores might not have been at the system level, which is causing some kind of to be transitionary blip because we opened the number of stores we did. And we also expect that -- them to reach system levels in the next couple of years. So there will be some momentum, which will come from that side.
And like I said, we are a momentum business. Finally, we have reached positive. It doesn't always change in 1 quarter. I remember still the time when we had launched the happy price menu campaign in 2004. It almost took us 3 quarters of launching it to become positive and then 1 year to really have the next 5 years run of good positive numbers. So -- so this is all -- we are true to our strategy. I think whatever we had laid down in Vision 2027, we are fairly committed to it. In fact, what we did do was because of all this crisis, we have augmented it and said accelerating value platform is now one of the key agendas we have. We are comfortable with what we are providing as input. And we believe this is just a matter of time when you'll start seeing the momentum shift to even better numbers.
So safe to assume that it will be largely transaction driven. I'm talking about the SSSG because you're focusing on value, so you're trying to get more and more footfall?
Yes, we would largely want to transaction-driven without having any impact on the average customer bill value. That would be -- that's pretty much how we have always thought about things. So -- and that should continue.
Okay. And I think you mentioned in your remarks that you feel that dine-in is still not fully back. Can you just dig a little deeper into that? Do you say that because some of your earlier -- the impacted restaurants, are they still down in footfall? Is that -- are you expecting them to come back? Or is it something else?
No, no. I don't think I mentioned that in my comment. But however, I think there was a new baseline getting established -- got established last year. We have to improve from there. And we believe the growth will be broad-based across channels and across types of stores. We did see even in the last quarter, some of the regions not performing as well and some of the regions really doing quite well. So we're able to work on those regions, and that's how things will pan out.
Okay. And did you exit this quarter since you mentioning momentum, did you exit this quarter better than this overall 3%? I mean was the last few weeks better than 3%?
So overall, if I was to say it was a quarter which was pretty much at par. If I also look at it very, very in detail, I would say the last 10 days in December weren't as we would have expected it to be in the conventional sense. However, December, January, we see it coming back. So that's how it is.
Okay. One last question. If I'm reading the numbers right, the royalty as a percentage of sales seems to be quite low. So what explains that?
Last year, December also, we had told that, that on an annual basis, we reconcile all the incentives, et cetera, which comes from the McDonald's Corporation on store opening, et cetera. So all the numbers have been reconfined, they're not materially big impact on an annual basis on the 1 quarter, it sometimes look a little better.
The next quarter you revert to what your normal royalty is as a percentage of sales?
Our normal royalty is what is given in the -- given in our website -- on an annual basis. Beyond that, if there are any incentives, et cetera pass-through, we do it once in a year in December. So last year also, you would see a bit similar.
[Operator Instructions] We have the next question from the line of Avi from Macquarie.
I just wanted to check on the impact of the geopolitical factors. How has that behaved in 3Q and whether that is changing given the recent agreements, et cetera that are coming?
Avi, how are you doing. I hope you are well. Yes. So actually, Avi, I look at it a little differently. There was a new base got established last year. We are not necessarily looking at it. And for us its history, it happened. We are not doing anything extraordinary for any type of cohort specifically for any geopolitical, et cetera, ratios. We have taken it as a part of our base. And we are saying how do we grow from there. And the good news is some momentum got built last quarter.
Correct. And largely, we are seeing a lot of appreciation of our efforts. There are some stores that still have some of this overhang, but largely like Saurabh said, it's history for us, and we're focusing on building momentum through the value levers or the levers in general that we've spoken about.
Got it. Got it. So I mean where I was coming from is you pointed towards gradual improvement in demand. Your initiatives are on track on value, doing very well over there. I just wanted to get some comfort on whether the macro, is it giving us any sense of expecting a sequential improvement in same-store sales growth trends as we go forward. That is what was the -- and the only thing that I was trying to kind of balance the equation was this, which is the basis of the question. So would it be fair to say that it looks all in place for a potential...
I'll give you this answer in a little bit other way. When people leave a brand for a certain reason, new habits get created. It is not a switch on or switch off. I think that's why I said we've created a new base. The IEO growth remains pretty much muted for the entire year, which is the informal eat-out sector. Luckily, Western fast food is doing quite okay, which is also reflected in our 9% growth overall. But the eat-out occasions have not grown or have remain muted. In fact, O&D with whatever we see is almost flattish as much as July, August, September. It's not a little lesser. So that's what we see.
