Showing posts with label McDonalds. Show all posts
Showing posts with label McDonalds. Show all posts

Tuesday, November 27, 2018

Coming soon - 60,000 Retail Centres in India…

The Central Government announced on Sunday that it is planning to issue application forms for 60,000 Fuel stations across the Country to be operated through Dealers using the trade name of the Three Oil Marketing Companies (OMCs) Indian Oil, Bharat Petroleum and Hindustan Petroleum. There are already 62,000 (and counting) fuel stations across India which retail Petrol, Diesel and allied products while a bunch of them also retail CNG for commercial vehicles. About 10% of these stations are operated by private players such as Shell, Essar, etc. It is a remarkable feat that the world’s highest fuel retail station is in India at the Ladakh region of Jammu & Kashmir in the Himalayas which is a favourite among auto-enthusiasts. 



As in the past, prospective applicants need to apply online and pay an Ernest deposit to the OMCs which would be followed by a lucky draw. And those who win would be awarded the contracts and assistance provided by the respective agencies in setting up the outlets while those who didn’t qualify would be refunded their deposits. While this generous move by the BJP Government is seen as a positive measure since no such new contracts have been issued in the past four years, critics have dubbed this as a meaningless move with spiralling fuel costs and dwindling vehicle sales over the past two quarters this financial year and a mere public-pleasing stunt ahead of the upcoming National Elections in May 2019. So, the verdict is split. 

It costs a whopping Rs. 1.5 – Rs. 2 Crore to set up a Fuel Station spread over 5,000 sq. ft in the name and style of the OMCs while the cost is more than double for private players like Shell who have stricter norms towards the setting up of the outlets. The biggest challenge for setting up a Fuel Station has been land acquisition, especially on National & State Highways which have seen a 10-fold increase in vehicle traffic over the past decade, thanks to better roads, lower cost of acquiring personal vehicles and a generally heightened mood for vacations and road trips. 


Being an avid traveller and a terrific lover of road trips myself, starting with my beloved Hyundai Santro in 2005 till the new age Mahindra XUV500 (I upgraded to an Automatic from the previous Manual this March), I have personally seen how the entire ecosystem has evolved over the past 15 years or so. In fact, I plan my trips now, whether short or long depending on the wayside amenities that I could use, from rest rooms to coffee shops, meals to speciality snacks and of course the need for service centres, local vehicle mechanics and Authorised Service Centres, etc. The need for such pitstops vary when I travel solo or with family and of course based on the number of hours we travel at a stretch. 

My pet peeve on highway travel has been the lack of good quality toilets (well, good is a relative term, so!) and clean and hygienic food outlets which have somewhat been fulfilled at least across Tamil Nadu Highways which I frequent the most by road. While only a handful International and National Retailers such as Café Coffee Day, KFC, Mc Donalds and A2B have scratched the surface of the opportunity of Highway Travel Retail, there seems to be an enormous opportunity that lays ahead of us. I see these upcoming 60,000 new Fuel stations (many say only 1/3rd of all locations proposed actually turn up in reality) as nothing other than Retail Centres, where apart from filling Fuel, one can have various other retail offering from food outlets like cafes to speciality restaurants, shops selling snacks, fruits and condiments for the journey ahead and of course, wayside motels for a quick overnight stay for tired drivers and their families. 


Reliance Retail with their Fuel stations did come up with some of these models way back in 2006-07 but the whole effort slowly dwindled due to decentralisation of Fuel prices and today, they remain large parcels of land ready for an explosive growth. These fuel stations (and Retail Centres) could be beneficial not only for travellers but also for the nearby towns and villages, generating sustainable employment and entrepreneurial opportunities. 
I am writing this sitting in the back seat of a Bolero travelling on work and just stopped at a highway shack where I had a glass of Coffee. I see a new Retail Centre coming up closely (when I close my eyes).

Monday, February 5, 2018

Waiter, Please Wait.

You walk in to a restaurant and search for a place to get seated yourself. While you are still contemplating to wash your hands (yes, few of us still do) before eating, the Waiter or the Captain ask you for your Order (A Waiter manages usually 3 tables and a Captain manages 3 Waiters). The Waiter narrates the standard Menu, usually the top selling ones and at times the slowest selling ones as advised by the Kitchen King. You ask for the Menu and the Waiter sulks. You see that he Menu has atleast 200 items and start discussing with the Waiter asking for details about a few interesting names. The sulking and discomfort of the Waiter increases with an indifferent attitude as well and you decide to order something. If you are a bigger group, say 4 plus, things get a bit complicated.


