Rising Food, Labor Costs ‘Straining Business’, Jubilant CEO Says

Ajay Kaul, chief executive officer of Jubilant FoodWorks Ltd., the Indian franchisee of Domino’s Pizza Inc., comments on the rise in costs and the company’s expansion plans. He spoke in a phone interview yesterday.

India’s benchmark wholesale-price inflation in December was probably 8.40 percent, accelerating for the first time in three months, according to the median estimate of 30 economists in a Bloomberg survey ahead of a government report due today. Food- price inflation has remained above 12 percent for four straight weeks.

On costs and profit margins:

“There are inflationary pressures on labor, food items and fuel, which are putting strain on the business.

‘‘It concerns us no doubt, but we are fairly in control and not too challenged by that.’’

The cost of labor ‘‘is something we are watching because that can put pressure on our margins in times to come.

‘‘Because we are adding 65-70 stores a year and buying in bulk, we are able to better negotiate price increases with our vendors and business partners.’’

He declined to say whether or not higher costs will narrow margins.

On alliance with other food brands:

‘‘We are in advanced stages of talks with more than two companies in different food categories. Most certainly, we would have a tie-up announced’’ during the year starting April 1. Jubilant is considering alliances with other global food brands, though it hasn’t signed any deal, Kaul said in August.

On expansion:

The company is on track to open its first store in Sri Lanka, he said. ‘‘It is under construction and we are hopeful that by either March-April, we should be able to open it.’’

Jubilant ‘‘would aim’’ to also open a store in Bangladesh by the end of March 2012, Kaul said.

Jubilant opened 65 stores in India in the year through March 2010 and expects to have added 70 more stores in the year ending this March, Kaul said. The company had about 339 Domino’s Pizza stores at the end of September, he said.

To contact the reporter on this story: Shikhar Balwani in Mumbai at sbalwani@bloomberg.net;

To contact the editor responsible for this story: Darren Boey at dboey@bloomberg.net.

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