So how I would read it is there are new habits got created, and we need to improve from where we are. And we are no longer talking about any factors impacting directly or indirectly.
Got it. Got it. Just a follow-up on that. Given this weak demand environment across this industry that you are witnessing, has there been any change in competition or competitive intensity, whether it is from peers or aggregators?
Whenever there will be a pressure, everybody wants to give the best value to the consumer. Eventually, when I look at it for us, right, we have put our best value offering and everyday affordable pricing there of what is good for the business and what is good for the consumer and what is good for us being able to have a sustainable business as well. And that's why we look at it this way saying we have to do what we have to -- we have charted out for ourselves. So I don't see anything from a competitive standpoint because we discuss what do the consumers want. In this environment, value will work, and therefore, our #1 goal right now is to accelerate the value platform.
And sir, will there closures or something?
Avi. So I think we do also talk about value in its entirety, which is our value for money proposition. So it's not only an entry level price point. It's the right price point across our entire pricing ladder. So whether it's at the entry level, at the core level or at the premium level, we feel that it's the best quality product at the best price possible for the customers that makes the difference. And we supplemented or complemented with our experience as well as the quality hygiene standards that we offer in the McDonald's, whether it's at the restaurant or through our delivery, drive-thru or omnichannel experience.
So I don't want you all to get caught up in the thought that value is just price. So that's what I just wanted to clarify. And like Saurabh said, we want to maintain this that a new base has been created, and we are gradually improving from there. We're quite pleased with how our initiatives are being appreciated by customers, and we feel like we have the right product portfolio as well as the use case occasions are drawn out. And we're quite excited about our FY '26 plans as well.
The next question is from the line of Jay Doshi from Kotak.
First is, could you give us some update on how your chicken venture has progressed over the last 2 years since you launched. In how many restaurants you have fried chicken available today of your overall network? And what would be ballpark salience that you would have reached in those restaurants?
Sure. So I think we have it in all our restaurants in the South as we've always maintained, and select restaurants in other geographies where we feel the chicken eating occasion is relevant. I think we've made good progress in terms of our platform. We now have a holistic platform where we have a McSpicy range or McCrispy range as well as Wings in the McSpicy format. So we feel like now we have the right bone-in offering. In addition to that, we have our burger chicken as well as -- or chicken burger as well as our chicken fries, which include chicken nuggets, et cetera.
So I think we've done a lot of good work in establishing this portfolio. And additionally, we've further improved the product with our most recent rollout in this quarter, ensuring that customers are viewing this as a differentiated product. So we've done a lot of process, product improvement and long story short, this quarter is when we are launching our final version of the back-end product. And moving forward, we are very bullish as we bring customers back to our restaurants in using this as an added lever to add an occasion as well as build credibility as well as leadership in the chicken category or further build credibility and establish leadership in the chicken market, and I think that's why we are so bullish on the South as well. And it's one of the growth levers that still has to play out for the years to come.
Understood. Akshay, would it be possible to give us a count in terms of how many restaurants you have these products available and whether it is high single-digit salience as a percentage of ADS or double digit? I believe you had called it out early on when you initial year that you launched? And what we don't know is whether it has improved in terms of salience or it has tapered off or it's where it used to be?
So -- yes, sure. So we have 160 restaurants. I can share that. In terms of ABS, it's remained largely stable It hasn't grown exponentially. But we have seen a stable base over the last 6 months. We haven't broken out the number basis that first time. But at the right time, we will share some more flavor because like I said, we've been constantly working on getting the foundation right, because it's required a holistic approach, which includes the product, the training, the mindset -- the mindset that we want to establish chicken leadership in the South. And on top of that, we've launched this McCrispy platform, which includes the bone-in chicken as well as the McCrispy chicken burger, which is again targeted towards our Southern customers as well as customers in the West who enjoy eating chicken burger.
So I think you'll only see ADS go up moving forward. And at the right time, we will give some flavor in terms of how it's contributing to growth. As of now, like I maintain the growth lever still needs to play out.
Understood. Second is on value. You did partly answer the question in response to the previous question. Again, is it possible to sort of give us some quantitative data point, it's kind of help us better understand how your strategy to -- your focus on value earlier this year or doubling down on value has helped either in terms of driving transactions or -- or has the mix changed in favor of value? The reason of asking this question is when we look at one of your peers, post-delivery fee waiver and slightly more sharper pricing, we have seen a massive pickup in same-store sales growth. So have you -- are you seeing any such signs or do you anticipate similar trends in your business also may be a quarter or 2 down the line?