Assuming you order a quick snack, even before you start digging on it, the Waiter again prods you for the next item order. And this repeats till you ask for the Bill. Worse still, the bill arrives even as you are about to start eating the last item you’ve ordered. The Waiter stands till you pay up and if it’s a plastic card you plan to pay, then he gets even more moody for the tip amount then is suspicious. Only till you have left a decent tip on the folder which usually looks dirtiest and appears to be a charity by some Bank, the Waiter leaves you in freedom to enjoy your meal. His sulking continues if he’s unhappy with the tip. And you feel miserable.

Does this sound familiar? Has it happened to you or someone you know?


This is the state of affairs at most restaurants in India, especially in South India where I spend most of my time. When the above scenario occurs, I tell the Waiters and Captains that that they are running a restaurant, especially a dine-in where patience is key. I try to explain one waiter at a time, one hotel at a time, the difference between fast-food and dine-in. Most fast-food joints in India have a pay-up/self-service model where the Guest first pays for the food and drink and then settles down at a table, standing or sitting. While in a dine-in restaurant, you expect someone to actually come to you and serve you. I take the effort to educate the Waiters the difference between the two and that the Guest has preferred their outlet over others. Some get the drift, some pass me on as a complaining customer.

The above has happened to me so many restaurants including some marquee names. Sadly, the fault is not of the Waiter, rather it is the of the Management, which hardly takes the effort and time to train the staff on etiquette and behavior. Most restaurants have this ego that he Guests are flocking to their outlets only for the food they provide. And believe the food taste, quality and price will compensate for any otherwise unacceptable behavior. There are a few at least in Chennai who provide special prices or “Combos” during popular hours and the Waiters believe they are doing charity for Guests who are short on budgets or cash.


In my last 21 years, I have said this every day to my staff – “Remember, our families are able to eat three meals a day because the Customers decided us over the others in the Market. Be grateful for that and treat them as Guests and not as paying machines”. Sadly, somewhere Business owners lack empathy and this drizzles down to the lowest guy in the rank. With his or her educational and cultural background, I do not expect the Waiters to pick up patience and empathy all by themselves. But how many company Chiefs actually walk the floor every day and see what the Guest is going through? At least, I have seen very few of them.



Friday, October 31, 2014

Hate thread on McDonalds


Mc Donalds has been in India for over a decade and a half now and due to FDI regulations operates through two Franchise arrangements - with Cannaught Plaza Restaurants for North & East India and with Hardcastle restaurants for West and South India. Vikram Bakshi, the MD for Cannaught Plaza Restaurants has been locked in a legal battle for a little less than a year now and has pulled Mc Donalds to the Indian Courts and the case is only getting messier by the day with no sight of compromise or a solution between the two parties. Meanwhile, Hardcastle has been growing its number of stores and is expanding aggressively in the South, after covering West reasonably. After expanding across Mumbai, Bangalore and other key cities over the past 4-5 years, McD is now looking at growing across Chennai and the rest of Tamil Nadu. The high real estate rates is not helping them as well coupled with the availability of good quality locations along with a good fascade and parking facilities.  

Here is a video of how those insanely awesome French Fries or "taters" as they are famously known in the US are brought from farm to table, literally.



I recently spotted a new building coming up in South Madras, at Adyar just behind the famous Bus Terminus. It is a crowded neighborhood area and has a dozen or more famous restaurants and eating joints. I posted a pic of the upcoming building on Chennai Food Guide, a Facebook Community with over 40,000 members and is plannign a gala celebration of 10 years in Feb. 2015. The Group which mainly discusses about food across the city and its members reviewing restaurants every other day. Within seconds of my posting the pic, the post attracted a dozen or more "likes" and an equal number of brickbats from discerning reviewers, about the ill-effects of eating Burgers at McD. One person posted a pic of a bun with fungus and confessed that his trust in the brand was lost. Another conceded that she hates to go there but would eventually drop over due to the pestering of the little ones at home. And a few commented about their deteriorating service levels.


So, why is everyone hating McDonalds so much? Are they cooking and serving that real bad a food? Are there people dying because of consuming food at McD every year? Or is it just based on hearsay and random research? People are talking about how bad the ingredients that are used while cooking the food are to our health, which we all try to take as much care as possible. People are talking how bad the burgers are, mostly the chicken and lamb (McD doesn't serve Beef and Pork in India due to cultural reasons), not even sparing the greens which are apparently processed with chemicals. Interestingly, no one spoke about the ill-effects of Coke that we all gulp down along with the burgers. I know people who are so health conscious while eating out at Subway, but don't really mind the Coke that goes along. And the reused, recooked, refurbished food that we all consume from standalone restaurants to the best of Five Star Hotels - there was no mention of that. 

