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. 

Highway dining is back…

I have travelled extensively (by road) during April 2015 across Karnataka, Kerala and Tamil Nadu. Being a road warrior myself, I love the journey as much as the destination. As age catches up one wants to take frequent breaks – nature’s call, food stop, caffeine, fuel, etc. It’s been difficult to search for good (read hygienic and safe) places, especially when the family is around. It is common to see passengers stop at large fuel stations or one of restaurants on the Highways but then, as I said, one needs to take more breaks to find each of the above mentioned facilities.

Cafe Coffee Day, India’s largest cafe chain has been on a massive expansion and growth spree over the past decade and now has over 1,450 cafes across India and interestingly has over 50 cafes just on the highways. However large this number looks independently, it is indeed a very small share of the immense opportunity that lays ahead. For example, between Chennai and Bangalore, a distance of over 360 km, there are just 4 cafes, 2 on either side of the road. Chennai – Trichy (280km) has just one cafe! Tourist locations such as Virajpet & Madikeri (Coorg), Udupi, Kozhikode Beach, Tanjore BIG Temple, etc. do not have a single cafe in the vicinity. Well, I am not mentioning here about just the CCD chain but any organized F&B player for that matter. With better road conditions and more excitement for road trips among Indians, there seems to be a much larger opportunity on hand than what many Retailers think.

When I read recently that Reliance is planning to open its 1,500 plus fuel stations across the country, I was elated. I have been a regular user of their services when they were operational until 2010 when they had to shut shop most of their fuel stations due to indiscriminate differences in fuel prices between the Govt. controlled OMCs and the private players. However, things have changed ever since 2012 when Petrol prices were dergularised and in 2014, Diesel prices have also been deregularised which is good news for private players like Essar, Reliance and Shell. A1 Plazas, as they were named, Reliance Fuel Stations were as big as football stadiums that had atleast 12 fuel pumps for vehicles, large food courts, both a/c and non-a/c, large open spaces for Car Parking, Garden areas for walking and ofcourse, spic and span rest rooms.

 

These 1,500 Fuel stations can readily take up 1,500 foodcourts, atleast 500 fast food restaurants such as Mc Donalds and KFC plus 1,000 cafes if not more – that’s a whopping number of new retail outlets to be created. Each foodcourt which could be run by players like A2B (Adyar anandha Bhavan), Haldirams, and so on (essentially local cuisine) can employ about 15 people, the restaurant can employ about 15 and the cafe could employ atleast 10. so, we are talking about creating over 10,000 jobs within the next six months in Organized Retail – that many number of families would get benefited. Being a market leader, Cafe Coffee Day has a massive opportunity to scale-up. Their consistency is not up to the mark of late, one of the perils of massive expansion, but then, no other F&B player has it anyway. 

Just 50km outside Chennai, there are several restaurants, fast food outlets and cafes which people are already flocking to. Same is the scene outside Delhi/NCR, Mumbai, Pune and so many other cities. There is one such place called “The Farm” on OMR (Chennai) which raises poultry animals, Horses, Cows and Buffaloes among others.

In a few years from now, I wouldn’t be surprised if many families would be driving for an hour outside their city for a Brunch coupled with leisure activities. Hope F&B players gear up and smell this opportunity, sooner than later.

180 Days as an Entrepreneur

 

I started my entrepreneurial journey exactly six months back from today, on 1st Aug. 2014. The journey has been nothing less than a roller coaster ride. I have always wanted to have a company for myself, but for that to happen in 2014 was based on various conditions at workplace and home. The last six months have been super exciting – everyday has been a revelation. I set foot by creating a retail business for myself, Smiling Baby which is a baby care venture that focuses on a wide range for products aimed at newborn children upto six years of age and catering to the aspirational middle class to shop in an affordable, comfortable and convenient environment. Confluence Retail Private Limited was established on an auspicious occasion – Teacher’s Day, which fell on 5th Sep. 2014. It was a great way of me dedicating my efforts to my teachers and Gurus, my mentors and well wishes and to everyone who have taught me a lesson or two in my personal, professional and public life.