Yes. So there, I mean, sorry to interrupt, I got the gist of your question. I think like we maintain in our commentary as well we have already seen a gradual improvement where we are at 3% year-on-year same-store sales growth. And it's come on the back of guest count-led growth, which means that our value proposition is working, but I want to maintain that value for us means value across the board. Obviously, sharp communication around entry-level price points does help customers enter the restaurants, but we do a very good job in terms of trading them up as well, because we want to maintain profitability as we keep adding average unit volume. That's when operating leverage truly plays out. We don't want to cannibalize and downgrade our customers.
So I think the quantitative indication is already there in our current quarter same-store sales growth, which has been primarily guest count-led. And we've managed ensuring that value has been across the board because our average check has remained largely stable. So I think that's how I would look at it.
The next question is from the line of Krishnan Sambamoorthy from Nirmal Bang Institutional Equities.
Akshay and Saurabh, over the last couple of years, all of your peers have ramped up their value offerings. You also -- both of you also mentioned at the beginning that you have retained your value leadership. But has there been any perceptible loss in your value market share over the last couple of years of the state of launches by peers?
So I mean, as we mentioned again in our commentary, in fact, our value scores have and affordability perception scores have increased significantly. And as a result, we've also seen a quantitative output or outcome, which is our increased customer footfall. So I mean we answered that already. But again, to reiterate, we definitely are the leader in terms of value for money, in terms of brand costs as well as affordability perceptions cost are increasingly important for brand trust.
And I think for us, quality of the consumer is as important as the value platform, which is sustainable to us so that it balances out the needs of the 3 stakeholders, right, the shareholders. The second part is the consumer, whether that proposition is good enough. And third part is for company profitability because we want to grow through internal accruals. So when you think about value platform, we think quite strategically about it. So whatever value platform you see, we believe they are good enough to be able to maintain high-quality consumer intake to the brand, and this is something which we can sustain. We've got internal norms around what do we do for entry level, what do we do from mid-tier, what do we do from high -- on the premium side of it. But I mean we like to be within those ratios because that to us is broad-based growth, which also signifies good quality growth. So that's how we think about it.
That's clear. The next question is on the pricing. The 50 basis points that has been initiated in Q3. In what month was this? Was it there for the whole quarter? And has it been more in the premium end of the portfolio and like I said, given what's happened to coffee prices?
Good news is you were not able to observe it. So I think that timing was pretty good. It's a small portion. Yes, it was done on a few leverages on a few products where we were not -- we were actually cheaper than most people in the marketplace. So we keep doing this activity. 50 bps, yes, it's not substantial. We did it in November.
The next question is from the line of Gaurav Jogani from JM Financial.
So just one question on the margin side. Effectively, what I read is that it is largely because of the suppressed AUV that the margins are getting impacted?
Gaurav, sorry, your voice is pretty -- Gaurav, sorry, you'll have to repeat it. Your voice is completely broken.
So the question is, I understand that the margin impact is largely because of the negative leverage. But at what level of the AUV do you think that we can possibly achieve the 2027 guidance in terms of the margins?
Let me answer it differently, like what I answered earlier. I think we had to invest in a few areas, which we did at that point in time. Now we will see sequentially we're improving our profitability literally for quarter-on-quarter for a few quarters to be able to retain our baseline. I will not go with an AUV guidance, there is work which we can do now to be able to bring back our base number on profitability. So that is the endeavor, and that's how we are thinking about it.
Okay. Sorry, if you can be more clear, please help me answer my question. I mean, see, the thing was that earlier even at 6.5% kind of -- and in the 7% kind of an AUV, we are talking around 13%, 14% pre-INDAS kind of [indiscernible] kind of pre-INDAS number. So given the entire conditions and I'm sure that you would have given the cost line it was more better, the understanding would be that even at a lower maybe AUV probably you can still see the margin guidance that you have given. So that is what I actually wanted to understand?
So Gaurav, we can't understand -- the call is very broken, so we can't understand what you are saying. So we'll take this offline, yes. We can answer your question, Chintan can get back to you.
The next question is from the line of Jignanshu from Bernstein.
So congratulations on improving performance, I think it sounds that the dine-in especially is coming back. So the context for my question is your 2027 Vision statement and I know you touched upon this earlier on -- specifically from achieving the AUV perspective. My question was there is, of course, we are behind on our straight-line trajectory from where we would want to be from '22 to '27 and given the market conditions. In your view, what would be the key levers that you think will come in handy to transition from the current AUV number that we have at around INR 60 million to, let's say, around INR 70 million, which we need at the midrange of our '27 Vision numbers. So is it get counts? Is it a better mix with more premium products, more AUV per customer, dining versus delivery? So what are your like top 1 or 2 ideas that you think should have the highest impact in that growth?