I recall an interesting article that appeared in the TIME Magazine a couple of months back. A Teacher from Iowa, USA ate at a nearby Mc Donalds outlet everyday for three months and lost 37 pounds while also lowering his cholestrol levels. He walked 45 minutes everyday along with his other day job. "Its our choices that makes us fat", John Cisna said, "Not Mc Donalds". Quite true. 


We all love our food. I have been living with a motto to live for eating for many years now. I believe one must eat well, sleep well and have fun with friends and family and that should alone be the reason of existence. Everything else such as making money, owning houses and material possessions and professional success is incidental. I am not really sure to say whether food at McD is bad for health or not. But I would trust their processes much more than indie restaurants. How many of you have been inside the kitchen of some leading restaurants in the city? Ask the owner or manager if you can take a pic and post it on Facebook - see how many agree. How many of you know that the kitchen staff use the same chopping board and knife many times to cut vegetables and chicken? How many restaurateurs here would raise their hand and accept that they do not provide healthy, fresh food, every day? So why this hypocrisy? Just because people around are making a nose about something doesn't mean we should join them too, mindlessly.

For me, I am really waiting for McD to open in my neighborhood, I would be one of their first customers probably. But yes, to overeat the patties, gulp coke, indulge in desserts and finally stuff myself with absolutely unhealthy food is a choice I have - to do or not.

PS: I am not a stooge by MCD or any other domestic or international chain - just another common man who loves his food which is everything vegetarian. 

Wednesday, May 22, 2013

Inviting patrons for a great feast

The Hotel Industry in India is facing tough times ever since the global recession occurred a couple of years ago. In my current role at Royal Enfield as Head of Business Development, I travel atleast 2-3 days every week across the country. Whenever I try to book rooms in small and big cities, the room rates just surprises me. I was trying to look for rooms in Hyderabad for stay over the next few days and was surprised to find discounted rates at 5 star hotels for as low as Rs. 5000 (USD 90). The Leela and Grand Chola – both touted as 7 star rated properties in Chennai are offering over 40% discounts on printed rates, to as low as Rs. 7,000 (USD 130). Same is the case in Delhi, Gurgaon, Mumbai, Pune and is even worse in smaller towns. I stayed in Trichy, a city in central TamilNadu which connects a number of other towns of prominence in business and culture within a 100 km radius during the first week of May 2013. On the MakeMyTrip mobile app for the Apple iPhone, I could get a double room for three adults and two kids for as low as Rs. 2,500 (USD 55). The room was quite large to hold a King size bed and two single beds. I have stayed in cities like Coimbatore, Dehra Dun, Jammu, Patna and many others for similar rates in well maintained properties. The outlook for hospitality in India as such wears a glim look and with increasing inventory and competition, not to forget the choices that customers make, the pricing is aggressive at most of the properties. This is where ancillary income to Hotels are helping them.

Cappucino

Most of the hotels have in-house restaurants, mainly to cater to resident guests. Many of them advertise these restaurants quite heavily, thereby attracting visitors through the year irrespective of peak season or otherwise for room occupancy. While this practice has been there for long, its quite evident these days with a number of hotels including some premium Hotel chains advertising in the media. What caught my attention recently  was an ad (displayed above), by ITC Hotels, one of India’s largest companies in the hospitality space for their Cappuccino Restaurant at the erstwhile Park Sheraton (in Chennai) . They have advertised buffet options with prices! Do those patrons who visit these places really care for the price? I mean – everyone does. But then, do people care what the final bill is gonna be when they visit star rated hotels and restaurants? I really doubt. Restaurant incomes are an important source of revenue for Hotels. They contribute anywhere between 7-25% of total sales depending on how well these restaurants are positioned and popularised. Some of the restaurants in these hotels are even Michelin-rated – a rating by the Vehicle Tyres powerhouse Michelin which grades eating joints across the world and shares in a report that is published annually.

Suggested Reading: Franchising

Stand-alone restaurants are doing their best too, to woo potential customers. They advertise in leading newspapers regularly to attract attention and over a period of time become destinations. In some cases, they are located within hotels and Malls and in many cases they are located on High Streets. User reviews in sites and apps such as Trip Advisor, Zomato, Burrp! etc. help them gain more traction. Chains like McDonalds, Pizza Hut, Subway and Café Coffee Day advertise across the media regularly to pull customers to their outlets and many of them even offer complimentary WiFi as a hook to retain them.

Suggested Reading: Does Free Wifi help?

