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Finger Lickin' Good

The food business is in full flavour, tickling Indian taste buds and keeping the cash tills jingling like never before

Finger Lickin' Good
Gireesh G.V.
Finger Lickin' Good
outlookindia.com
-0001-11-30T00:00:00+0553
  • The Indian food service sector is now over Rs 40,000 crore

     

  • 11% discretionary spend of Indians goes on eating out

     

  • Restaurant business growing at 25% on average every year

     

  • 120 topline restaurants opened in Delhi, Mumbai last year

     

  • 50-60 eateries to open shortly in Delhi suburbs Gurgaon, Noida

     

  • Metro restaurateurs expect 40-45% growth in next 3 years

     

  • Barista has 110 espresso bars, plans 37 more; Nirula’s has 62 outlets

     

  • ‘Mumbai Good Food Guide’ is 900 pages


The lunchtime crowd is trooping in as I wait for Ritu Dalmia at her upscale Italian restaurant Diva in the capital. All around is steel and chrome and wire and their reflection on white linen, but it's a homely place, the kind where you don't realise (till the bill arrives) that a meal for one costs about Rs 1,500. Ritu arrives in her trademark white overalls. In between mouthfuls of heavenly prawn crostini, I garble out my first query: "What's the most important ingredient in the success of a restaurant?" It's a stupid question; anybody who loves to eat out should have anticipated the answer. Ritu turns a motherly smile towards me. "Food," she says. "And the overwhelming urge to feed."

It's an answer that echoes comfortably with all the leading restaurateurs of the country, 10 years after the eating-out boom whistled off, took a break with the shehnai-laden entry of the American fast-food kings, and returned again, this time to stay. Says the grand pasha of Indian food, 71-year-old Imtiaz Qureshi, who still puts in a full day at the Delhi Maurya Sheraton kitchen: "The secret of a successful dish is that it must be prepared with love and respect." Rahul Akerkar, a chef-restaurateur like Ritu, concurs: "I hope this tamasha that goes in the name of entertainment dies down and we refocus on food." Ditto, says Amit Amla, part owner of three privatised restaurants that have brought back the zing into the somnolent Ashok Hotel in the capital: "The quality and authenticity of the food. Take care of the food, the kitchen, the service, and you might just get lucky, fingers squarely crossed."

A sentiment that the Indian housewife would appreciate. But that's where the similarity ends between the home kitchen and the Rs 40,000-crore-plus Indian food service sector. A sector that has grown a whopping 25 per cent annually on average over the last five years. Every week, one speciality restaurant offering Lebanese, Italian, exotic Oriental, eclectic, fusion, whatever, opens in your city. It's probably the only business really booming in these glum times, just as it did during the Great Depression of 1929. Last year, at least 50-60 topline restaurants opened in the gourmet metros of Delhi and Mumbai, where licensed and unlicensed restaurants, including deliveries, total over 20,000 each. What gives? Is the food service industry finally coming of age?

For starters, the young, urban, acquisitive Indian—McDonald's India head Vikram Bakshi calls them "the exponential class"—has discovered shopping as entertainment, and with malls offering a cheaper alternative to investing in developing real estate on your own, restaurateurs can keep shining their cutlery. About 50-60 restaurants are slated to open doors in the Delhi suburbs of Gurgaon and Noida in the next few months. Restaurateurs in the top metros expect around 40-45 per cent growth in the next three years. Meanwhile, the third edition of food writer Rashmi Uday Singh's Mumbai Good Food Guide runs to an amazing 900 pages—in three volumes!

So who are these nascent gourmands? Domestic travellers tapping flat hotel rates and rediscovering their country, or doing the world as airlines fly cheaper. "They want to taste what they'd had abroad, recreate the experience, the magic. Of course, you have the foreign businessmen too. The choice of the times is authentic global cuisine," says Dalmia. So speciality cuisine has moved out of prices-that-pinch luxury hotels to nestle reasonably in your neighbourhood. Import liberalisations too have helped the standalones in a big way. Affirms consultant Rajan Chhibba: "Over the past 12 months, specialities or fine dining places have cornered over a third of the market, which shows that the Indian taste bud has matured and that the restaurants too have been able to manage their costs and hold the priceline.With the liberalisation of policy and attitudes, most parts of the jigsaw has fallen into place for restaurateurs."