I think Jignanshu, we had laid down the Vision 2027 with clear priorities on that debt and what -- what is it that we intend to do in order to get AUV. However, there was a part on making sure that we continue to meet family and meal occasions. The second 1 was around menu. Third one -- then the rest of the 2 were more around growth in terms of the new stores, et cetera.
But to me, while augmenting menu and product innovations continue our menu continue to be an important lever, which you're going to see us play out. I think the guest count coming in through value is an important lever for us in the short and medium term to be able to ensure that we are continuously building some momentum in the business.
Okay. That's very helpful. And in fact, offers me a segue into my second and final question. You said the -- you said one of the reasons the SSSG was positive, was driven by guest count, which in turn was driven by value products. Now sort of my understanding, majority of the menu -- additional launches that we did were slightly premium than their existing counterparts. Value focus was largely on combos. So...
I'm sorry, I'm just going to interrupt you there, Jignanshu, I covered it in my questions -- sorry, my answers proceeding this where I mentioned that value for us means broad-based value, value across price points, we followed multiple strategies and tactics through our retail network in the last quarter, where we were communicating value across our entry-level price point, our core as well as the affordable premium price point. So we made sure that we were bringing in customers by activating our restaurants on the ground through entry-level price points. We were trading them up and we were also communicating on media about our affordable premium price point as well as our entry level. So it was broad-based value for money, and I've always maintained that. So just wanted to clarify that.
That's very helpful, Akshay. The final part of that question, which I wanted to complete was we are comfortable with the value of products and hence, the mix that we are getting post trading up, et cetera, has been both gross margin and EBITDA margin accretive, and that's not a challenge that we see going forward?
Yes.
Okay. That's short. And all the best for Q4, yes.
The next question is from the line of Latika Chopra from JPMorgan.
I have few questions or clarifications. One was on your new store addition. I know we are close to ending FY '25. But when you're looking at the broad demand environment, and you touched upon how new store AUVs are lower than the mature stores. And probably they are not trending as per your initial expectations. Would there be any change in the thought process on locations, which you will want to open new stores in? Would you target more of smaller towns or you would want to again target deepening presence in the big cities, which ensure a certain level of throughput sale?
Latika, no, I mean there's going to be no change in our development process because we don't target cities basis, only one factor. We use multiple factors in terms of evaluating our sites or the site pipeline that we put together, and this is actually built out over many years, not just 1 year because our real estate process spans over 9 months in terms of identification to opening. So nothing changes overnight. And again, like we've always maintained, we have invested for the long-term. And most of the locations that we are opening -- or sorry, all of the locations that we're opening are projected over a 30 -- 25 to 30-year timeline. So in the long run, I mean, all of them will be cash cows.
And this current pace of store addition is fairly comfortable for you?
Sorry, could you repeat that?
The current -- the current pace of store additions of 45 to 50 stores?
Yes, long-term profitable for us.
All right. The second bit was answered a similar question for chicken, and I was just trying to check with you on the coffee piece in terms of salience. Any incremental flavor on how is that trending for you? Is that salience very varied across different geographies, what more you can do on beverages. If you can elaborate a bit more on that?
Sure. So like we've always maintained, this is just the beginning of the coffee journey. It's a lever that's again going to play out because our consumption story still has to play out even as a country as well as the category. Cafes are definitely helping along with players like us who have set up the proposition in terms of creating the market and educating customers in terms of what good coffee is. And I think we're very well poised to take advantage of that in the coming years. We have a great proposition, we have 400-plus McCafes. And I think the strategy is across cities, specifically our key cities where we see McCafe as a very established part of our brand now, and it's about increasing trials as well as frequency. So I think we've done a great job, and the growth has to still play out.
So the salience of coffee and your overall ADS is stable over the last...
Growing -- it's growing.
Growing. It's growing, okay. And the third bit I wanted to check was on price, how do you think about price increases? I know there's been a lot of focus on value and there's a focus on guest count improvement. But in the past, historically, you have taken a low single-digit kind of pricing on an annualized basis because there is some inflation in the system always. So how are you thinking about that for the coming fiscal?