With inflation leading to peak rates of food items, it is becoming impossible to middle class families to venture out eating outside. But the upper-middle class seems to be slightly more insulated, fuelling the needs of these restaurants. While premium hotels and restaurants promise great food (quality) and a wonderful ambience, consistency is key. To retain existing customers and to attract newer ones. If you are planning a visit to a nearby restaurant this weekend, flip through the pages of newspapers or mobile apps and you may be in for a surprise at a hotel nearby you! Happy Dining…

Suggested Reading: Food Inflation

Tuesday, April 30, 2013

The Third Place just got costlier!

 

Eatery 1

On Monday, 29th April 2013, The Tamil Nadu Hotels Association (TNHA) observed a one-day strike to protest against the Central Government’s decision to impose Service Tax on their businesses. Speaking to the media, TNHA President M. Venkadasubbu said, “The TNHA had taken the lead to organise similar associations in all states in this regard and a federation, the Federation of Hotel Associations, had also been formed for the first time in the country.The announcement of Service Tax was made by India’s Union Finance Minister Mr. P Chidambaram in the Union budget and had already come into effect, beginning this month… (April 2013). The Service Tax of 12.36 per cent levied out of the 40 per cent of the sales proceeds is illegal and a big burden on consumers who are already forced to bear the brunt of price escalation due to inflation. While the hotels and restaurants were already paying VAT ranging from 2 to 14 per cent, the new Service Tax levied by the Central government would amount to double taxation,” he said. ‘This problem of double taxation was discussed at a meeting organised by the Federation of Hotel Associations (comprising office bearers and representatives of hotel associations from all states) in Mumbai last week and a unanimous decision was taken to launch a nationwide bandh if the Central government did not roll back the Service Tax.’

Eating out has become extremely expensive over the past decade. I remember, when I was in Graduate School, with pocket money of less than Rs. 300/- per month, we could meet most of our out-of-home expenses including filling fuel for our bikes. Not so these days. The purpose of having a meal outside home, The Third Place as it is called is not just eating. It’s all about building camaraderie and relationship/bonding with family and friends. Ray Oldenberg defined the third place as an alternative to Home and Workplace in his research paper in 1991. Oldenburg calls one's "first place" the home and those that one lives with. The "second place" is the workplace — where people may actually spend most of their time. Third places, then, are "anchors" of community life and facilitate and foster broader, more creative interaction.There were already numerous such spaces all over the world. Cafes, Restaurants and other Eating Spots are among the most sought after third-places. In India, cafes and eateries have burgeoned all over the country in the past few years. Café Coffee Day, India’s largest café chain has over 1,400 cafes across the country. Starbucks, Costa, Coffee Bean and Tea Leaf, Gloria Jeans, Mocha and many other such international and domestic café chains have their outlets spread across major cities, providing an opportunity to people to hang around and discuss everything under the sun – from personal banters to professional meetings to matrimonial discussions, one can find all of those out there. Apart from Coffee Shops, there are over half a million eateries of various shapes and sizes across the country which provide Food & Beverage options. For nuclear families, eating out is one of the biggest entertainment these days, what with very little time to spend with the family!

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With the proposed new tax, food bills are expected to go up significantly to consumers. For example, on a bill of say, Rs. 1,000/- for a family of four, the Value Added Tax ranges from 2-14%, so lets assume its on an average of 8%. So, the bill goes up to Rs. 1,080/-. The service tax of 12.36% is applicable on 40% of the Sales, so that works out to Rs. 49.44, rounded off to Rs. 50/-. Hence the total bill to consumer now is Rs. 1,130/- just because this family chose to eat in an air-conditioned restaurant…where such a tax is applicable. The definition is quite clear – whether serving F&B in an air-conditioned area is a sale or a service. As per the recent amendment in the Law, its both. While food is cooked and sold, it is also served (by waiters) and hence considered a service. Also, the a/c facility is meant for seating and consumption, thereby making it amply clear that it is indeed a service. While this rule will bring about encouraging revenues to the Government, those that are meant to suffer are the middle-class consumers. For students and youngsters, visiting their favourite coffee shop or a fast food joint would get more expensive, thereby creating a dent on their pocket money. However, for the affluent and well to do, the proposed hike may not mean much, given that their spending power is relatively higher. In most cases, such individuals / families don’t even check the bill – probably pay (usually by a credit card) and sign-off.

While inflation and cost of consumption have gone up significantly, the income rates haven’t gone up proportionately. This has left the middle-class with fewer options for recreation. And Eating joints may not be the most preferred Third-Places anymore! For F&B Retailers, it means reduced number of visitors. And business too.

