Case Study : WoW! Momo & it’s growth story !

The Indian restaurant market has gone through a massive shift post-pandemic. And quick-
service restaurants or QSRs have been the biggest beneficiaries. While the space is dominated
by international players such as McDonald’s, KFC, Domino’s, Pizza Hut, Burger King, and Taco
Bell, one Indian chain has slowly been making its mark.

In January 2024, Wow! Momo, one of the fastest-growing Indian QSR chains, raised INR350
crore from Malaysian Sovereign Wealth Fund, Khazanah Nasional Berhad. This is the largest
fund raise by the company and will come into effect in two phases. There will be a primary
infusion of funds, and secondary buying from early-stage investors of the company. Apart from
this, another INR60 crore was raised by existing investors, namely Oaks Asset Management.

Founded in 2008, Kolkata-based popular QSR chain Wow! Momo has posted an almost 2x jump
in its revenue from operations, as claimed by Sagar Daryani, who co-founded the company
along with Binod Homagai. The company grew from over INR222 crore in FY22 (as reported by
Tracxn) to INR400+ crore in FY23 (the company is still in the process of filing data with the MCA)
in terms of revenue. In FY22, the company reported losses worth INR53 crore and continues to
be in losses as of FY23.

More than being a momo company, it is a logistics company that ensures the momos and all
other ingredients and dishes reach their 620 stores every single day. They have cracked the
logistics. In the last one year, it has seen a jump in the revenue of INR220 crore to INR415 crore.
It has grown by almost 93%.
It has opened 190 new outlets during the year. The company also plans to add 160-180 outlets
in FY24.
While it was well established, especially post pandemic, that QSR format is the fastest way to
have a profitable restaurant business, what stands out for Wow! Momo is that it is one of the
first Indian QSR chains to do so at this scale.
The QSR market of India, or as market research firm Euromonitor International calls it Limited
Services Restaurants, is expected to hit USD5.4 billion by the end of this calendar year. It is the
second fastest-growing category in the consumer foodservice industry and is estimated to grow
at a CAGR of 6.8% during 2023-2027.

Brand extension
After exclusively dealing in momos for nearly a decade, the company finally decided to extend
its reach by launching two more brands — Wow! China (2019) and Wow! Chicken (2022). While
the primary revenue generator continues to be Wow! Momo.

The company’s current revenues are around INR42 crore a month, out of which Wow! Momo
contributes INR25 crore; Wow! China around INR14 crore; and Wow! Chicken around INR3
crore - INR3.5 crore. Similarly, out of the total 620 outlets, 60% run the brand Wow! Momo,
33% Wow! China and 7% Wow! Chicken. The average order value of the three brands for the
company is about:
 Wow!Momo – INR240 - INR260

 Wow! China - INR300

 Wow! Chicken - INR360 - INR380

In Bengaluru, a plate of steamed chicken momos, from an unorganised, unbranded, roadside

outlet costs around INR60 - INR80 for 8 pieces. Wow! Momo is selling at a super-premium price
at INR240 - INR260 per plate. Today, 70% of the population consumes non-veg, out of that
(70%), 95% consumes chicken, so it's a big market for Wow! Chicken.
Wow! Chicken is not fried but consists of grilled and tandoor options.

People talk about owning market share, but for them it's about owning the stomach share…
There is a belly expansion happening in India so it's all about owning the share of the
stomach.
The company is working with the goal of getting its Wow! Chicken outlets to make one-third
revenue of a KFC outlet, at one-fifth of the size of the same. Currently, a Wow! Chicken outlet
makes one-fourth of the revenue. Wow! Chicken is the only loss-making brand of the company
at an outlet level. Ebitda-wise, the company is operating at a higher single digit Ebitda for both
Wow! Momo and Wow! China, at the corporate level.

Product extension
Wow! Momo has three production plants, one each in north, west and east. The company also
has three kitchens, one each in Bengaluru, Chennai, and Hyderabad. The Hyderabad kitchen will
be converted into a plant in the next 4-6 months. The company has a production capacity of 10
lakh momos per day, however, is making only four lakh currently.

Momos as a category is often not differentiated much when bought freshly made or frozen,
something that Wow! Momo is using to its advantage. In addition to the other two restaurant
brands, the company also launched its frozen momo’s arm called Wow! Momo Sales. With this
launch the company has entered the FMCG ready-to-eat market and is giving direct
competition to the likes of Prasuma. A 10-piece frozen chicken momos pack of Wow! Momos is
priced exactly the same as Prasuma at INR195. However, packaged food brands entering the
QSR space and vice-versa is not new. Brands such as Prasuma and Haldiram’s are big examples
of the same. They both followed Wow!Momo’s reverse strategy. For example, Prasuma Momo
started its own restaurant called Prasuma Momo Kitchen recently. However, FMCG packaged
food market is a whole different beast. Apart from cracking the distribution network, the
company will have to focus on cold storage as well. As of October 2022, in the frozen category,
Prasuma sold over 100 million momos across 72 cities, with a network of 5,000 outlets.

Similarly, brands such as Chai Point and Chaayos, which started as QSR restaurants, over the
last two years have launched their premix tea sachets that are available across online
marketplaces and their D2C channel. Even Third Wave Coffee Roasters and Blue Tokai coffee
chains have their packaged coffees available at their outlets and websites, as well.
However, the packaged food sales contribution to overall revenue in such expansions generally
is in the minority.
Wow! Momo Sales is generating INR2 crore a month, which is less than 5% of the monthly
revenue of the parent company, and it is running in losses as of mid-August 2023.

