India’s fast-food landscape is set for a major shake-up as the country’s largest operators of KFC and Pizza Hut move to combine forces in a blockbuster $934 million merger.
On Thursday, Sapphire Foods India and Devyani International announced plans to merge, creating one of India’s biggest fast-food franchise powerhouses in a market that has become increasingly challenging for global brands.
Both companies are long-time partners of Yum Brands, operating thousands of KFC and Pizza Hut outlets across India and select overseas markets. Once combined, the merged entity will control over 3,000 restaurants, strengthening its scale as it battles rising costs, slower consumer spending, and intense competition.
Why the Merger Matters
India’s quick-service restaurant (QSR) sector has been under pressure as inflation squeezes household budgets and consumers cut back on discretionary dining. Franchise operators are also grappling with:
- Higher raw material and operating costs
- Slowing same-store sales growth
- Margin pressure in a price-sensitive market
Against this backdrop, the merger is aimed at improving efficiency and long-term profitability.
Under the deal, Devyani International will issue 177 shares for every 100 shares of Sapphire Foods, consolidating operations into a single listed entity. The company expects annual cost synergies of ₹2.1–2.25 billion starting from the second full year after the merger, driven by shared supply chains, procurement efficiencies, and streamlined overheads.
Losses Highlight the Need for Scale
Despite their strong brand presence, both operators have been struggling financially. In the quarter ended September:
- Sapphire’s total costs rose 10% year-on-year to ₹7.68 billion
- Devyani’s expenses climbed 14.4% to ₹14.08 billion
Devyani posted a net loss of ₹219 million, reversing a marginal profit a year earlier, while Sapphire’s losses widened to ₹127.7 million.
Industry experts say scale is critical for survival. According to consumer goods consultant Akshay D’Souza, even achieving half of the projected synergies could help turn the merged company into a profitable operation with better cost control.
Competition Heats Up
The combined entity will continue to face stiff competition from India’s operators of McDonald’s and Domino’s Pizza, led by Westlife Foodworld and Jubilant FoodWorks, respectively. However, the merger gives the Yum Brands partners a stronger footing to compete in an increasingly crowded and value-conscious market.
What’s Next?
If executed well, the deal could mark a turning point for Yum Brands’ franchise operations in India—shifting the focus from aggressive expansion to sustainable profitability through scale and efficiency.