Wednesday, March 6, 2013

Consumer Spend – a loot at Airports

Recently, the Chief Minister of Tamil Nadu launched a populist move in Chennai to commemorate her birthday – a Government funded canteen that serves one idly (rice patty) for Re 1 (1 USD is Rs. 53 approx.) Yes, you read that right, One Rupee for a Idly. The move is aimed to cater to the needs of those under the poverty line and the poor, the working class such as drivers of autos, taxis, trucks and so on. This was a way Amma (mother) as she is fondly known as, appeased the vote bank. It is not sure how much this scheme is going to cause to the State. Ofcourse, these so called welfare measures are out of the state’s coffers – tax payers money. It so happened that the very next day since this scheme was launched, I was travelling through the Chennai Airport which is managed by Airports Authority of India, a government body which also operates the Airport in Kolkata. These two airports faced stiff opposition by the unions when the Ministry of Aviation privatized the other major airports in India in 2005 located at Delhi, Mumbai, Bangalore and Hyderabad. These six airports contribute to over 70% or more of the total air travellers in the country which is estimated at 110 million pax per year. While the Kolkata Airport has been recently renovated at a cost of Rs. 3,000 Crores, the Chennai Airport has been renovated for aorund the same cost and was inaugurated recently although the terminal buildings havent been opened up to the public due to lack of passenger amenities, a move that the Commercial Department of AAI conveniently seemed to have forgotten while planning the terminal building.

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I was taking an early morning flight, a long one that too to Ahmedabad via Mumbai, an arduous 5 hour journey. And I was flying Spicejet, India’s most preferred low-cost airline which doesn’t offer complimentary meals on board, rather “sells” Cashews and Sandwiches at exorbitant prices. So I chose to have a quick breakfast before the Security Check for which I had quite some time. I walked up to the nearest F&B Kiosk which was serving hot food items. I ordered a plate of idly consisting two pieces and a Vada. The damage was Rs. 100/-. Yes, you read that right. Most passengers like me had no option but to pay such steep prices at airports to quench their hunger and thirst. What was more surprising is that the staff do not issue bills for every item sold on their own. Rather, the consumer needs to insist one of they really need one. I demanded one. And bingo, the staff tore a piece of paper from the manual bill book which had pre-written “Breakfast” in many of the bills. A closer look and the TIN numbers which are mandatory were indeed printed. But VAT or Value Added Tax and other charges such as Service Charge, Service Tax, etc. were not explicitly mentioned in the bill. I couldn’t blame the staff because they were just doing their job. I quietly paid the bill and proceeded to the aircraft. Afterall, this is not an isolated case at Chennai Airport. Almost all airports managed by AAI have the same issues more or less.

So, why are airport food products so expensive? To begin with, it’s the way the places are leased out by AAI. They follow an age-old practice of an out-dated tender system wherein those who qualify should propose a base price for the said location. H1, which is the highest quote gets selected. The tender period is usually for 3-5 years and doesn’t specify the architectural look and feel of the outlet. And most often, there is no seating option that is provided. This is completely contrasted by the approach taken by private Airport operators such as GVK and GMR Groups which manage Mumbai & Bangalore and Delhi & Hyderabad Airports respectively. The chosen partners need to submit and discuss schematic drawings and layouts with the airports and thereafter finalized. The design is not just contemporary but also functional and convenient. During my tenure at Bangalore Airport (BIAL) in 2006, we launched a global tender for Retail and F&B which attracted top players in the world to compete on a level playing field. The selection process was touted as one of the most transparent and efficient processes by international media which tracks Travel Retail.

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AAI’s outdated tender system is the mother of all troubles. Coupled with it is its terrible space planning with outlets spread haywire here and there. Add to it, unqualified commercial guys who have no clue of global best practices and arbitrarily follow the H1 route to choose partners. It is quite obvious that they quote higher fees in the tender and therefore over charge customers. Branded players like Café Coffee Day, Subway, Pizza Hut, McDonalds, etc who also operate at airports follow a corporate pricing policy and provide bills with all statutory requirements. Due to high entry costs and related operating costs such as complimentary snacks and beverages to airport staff, most organized players do not even venture into this arena.

A popular Indian Aviation Entrepreneur who successfully started and shut a low-cost airline often used to quip that there is a private mafia now in the form of private airport operators. But then, the government operated airports are no better.

Thursday, April 12, 2012

Forecourt Retail–More returns per Sq.ft

DSC00037

The Apurva Chandra Committee appointed by the Union Government of India to review the proposals made by the Associations and Unions of the owners of over 40,000 fuel stations in India to increase their margins has proposed a few charges to be incorporated which are as below;

  • Rs. 2 to fill air for two-wheelers
  • Rs. 5 to fill air for four-wheelers
  • Rs. 20 to fill air in a truck or a bus
  • Rs. 2 for Drinking water / Toilet usage etc.