Company-owned, company-operated
“If Domino's can open, and sell a pizza worth INR400 in 300 cities, why can't Wow! Momo sell
INR100 priced momos in 300 cities?” However, one of the stark differences between Wow!
Momo and McDonald’s is how the two operate their outlets. All international brands such
McDonald’s, KFC, Pizza Hut, and Subway, follow a master franchise model, where the global
brand appoints a few master franchise partners in the country of their operations, in this case,
India. These local master franchise partners run the outlets and ensure that all quality
standards and food taste consistency is maintained.

Wow! Momo doesn’t operate using the franchise model. All outlets are company-owned and
company-operated — simply put, run directly by the parent company, and not a franchise
management partner. This is a strategy which is also employed by Biryani by Kilo and Paradise
Biryani. While Biryani is not a QSR food item, Biryani By Kilo is definitely working towards
making biryani standardised, easy to make, fast to pack and deliver. The company runs over
100+ outlets. Paradise Biryani, wherein Samara Capital acquired a 51% stake, is also planning to
expand its outlets number this year using the company-owned company-operated model.

Wow! Momo is one of its kind. It's the first homegrown QSR brand that has company-owned
company-operated stores and clocking run rate of close to INR500 crore right now (for FY24).
The company runs two of its brands that is Wow! Momo and Wow! China in four different
formats:
  Kiosks (60-100 sq ft), which are primarily located in airports, railway stations, tech parks
and metro stations.

 High-street mini format (250-300 sq ft), more of small-box format, located mostly in
residential or high footfall areas.

 Maxi store format (around 700 sq ft), where one can buy Wow! Momo and Wow! China.

 Presence in foot courts (approx. 300-400 sq ft in each mall) in almost 110 malls across the
country.

The company is operating Wow! Chicken with the help of two formats of outlets — food court
format (300 sq ft), and high-street format (500 to 700 sq ft).

They have individual stores of all three brands, and also have combo stores of Wow! Momo and
Wow! China. In addition to that they have just launched a new format called Wow Eats, which
has all the three brands together in a larger format, between 1,200 – 1,500 sq ft. The company
has five of those stores as of now and all of them are doing well. They are planning to start
another five of these large-format stores and based on the P&L take a call whether to expand
with that format or not. The cost of setting up a Wow! Momo, or its other brand outlets is
between INR30 lakh - INR50 lakh, depending on the format. Each store takes anywhere
between 18 and 24 months to break even.

Online demand and experimentation with ONDC

Wow! Momo is present across 30 cities currently. However, 44% of its revenue comes from the
online channel, primarily from aggregators such as Swiggy and Zomato. Out of that 44%, 10% of
orders are direct, that is via ONDC, and 90% are through aggregators. These numbers have
grown phenomenally for the company, as last year the contribution of ONDC was zero, and in
about less than 8 months, the company is generating 10% of its online orders via that platform.
They plan to increase the contribution of the direct platform within the online channel, with the
help of ONDC and its own app, Wow Eats, to reach 15%-20% in the near future.
To ensure that the consumer gets the maximum value and convenience, it is the duty of both
the restaurant partner’s and aggregator’s. With the commission rate being very high, and with
delivery becoming a very large pie in the business, the goal now is to make the delivery
business more profitable.

To achieve that, Wow! Momo has been one of the early adopters of the ONDC app. In the
ONDC app, Wow! Momo receives nearly 60,000 orders a month, making the company among
the largest business generators on the platform. Its logo is right on the landing page of ONDC
website and with this Wow! Momo is enjoying the first-mover advantage on the ONDC app and
is working with both buyer and seller apps. Apart from ONDC, the company is also taking orders
via WhatsApp. This was launched in February 2023.

Momo and beyond!

Whether you want to eat a momo or Chinese or Chicken, they want people to come to Wow.
There is a belly expansion happening in India so it's all about owning the share of the stomach.
The pandemic has made QSRs one of the most convenient and reliable food ordering
categories. Standardisation of taste and quality are key to the success of any QSR. And
international chains achieve this by automating the process of food-making with least possible
human intervention.

Their real strength comes through as they believe that Wow! Momo is more of a logistics
company than a food company. The use of technology to deliver to all its 620 locations every
single day, ensuring that the standardization of each and every product is taken care of, with
the help of technology and equipment, ensures consistency in terms of experience of the food.
This process needs to be automated as much as possible and they are doing exactly that. Their
restaurants have a robotic fryer and a robotic steamer, so if a steam momo must be steamed
for one minute 27 seconds, that’s exactly how long it will be cooked with no human interaction
and that’s just one part of automation. QSR business works only when decisions are made with
the final idea of cutting your losses.
As per industry matrix 10% of the stores will not always deliver and at a company level, they
have taken a conscious call to shut down 5% stores every year, which are underperforming. If
they are launching 20 stores a month, they are bound to get two locations wrong. The beauty
of this model is to understand where you've gone wrong and accept that mistake and move on.

Questions:
1. Discuss the features of the QSR model and its benefits to the company
2. Analyze & explain the brand extension strategies adopted by the company
3. Understand & explain the depth of product extension strategies
4. Explain the ways in which the Company-owned, Company-operated model has
benefitted the company?
5. Suggest alternate strategies that the company can further expand & markets into
which the company can penetrate