Not only speciality cuisine. All over the country, people are also succumbing to the grab-a-snack syndrome, be it traditional dosa-idli-samosa-dahi bhalla or the fun-in-a-bun variety. Prime movers include the Rs 70-crore Haldiram's with five outlets in Delhi and exports to 23 countries and the Rs 100-crore Nirula's with 62 outlets. A quarter of these outlets were set up in the last five years alone, says Gurpreet Singh, GM operations, Nirula's. Current plans include swamping the north zone. Or cut to the big daddy of them all, the 46-outlet McDonald's India with a turnover of Rs 130 crore, and seven more probable outlets this year. The Sagar chain, run by one-time Ghaziabad canteen contractor Jairam Banan, is 17-strong in as many years whipping up a business of Rs 15 crore. The Tata Tea-owned Barista Coffee had a billing of Rs 121 crore last year at its 110 espresso bars and it plans 37 more this year. It's a business where visibility is important, so the mad rush for expansion. Nirula's claims 50,000 billings, McDonald's guarantees 3,500 per outlet in the north, Rohit Khattar's Eatopia at Delhi's India Habitat Centre (ihc) claims 3,000 over weekends. At even Rs 200 per bill, that's sackfuls of cash jingling down the till.

Projections on these numbers could be an underestimate three years hence. Because, says Rashmi Uday Singh, "increasingly, celebration is about visiting a restaurant. That's probably the only public experience that pampers all five senses". Trends bear her out. Office hours are getting longer, office staff are getting younger, good cooks are rare to find, the lady of the house is often working, entertaining is becoming serious business. Most important, children or young adults of the household are making more decisions, and one of them is to have less of the mom-cooked stuff. Increasingly, we are buying less food and groceries and more restaurant dinners/home deliveries. Says Sandeep Tandon, executive V-P, Old World Hospitality, the company that owns Delhi's Broadway Hotel and runs all eight restaurants at ihc: "More important than the numbers is the kind of people that come to restaurants now. It's more broadbased, much younger, much more middle-class than ever before...much more hip and happening."

In Calcutta, which has finally caught up with the other top metros, standalones like Peter Cat or Mainland China report full occupancy the week over, compared to just weekends four years ago. Says Anirban Shimlai, F&B manager, The Park: "The only ones worrying are customers who have to wait up to half an hour for a meal." And what's true of largely middle-class Calcutta is true nationally now. According to market researchers KSA Technopak, Indians used 11 per cent of their discretionary spend on eating out in 2002—a 50 per cent jump in three years—against 46 per cent on food and groceries which has remained static. So what are they spending less on? Home appliances, for one. Also, savings and investment has slumped from 12 per cent in 1999 to 8 per cent, and disposable income has ballooned—and eating out is claiming a larger share of it every year.

Says Dalmia: "What happened to the IT industry is now happening in restaurants." The lucrative margins are an open secret. Typically, return on investment is 25-30 per cent, and if you stick to the tried and tested—Indian-Chinese, East India Company continental and a bit of the fast food, you can settle down to a steady wicket in 6-12 months. If you own the real estate, count in a few percentage points more. Of late, the industry has been attracting investment from people with a roving eye and cash to spare—small businessmen who've made a pile in downmarket businesses like plastics or corrugated paper and seeking a 'lift kara de'.

But it is not without its flip side. Whether you sell burgers or burritos, this is also a fatally insecure business—the diner holds all the keys and then some. There is no foolproof recipe, aver restaurateurs. Mortality rate in the metros run to 30-50 per cent in the first 1-3 years. Much better than the 80-90 per cent in the West but that's only because we're less open to taking risk, says Navjit Ahluwalia of hotel consultancy hvs International. Grimaces Dalmia: "We once closed for half a day due to an electrical problem, and I got 50 calls asking whether we'd wound up." This insecurity can starve even the best, which no amount of innovation can fill. The Delhi Oberoi, for instance, is doing roaring business in three restaurants, but burnt their fingers with two. While tgif is a big hit in Vasant Vihar, just 10 km away, it still hasn't got a hang of the Connaught Place customer's taste. Some restaurants dodder even with winning combinations—Sanjay Narang of Mars Restaurants, while running Mumbai's hugely successful Not Just Jazz By the Bay and the Dosa Diner chain, had to convert Three Flights Up into a nightclub. Even Tendulkar's is hanging by the slender thread of the cricketer's legend.

All agree that the most cosmopolitan and adventurous of metros are Mumbai and Bangalore. In Chennai, fine dining is a strictly upper class experience. And in Delhi, even Taj Mansingh GM Abhijit Mukerjee (who sees great potential in 2003 for exotic cuisines like Scandinavian and Vietnamese) takes care with his light sauces, retaining the Indian staples and rueing the Longchamps experience. The average Indian diner is still a bit like R.K. Narayan in My Dateless Diary: "My regard for the man went up when I found him uttering little cries of joy at the sight of sambhar and dosai. I knew then that the man could do no wrong." Says Shyam Suri, secretary general of the 2,600-member fhrai: "Close to half of all food consumed in the US would be in restaurants and about a third in the UK. In India, we're still about 5 per cent. It's been a huge but slow cultural shift."