“These are the maximum suggested charges. The RO (retail outlet) dealers would be at liberty to charge lower rates” the committee said in its report reviewed by the Economic Times, India’s leading Financial daily. Currently these services are provided free, and pumps are penalised if they do not offer these facilities. The committee, which submitted its report last year, justified user charges as dealers required to employ additional staff to man these services. The Federation of All India Petroleum Traders (FAIPT) has threatened to go on an indefinite strike from April 23, 2012 onwards in case their demands are not fulfilled, among which are to increase their dealer margins on selling petrol and diesel which is Rs. 1.49/- and Rs. 0.91/- respectively at the moment. The committee had summarily rejected fixing the commission as percentage of the invoice value (proposed by the dealers as 5%) and recommended a 33% increase in dealers’ commission on petrol and 23% in diesel.

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To me, it seems ridiculous to say the least to charge for value-added services such as water and toilets, let alone filling air in the tyres! Not that patrons would mind paying these small change – but for a Government appointed panel to propose such recommendations is going back ten steps – with all the modernisation and world-class looks and amenities of fuel stations in India, which started off more than a decade ago.

Petrol & Diesel are essential commodities. While Diesel (prices) are regulated by the Government, Petrol was deregulated a few years ago. Public Sector Undertakings like Indian Oil Corporation (IOC), Bharat Petroleum, Hindustan Petroleum, etc. and private players such as Shell, Essar and Reliance are free to price petrol as per their wishes. The price adjustment is executed once every 15 days and it usually goes up or down by a few paise – small change at a rupee level, though it could run upto Rs. 10-15 for a full tank of fuel of 40 litres. Petrol price itself is usually hiked once every 3-4 months by the Oil PSUs which also allows the private players to proportionately increase their prices. Private players price their commodities a bit higher than the PSUs citing lack of subsidies by the government which are liberally showered by the Union Government. Diesel, which is the main fuel used to ferry people and products in this country is almost a sacred commodity – tweaking prices by a few rupees has seen severe backlash over the years and is left untouched – swelling the losses incurred by the oil companies.

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Forecourt Retailing, or having Retail outlets within a Fuel Retail Station is not very popular in India, although it has been a practice to have some convenience shops within its premises selling chips and candies. In the West, it is common to see supermarkets, grocery stores, gift shops, coffee shops, fruits and vegetables and so many categories of items being sold in such outlets – they bring additional footfalls to the RO as well as provide alternate, incremental incomes to the RO owners. In India, it hasn’t taken off very well, except for the one of success claimed by Bharat Petroleum and Hindustan Petroleum with their respective convenience stores. Café Coffee Day, India’s largest café chain with over 1,250 outlets at the moment is the only national player apart from McDonalds to have a significant presence at Fuel stations. And this seems to be only growing. "Between verticals and formats we keep looking at opportunities for expansion," said K. Ramakrishnan, President – Marketing in an interview to The Hindustan Times recently.  The other verticals where CCD is expanding include transport hubs, malls, multiplexes, highstreet, residential, premium institutions (such as hospitals and educational institutions), and highways. Highways are an important component for retailers like CCD, where finding reasonably lower-rental locations is easy, especially within fuel stations. Customers are familiar with the brand and therefore stop by at their outlet while refuelling their cars and refilling and relaxing themselves. McDonalds too operates many outlets on the highways, mostly within petrol stations. The RO dealer, in return for renting space gets either a fixed rent or even a revenue share on Sales.

Rather than charging additionally on value-added services like filling air and drinking water or for usage of toilets, it would make sense to create a strong value-proposition by exploring various retail formats within the ROs. Reliance Petroleum, which operates and manages over 600 ROs in the country includes a restaurant in most of its outlets. These were earlier operated internally by Reliance in the name and style of “A1 Plaza” but were later outsourced, given the better understanding of F&B players like Kamat Yatri Nivas who manage some of their prestigious locations. While the luxury of space allows to operate F&B outlets and other large format stores in the Highways (where overall rentals are cheap), it may not be possible within the city limits where space is at a constraint and while people are in a hurry. In these cases, it may make sense to sell small ticket items such as magazines and popular books, candies, chocolates, wafers etc. This wouldn’t require heavily trained staff while at the same time can get incremental revenues too.

It is only in the interest of customers, fuel dealers and Retailers that we move progressively – in a direction that is to the mutual benefit of all rather than recommendations like above where basic amenities are charged for! Pity!