Exactly how we've always thought about pricing that you cannot fall way below inflation for multiple years for sure. So every year, it takes small, small price increases, don't be shy of taking small price increases and taking at least 50% of what the inflation is running as price increase would remain a norm. So typically, 2% to 4% of price increase is what we have conventionally taken not more than 1% or 2% at one go. For the year, it might be 2% to 3% or 2% to 4%. So we'll continue doing what we've always done.
Understood. And absolutely last bit, MAU numbers that you have shared that they are up low double digits. I just wanted to check whether this is the kind of growth that's also translating in terms of the absolute value sales that you are doing through your own app ordering -- or basically, is the own app delivery orders increasing at a pace similar to MAU growth? How should we think about it?
The MAU actually both are of our own channels, which is our delivery app and also on the app, which we do dial-in. So it's the cumulative number, we don't break out. But having said that, I think the delivery growth is coming out of all 3, right, the third-party operators like Swiggy and Zomato and our own app. Good news is our own app is not lagging behind for sure as far as the percentage of group is concerned.
[Operator Instructions] The next question is from the line of Prathamesh Dahake from Motilal Oswal.
I just wanted to check, if I were to break down the growth as well as SSSG in this quarter, how much impact of festivals versus transactions do you see being factored into this quarter? And will the impact of festivals, if there is any, go off in the coming quarters?
See, we have never looked at it this way. Luckily, all festivals are cyclical. They're all building the base, exactly like that. So we do not believe there are good times, there are bad times. It's to me, there was no positive or negative impact of festivals. They were like-to-like what it was last year. So I wouldn't attribute positively or negatively around any of this.
I asked because last year, third quarter was negative 9% SSSG. So I mean, did we get any benefit of that lower base something like that?
Again, as we mentioned, we believe that the growth that we've seen is coming on the back of the new baseline that was achieved, and primarily linked to all our efforts in terms of value for money. And hence, it's been primarily guest count-led, and we don't attribute it to any specific days or any specific events. That's why we report SSSG quarter year-on-year. And that gives you a sense in terms of how growth is playing out.
I also give a flavor of how when there is a negative trajectory in a retail environment, it's generally -- you would not come out of it immediately. I think this is -- this will be the shortest run of negative where we have been able to come out of it in 4 quarters. Normally, you would not see that in a retail environment. If you look at it from that standpoint, because a lot of it is behavior linked. A lot of it is consumer habit linked things don't change, switch on and switch off. And it's not that since last quarter, you were negative 9% so now you should be -- your base should come back because that unfortunately, that's not how consumers work as [ you ].
Okay. My next question was with respect to the numbers. So our store-level payroll expenses have fallen sequentially. So should we consider this as the new base for the coming quarter and the coming quarters, if I were to say?
Yes. So as you rightly pointed out, sequentially, we have seen improvement in our margins, right? So the focus is -- and Saurabh has also rightly pointed out in terms of the effort in terms of maintaining the margins as we go ahead. So your hypothesis is in the right direction.
The next question is from the line of Harshad Gadekar from Elara Capital.
So congratulations on a good set of numbers. So my question is on the recently lot of food delivery platforms have started 10, 15 minutes of delivery, and burgers are there 1 of the prime menus. So how it has been fared for us? That's question #1.
Question #2 is on how much of our overall exposure as regards the online food delivery platform has shifted to this kind of 10, 15 minutes delivery format?
Luckily on the food side of it, that hasn't actually been a significant portion yet. We had -- in the last quarter, we had tried out a few restaurants. We are now expanding the number of store base on the 15-minute delivery, et cetera. But if you look at it, burger delivery which is mostly our majority of orders get delivered in 20 to 25 minutes even with the third-party operating partner. So I don't foresee too much change coming on that side. It could be an interesting marketing proposition for the consumers. And if it does that, it augurs well for us in the future. But right now, I have no evidence to say if the offering of 15 minutes is doing anything for the system yet.
The next question is from the line of Krishna Shah from Ashika Stock Broking.
I have only one question regarding the store count. So we are hoping to open close to 45 to 50 stores as guided at start of the year. And we have so far had a net addition of 24 stores. So are we in line of closing our -- meeting our guidance for the near-term?
So our guidance remains the same. And yes, we are on track.
We have no further questions, ladies and gentlemen. I would now like to hand the conference over to the management for closing comments. Over to you, gentlemen.
Thank you so much, everyone, and see you next quarter.
Thank you.
Thank you. On behalf of Westlife Foodworld Limited, that concludes this conference. Thank you all for joining us. You may now disconnect your lines.