Showing posts with label food and beverage. Show all posts
Showing posts with label food and beverage. Show all posts

02 January, 2020

Highway Retailing – Retail 2020 (Article #6)

I have just completed a 10-day vacation across North India. Being an avid traveler, my travel plans are usually frozen at least 2 months in advance, which includes booking of rooms, air / rail transportation as well as ground transportation including the last mile to the Hotel or Resort where we would stay. However. one thing which has always been unplanned, or rather difficult to plan is the place to eat / take a break during such trips, especially while travelling by road. On our last leg today, we drove from Jaipur to Delhi, a distance of 270 Kms which took us around 4.5 hours non-stop. Due to intense Fog in this part of India, we wanted to reach as close as possible to Gurgaon before we took a break. Thanks to constant protests across country on some pretext (currently the NRC) or the other, we decided we wouldn’t stop midway and filled our “tanks” at Jaipur during breakfast. Sadly, the weather played spoil sport and my flight was delayed by over 2.5 hours, thanks to the Fog.


To give a perspective, there are an estimated 40,000+ Fuel Stations across India. Of these, at least 90% of them are branded by PSUs including Indian Oil Corporation which has close to 40% of the outlets, followed by Bharath Petroleum, around 30% and Hindustan Petroleum, around 25%. Lastly, there are the privately-owned OMCs - Oil Marketing Companies such as Reliance, Shell and Essar which are less than 5% in number and growing faster than the PSU OMCs. During my stint at Café Coffee Day in 2009, I signed up two exclusive contracts with Shell and Essar which were riding high on the deregulation of fuel prices which meant that the OMCs could fix the price for Petrol and Diesel. Although they have maintained their prices on par with the PSUs, there are benefits they cater to the consumers beyond filling high quality fuel. For Ex., all Shell Outlets have clean rest rooms separately for Men and Women. Some of them even provide services such as Vehicle Wash and minor repairs. The erstwhile Reliance Fuel Outlets had separate Food Courts from the Fuel Station including independent ingress & egress which was extensively put to use by the company through company managed as well as Franchised / outsourced F&B operations in the name and style of A1 Plazas. 

However, the majority of Fuel stations managed by the Dealers of the 3 PSUs do not even have basic amenities such as clean rest rooms which has been a regular qualm of most highway warriors like me. There are exceptions such as the Yamuna Express highway which connects Delhi to Agra with an Eight-lane highway which has three Toll Plazas and each of them have a neighbouring resting area including large food courts housing International and regional F&B outlets. 


Café Coffee Day remains the Number One F&B brand in India which has the most number of highway Outlets as compared to any other business house in organised F&B Retail. But this trend at CCD started many years back, beginning with the coveted Bangalore – Mysore State Highway followed by many such Highways across India. Many other regional brands such as Haldirams in North India, Sukh Sagar in the West and A2B (Adyar Ananda Bhavan) and Adigas in the South have cracked the regional markets but none at a large pan-India scale. Perhaps, Indian businesses can take a leaf out of International operators in the US & Europe who have built Billion Dollar businesses around this model. 

Personal driving as well as Cab hailing for long distances have become affordable now, thanks to lower cost of owning 4-wheelers as well as many tourist locations across India. Highway Retailing is in it’s infancy in India now and much more needs to be done in times to come. 

01 July, 2015

Are Cafes sustainable?

The most discussed topic these days in Retail circles in India is the impending IPO of the company that runs the Cafe Coffee Day chain of stores. The holding company, Coffee Day Enterprises is planning to raise ₹1,150 Crores from the Indian Stock Market for which Draft Herring Prospectus has been submitted recently. The company is among the few of its peers such as The Future Group, Shoppers Stop, Trent(Tata's) and Dominos (Jubiliant Organosys) who have gone public with the companies. CDE plans to utilise the money raised for paring debts and for expansion almost on an equal basis. The company started out renting its premises for Internet enthusiasts to browse in 1996 while also encouraging them to buy a good cup of Cappuccino, coffee that is prepared and presented in the Italian style for 5 times the price of a normal cup of coffee. Very soon, the company decided to change its strategy for Internet to consumer and positioned itself as a place for conversations and more. The rest is history. 

A lot happens over Coffee, is not just the tag line for CCd but also something that is real. A lot of things get done at cafe similar to CCd such as Costa, Barista, Coffee Bean and Tea Leaf, and of course at Starbucks, the world's largest cafe chain which entered India in 2012 in a joint venture with Tata's. I was at a Starbucks for over 4 hours yesterday, which included a one hour meeting, a half an hour call and rest of the time on Mails and office work. During those four hours, not more than two tables were empty for more than 5 mins. The cafe was running at full occupancy. There were people working on their Macs and other laptops, a few who were reading stuff on their books and devices and one man sitting next to me who watched a full movie! 



With an Investment of over ₹1 crore in interiors and hefty rents for locations, this SBUX outlet does a Sale of about ₹40-50 Lakhs a month. Compare that with ₹3/5 Lakhs that a CCD would do, albeit with 1/4 th the investment and 50% lesser opex. So, are these cafes really viable in the long term?

Answer is Yes and No. 

Cafes are viable in the medium to long term provided they receive continuous and healthy patronage. Keeping aside the Capex and Opex for a moment, the cafes would be profitable not just financially but as a Brand asset in the medium to long term when their occupancy remains high. Consumers walk in to a cafe for the coffee (and food) for only 30%. The rest is for the experience in itself and a peaceful me-only space that one doesn't get at home or workplace. 



It is far easier to be viable as a single store than as a chain of stores, for Ny format in Retail. Most of the Indian Retailers are bleeding due to unresponsive assets in the form of their stores and high costs of operations including servicing debts. This will change over time with Retailers finding new avenues for their revenues. But what about cafes? CCD took a strategic position to be the nearest cafe in every neighbourhood and that has paid off. There are over 1,400 cafes across four formats in over 250 cities in India apart from a handful of them in Austria and Malaysia. Most of the cafes for CCD are operationally viable and are not seeking money from Corporate anymore. The newer ones face tough competition with the traditional outlets, especially with the changing landscape in the out of home consumption sector.

Cafes have always been viable provided you get the fundamentals correct. So, for every Java Green and Barista, there is a SBUX and CCD as examples. As the saying goes, the 120 bucks you paid for the coffee is actually not for the coffee but for the sofa and a/c. With the increasing trend of people working in casual environments, cafes will have a large impact on our lives. Next - probably a Bollywood fil, on how cafes have made or broken marriages! Watch this space. 

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