Tuesday, January 31, 2012

India: Starbucks Coffee–A Tata Alliance

 

SBUX

“We will look at expanding this partnership as a long-term relation... We are excited at building an enduring company that has a positive impact on India,” John Culver, President of Starbucks (China and Asia-Pacific), told reporters on Monday, 30th Jan 2012 at Mumbai, India. The company has signed a joint venture with the $ 80 Billion Tata Group, its first outing in India after waiting and watching the market for a long time now. Starbucks (Nasdaq: SBUX) operates over 17,000 cafes across 57 countries, with over 30% of them being outside the US (home) market. China has over 400 cafes since it opened in 1999. For the Tata Group, this is their second outing in the coffee business – earlier, they bought a 34% stake in Barista Coffee in 2001 which was later sold (in 2004) to the Sterling Group which later sold it to Lavazza of Italy (2007). “The joint venture with Starbucks is in line with Tata Global Beverages’ strategy of growing through inorganic growth focusing on strategic alliances in addition to organic growth,” R.K. Krishna Kumar, vice-chairman of Tata Global Beverages, told reporters.

(Suggested Reading: National Coffee Day)

The Indian coffee market has been well sought after for the past decade or so. Homegrown café chain Café Coffee Day has over 1,200 cafes across 140 cities in India and also has a presence in Pakistan, Austria and Czech Republic. The company, founded by serial entrepreneur VG Siddhartha and backed by Sequoia Capital and KKR among others has a deep rooted coffee heritage spanning over 130 years. The Coffee Day Group manages thousands of acres of coffee plantation in Chikmaglur, the coffee belt of Karnataka in the south of India and consumes most of its production for self-consumption and very little for exports (which was the other way around a decade ago). Barista Coffee, owned and operated by Lavazza from Italy comes a distant second with over 250 cafes across the country while Costa Coffee from the UK,  which has a JV with Devyani International, a Delhi based business powerhouse comes close with over 140 cafes. Apart from this, there are several regional players who occupy a sweet spot for themselves in their respective markets.

So, what is in it for SBUX and for the Indian consumers?

Well, for SBUX it is a large play on an untapped burgeoning coffee market in India. With over one-third of the entire population of 1.20 billion under the age of 35, there is no better market than ours for a café chain. With increasing earning ability and higher disposable incomes, Indian consumers want nothing but the best and hence there has been a mad rush by various apparel brands in the premium and high-end spectrum of the organized Retail Market. From McDonalds to Pizza Hut, Dominos and KFC, they are all here and have even tweaked their global menu, mostly for the first time to suit the Indian palette. So Starbucks has a ready market which is waiting eagerly to lap it up immediately. For the Indian consumer, there is a lack of differentiation today; they have been used so much to the CCDs and Baristas that they are eagerly looking forward to a change. With more consumers undertaking International travel on work and leisure, they get exposed to various facets and hence are expecting similar standards and offering.

CCD Cup

Starbucks’ entry has been a dogma for many years now. There was an aborted attempt in 2006 when it planned a JV with The Future Group. And thereafter, it has been slow. This time, they seem to have got the JV right. Rest, as they say needs proof of the pudding. Well, you can’t really go wrong with the Tatas, given the way TRENT has managed its relationships with Woolworths, Tesco and Zara. However, they wouldn’t have an easy task to establish themselves, here’s why;

  • Scalability – Delhi, Mumbai and Bangalore would contribute to over 1,200 cafes together, about three-fourths as many cafes in the country.To penetrate these markets wouldn’t be easy. And then to scale up. Well.
  • Real Estate – While more and more Malls are coming up in the top 10 cities, High Streets will continue to remain a favourite for SBUX and this is an area they will indeed find a huge challenge, in getting the best locations
  • Menu – While CCD has a more or less Indian menu (Read: suiting the local palette) no other café chain has done this – and would apply to SBUX as well
  • Pricing – This would remain the most important competitive advantage that CCD would score against SBUX and probably all others. Getting this right would be a key challenge, to say the least
  • People – To get high quality baristas and front-end staff is not going to be easy. With its rigorous process-driven approach, SBUX may find this as a problem but this is one that can be fixed sooner than the others above

(Suggested Reading: When Skill sets take over everything else!)

It’s now a matter of time that Starbucks would be all over, but probably not as ubiquitous as Café Coffee Day. There are neighborhoods, for example in Bangalore where CCD has half a dozen cafes within 3-4 sq. km. And this applies in Mumbai, Delhi, Hyderabad, Chennai, Kolkata, Pune, etc. as well. SBUX would probably take half the time (or probably lesser than) it took CCD to get as many cafes, but that’s still a long way ahead. It was announced yesterday that the first few cafes would come up at Delhi and Mumbai, which is a disappointment for me (living in Bangalore) but also strange that Bangalore has not been given its importance. Anyway, look forward to having a large café latte soon!

