Sapphire Foods bets on KFC value meals to drive traffic amid weak demand
Sapphire Foods India Ltd, which operates KFC and Pizza Hut in India, is accelerating a permanent value pricing push on KFC to attract more customers to stores amid weak consumer demand. The move marks a shift in strategy from temporary promotions to discounting as the franchise operator prioritizes store traffic over immediate profitability.
“This is not a promotion, it’s a permanent layer of value that we’re building,” CEO Sanjay Purohit said during the company’s March quarter earnings call.
The strategy focuses on cheaper burger meals, low-price combos, and periodic buy-one-get-one (Bogo) offers on chicken buckets. First tested in approximately 150 stores in November and December, it was expanded to approximately 200 outlets earlier this year and is now live in most KFC locations.
The company has not implemented this in Tamil Nadu, where demand trends are stronger, and is following a different strategy.
Purohit said the value increase is part of a broader plan to acquire new customers; This plan focuses on entry-level products in underpenetrated markets while offering larger deals like Bogo buckets in more mature markets to drive repeat orders.
Most of these offers are available through dine-in and takeaway channels, which currently account for 57% of sales, with some supplier support also helping to limit margin impact.
The company is currently prioritizing customer traffic over margins. “As long as we can achieve positive same-store sales growth and transactions, a marketing investment or gross margin investment becomes secondary right now,” Purohit said.
An important merger looms over these operational changes. Devyani International Ltd is preparing to create a giant with 3,000 stores. The agreement, which is expected to be completed within 15 months, is aimed at building scale and ₹350 crore cost savings that could give the combined entity the financial strength to sustain its price war plan against global and local rivals.
Key Takeaways
- KFC is switching to permanent value pricing to increase traffic during demand slowdowns.
- Sapphire prioritizes transaction volume over margins to drive positive same-store sales growth.
- Pizza Hut continues to struggle with declining revenue and declining same-store sales.
- The planned merger with Devyani International aims to create a 3,000-store QSR giant.
- Regional strength in Tamil Nadu provides a blueprint for future brand profitability.
positive outlook
Analysts see meaningful upside in the deal. “The combination is expected to unlock meaningful financial and operational synergies with potential cost savings of 5-7% of underlying revenue. ₹260-350 crore in the near term, Kotak Securities said in a note. Consolidated scale can also strengthen sourcing and supply chain efficiencies, the memo said.
Announced in January 2026, the all-share deal will merge KFC and Pizza Hut, the two largest franchise operators in India, into a single entity. Devyani will issue 177 shares for every 100 shares of Sapphire.
“With the merger, we think this will provide a unified brand strategy and growth for the future,” Purohit said.
KFC’s same-store sales rose 4% in the March quarter, or 6% when adjusted for Navratri; This is the strongest performance in three years. Digital orders are also on the rise, with kiosks installed in 73% of KFC outlets, often leading to higher average spend.
KFC for FY26, approx. ₹2,114 crore while Pizza Hut India contributed approx. ₹507 crore, reflecting continued weakness in the latter. The company does not disclose profitability by brand.
Here’s Sapphire Foods’ report for the March quarter: ₹790 crore revenue and ₹12.6 crore losses reported for FY26 ₹3,116 crore revenue generated ₹32 crore net loss.
The company added 19 KFC outlets during the quarter, bringing the total number of KFC stores to 1,052; Pizza Hut’s network has reached over 300 stores.
Unlike KFC, Pizza Hut India remained under pressure; Its revenue fell 6% and same-store sales fell 7% during the quarter.
However, Tamil Nadu stood out by delivering double-digit growth in both sales and profitability. “Tamil Nadu…gives us a playbook for the future,” Purohit said. This explains why the KFC value strategy is yet to be rolled out in the state.
Despite short-term pressures such as food inflation and a sharp rise in liquefied petroleum gas (LPG) costs, the company expects the momentum to continue. It has made modest price increases of around 1.5-2% and is not planning further increases for now.
“We do not see any further price increases in the near future unless the situation worsens significantly,” said Sapphire Foods chief financial officer Vijay Jain.