The experience of the MNCs bear that last part out. McDonald's India may be among the top 10 per cent in transactions (among its global operations), but it's also the cheapest and is feeling the pinch of a market where a seven-rupee icecream cone is its highest selling item, far removed from what founder Ray Croc had in mind. Worse, it's most popular burger item is McAloo Tikki! Break-even has now been postponed from three to seven years. Pizza Hut's Gujarat outlets are the only ones in the world sporting a Jain menu, excluding even tubers. In Bangalore, it's the dirt-cheap 'darshinis' (idli-vada cafes) and Andhra foodjoints which are the fastest growing segment, says Chander Baljee of Baljee Hotels there, which owns popular restaurants like Tiger Trail and Geoffrey's.

Now take Diva. After three years, it's finally breaking even and that too after establishing a solid reputation with a dining public which includes Italians. But Dalmia is happy because, for extra dough, she's taken up the food court at Delhi's latest hangout, the eternally-crowded 3C's. And it's better now from five years ago when she had to close down Mezza Luna, Delhi's first Italian standalone: "All people wanted to eat was baked beans and macaroni," she wails".I'd be happy if I got 10 covers on average." Today, Diva gets away with a no-pizza menu and 100 covers at least.

Says Abhijit Saha, executive chef, The Park, Bangalore: "The growing interest in global cuisine has led to higher investment in the food business. But the true market potential exists in just one segment—a high-quality, medium-priced restaurant with economy of scale. That would cost Rs 30 lakh for a 60-80 seater in Bangalore (and three times that in Mumbai or Delhi), and you can bet it'll be a money-spinner.That's the magic formula, a gap that must be exploited much more, even as the cheap fast food business continues to grow."

The key is to price correctly, not necessarily cheaply, feels Tandon. "For every new place, the real test begins from the fifth and sixth month, after the novelty wears off," he says. "For a 100-seater, it is important to have 150-175 covers per day. The margins will depend on how well you keep your costs down. What you can't compromise on are other costs—of hygiene, labour, quality and consistency." But meal prices, most globe-trotting, West-trained chefs say, are about 50-60 per cent higher here than even in America! Says Ahluwalia: "All over the United States, you can get decent, hygienic and real food for a maximum of $20. It's important that rentals are kept at about 10 per cent of your total sales per month, but that's very tough in India."

Why? Lots of reasons. Good interiors cost a bomb, most equipment in fine chains are imported at 60-65 per cent duty. Raw material again is imported since local sourcing is still inconsistent, and perishables management is costlier in a tropical country like ours. Meanwhile, licences, about 7-8 of them, are time-consuming and cost the earth. A liquor licence, for instance, costs Rs 3.5 lakh for a standalone—and Rs 6 lakh for a five-star place (50 per cent more if you want to keep it open for an extra hour till midnight)—compared to say, £22 in London! The highest cost, about 50-60 per cent, is the property, with rentals sky high in Delhi and Mumbai. "Which is why most restaurants used to be owned by property owners till recently," says Ahluwalia. Even now, says Rashmi Singh, property owning restaurants like Mumbai's Copper Chimney or Khyber find it easy to stay in business.

Property prices went through the roof for this business when the global chains came in. Compared to the Rs 5 lakh for Mezza Luna (without real estate), Diva needed an investment of Rs 50 lakh. That amount has now shot up to Rs 1-2.5 crore for a fine dining place. Even McDonald's spends Rs 1-2 crore, and about a year of planning, on an outlet. Weary Nirula's are now concentrating on icecream cafe "21s" that cost only Rs 3-5 lakh.

Despite the glamour and lure of lucre, it's a very tough business, tougher than even hotels, with gruelling 18-hour days, hope and heave-ho for the long haul. Professionalism can be a good guarantee during cut-throat competition when many will fall by the wayside. That day is not too far off. Says Amla: "Competition is good for specialisation. In New York, there are about 12,000 restaurants over an area of 12 square miles." That scenario is sci-fi for India but then, all sci-fi is also dreaming ahead. Right now, the chance of success is higher if you're in the food business to begin with; being involved with food and having already burnt a few fingers do help. An established name also gets funding, downright impossible for just a mere lover of food—after all, except real estate, there is no hard asset to mortgage!

It's here that the evolution of taste helps. Says Akerkar: "It's time for serious food-focussed places. The chef-driven places are necessary for a real change to happen." The world over, good restaurants are owned by chefs who are guaranteed to give good food. The new Indian epicures have been quick to spot people with talent but no matching back-up cash, like Nelson Wang and Dalmia and Akerkar, and bring them to the forefront of the gourmet movement. Says Singh: "Food has no frontiers, it speaks a language everybody understands, it's the best representative of the ethnic culture." That's the new age the bon vivant Indian is waking up to, and may the sun never set on it.


By Paromita Shastri with Charubala Annuncio in Mumbai, Archana Rai in Bangalore and Ashis K.Biswas in Calcutta

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