The above video has been shared from www.starbucks.com

Sunday, January 1, 2012

Retail in India–Way ahead for 2012

Customer Checkout 

Organized Retail in India has come a long way over the past decade and 2011 was expected to change the wind towards the positive side, due to allowing FDI in Retail. Thanks to political unrest and the opposition parties claiming hoarse, FDI in Multi-Brand Retail has been put on hold (hope not shelved) while FDI in Single Brand Retail has quietly been allowed, atleast on paper. While a few International Brands such as Benetton, Tommy, Diesel, Esprit, etc. have been operating in India for many years now through Joint Ventures with Indian partners, a beeline of Brands wanting to enter India is expected in 2012 – a hope that many in Retail have been holding on for sometime now! The coming months are expected to be exciting times for our Industry and here’s a view on how this landscape would evolve;

Malls

From a lakh square feet to a million square feet in 10 years, modern shopping centers aka Malls have walked a long journey all these years. Today, Malls are not places for consumers to just shop but a generous mix of shopatainment – which includes Shopping, Dining and Entertainment. While there are over 200 operational malls today in the country, another equal number is expected to come up in the next few years. A number of mall projects which commenced during the slowdown in 2008 are ready for occupancy now and many are expected to launch this year.

Supermarkets

The neighborhood supermarkets have evolved the most, among all formats of Retail over the years. Size was always a concern for players like Spencer’s and More – getting it right was a challenge, either the stores being too big with empty shelves or too small with regular stock-outs. Many players have exited the marketplace while a few like Food Bazaar and Nilgiris (through franchises) are increasing their presence assuming scale-up would help them gain overall net margins which range in high single digits. This would be the first format, in my opinion that would straighten up – only serious players would exist and they would do a great job while many others would exit – hopefully this year.

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Hypermarkets

With foreigner CEOs and advisors engaging the managements of Indian Retailers, it was widely believed that Hypermarkets must be large, really large like the ones in western countries.Thanks to some early learning, many players like Hypercity and Total have corrected their ways of working. Small is the new Big, with Hypers ranging from 20,000 – 45,000 in prime retail areas in multi-level locations compared to the earlier proposition of being over 60,000 sft – one single floor in suburban areas! Newer players especially multi-nationals like Tesco and Target are expected in this format in the coming year while existing players are planning massive scale-ups.

Department Stores

These large format stores, the blue-eyed ones due to their colorful appearance was and is expected to be the only ones to see some EBIDTA in their early years. That’s a boon and bane in a sense in this format. To ensure they attract high-spender footfalls regularly, they should turn their stocks quite often; that means having the right mix of merchandise is extremely important which is a direct impact of having high quality staff who can choose the right merchandise every consecutive season. This is a vicious cycle and players like Shoppers Stop, Lifestyle, Westside etc. have got it right while a few of them are still struggling to learn.

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Specialty Retailers

Stand-alone specialty stores of international and even domestic brands are seeing dwindling numbers. The total number of stores that were being added year-on-year have reduced considerably. If it was 20 new stores and most being unprofitable four years ago, the numbers have reversed, thankfully. Most brands don’t talk about crazy numbers anymore, only well-merchandised stores and outlet level profitably.

QSRs and Food Retailing

It seems cooking and eating at home is a more expensive proposition these days thanks to high food inflation and going by the sales of pizza chains and fine-dine restaurants. While Dunkin Donuts is almost ready with its first outlet, Starbucks is slated to open quite soon too. Café Coffee Day will ad over 200 new cafes this year while Dominos and Pizza Hut will have company in California Pizza Kitchen and a few others. This would indeed be the most exciting format to watch indeed!

Greenland

Kiranas

The unorganized retailer down the road doesn’t pay taxes or offer health benefits to employees; no one ever checks the quality or quantity of goods sold; BUT he is able to offer lower prices everyday to consumers with other additional benefits such as short-term credit and quick home delivery. Modernisation is the byword for the them and they are indeed giving a touch competition to the organized players.

E-Commerce

But the real competition, if not threat to all formats of retail in 2012 is going to be through E-Commerce. Sadly, many brands and retailers are not paying attention to the increasing internet user base – over 100 million as of 2011 compared to just three million in 2001. This has allowed fly-by-night operators to open websites that sell everything from toothpaste to watches, apparel to expensive jewelry! Most of them have no clue how e-commerce works and many are even buying merchandise and selling – something which goes against the fundamental philosophy of transacting online!