We inaugurated the (physical) retail store on Friday, 26th Sep. 2014 and the venture is seeing good traction. We are currently taking the next big leap of taking the business to the web, but it wouldn’t be yet another E-Commerce store selling diapers and creams at deep discounts but something more engaging and interesting.

Here are some lessons that I learned as an Entrepreneur which I would like to share;

• Time Management – From waking up in the morning to hitting the sack late in the night, time is at our own disposal. What we do with it completely depends on what outcome we expect out of it.
• Results are directly linked to the efforts we put in. Well, its the same while we work somewhere else, but most probably we are working in large or small teams. But as an Entrepreneur, we are working for ourselves and most often alone, or in a short team.
• Blame ourselves when things go wrong; probably try to put the pieces together and find out what went wrong, where and why. No Blame Game – no one to pass on the buck - to juniors, seniors or peers.
• Money Management is key – as important as managing time. While most Entrepreneurs start off with a buffer of savings, what we fail to remember is to keep maintaining or building the buffer from time to time to help you stay longer in the game.
• Trusting those around – this has been a great challenge for me. While we work for large organizations, we believe people will do their job. But when you are on your own, it requires a lot more monitoring and follow-ups.
• Getting compliments from your first time and repeat customers – gives us a high but also makes us to be more and more modest.

Some of the pain points compared to a professional life;

• After being in the Corporate world for a decade and a half, we expect a certain level of professionalism at work, which doesn’t happen in most cases.
• People walk in at their will at your office and expect you to value their time, leaving behind what we have been working upon.
• There is no respect for appointments – in most cases, we are taken for granted since we don’t carry a business card of a popular company!
• Money is always scarce, especially if we are used to a certain lifestyle.
• Friends and Family look up to us differently – as though we are wasting time without pursuing a full time job.

Overall, its been one exciting journey, a very long in terms of knowledge yet a short one in time. I have learned a lot more things in the last six months than in the past six years or so, probably. Setting up your own company, especially in the Retail world which has its own complications from Finance to Supply Chain, Marketing to Operations.

The journey has just begun and I have Miles to Go before I sleep…

Breaking fast the traditional way!

Indians are fond of their meals, especially their breakfast. Except that they find increasing lesser time - to prepare as well as to consume. A typical bachelor skips his or her breakfast atleast 17 times or more a month according to a survey conducted by the students of a premier B-School in Chennai. And most other times, their obvious choice is Maggi or Bread & Jam prepared in a jiffy at home or hostel or mansion where they live. In the family households, its usually Idly/Dosa in the South Indian households on the weekdays and something a bit more exciting on the weekends when the family spends more time together. Typically, the breakfast options include Omlette with Eggs and/or Parathas/Puris in the North & East of India while it is the ubiquitous Vada Pav & Poha in the West and Central parts of India. The upwardly mobile and the health conscious have moved on to more healthier options such as Corn Flakes and Oats, which is more a fad at the moment than a habit. Doctors prescribe atleast 3-4 short meals a day with a 3-4 hour break in between and recommend that the Breakfast should be the most healthy and sumptuous while Dinner should be the least. 

With increasing awareness through TV and Social Media coupled with higher spending power, consumers are naturally looking at better options for their breakfast. India has the highest number of Diabetics in the world and those having this disorder are stricter with their diet regimen than the others. A large segment of Senior citizens who are part of SEC A+ A and B are also quite health conscious with their diet, especially their breakfast. And this is good news to companies who are operating in this segment. Kellogs India has been present in India for 15 years now and has gradually replaced traditional breakfast with their corn flakes over the years. There are many variants of the Corn Flakes now and are an attractive for people of all ages. Another rapidly growing breakfast category is the good old Oats, but in a new avatar. Oats has several benefits: cholesterol, sugar and weight control; easy to digest; filling and energising; fibrous; and easy to prepare, says a Nielsen India report, 'Oats are making waves at the breakfast table'. The annual sale of oats is growing at 38%, higher than the breakfast cereal category's 21.7% growth according to the report. Quaker Oats is the market leader in the organized Retail segment followed by Kellogg's, Saffola (from the house of Marico Industries) and Horlicks (from Glaxo Smithkline). 

Kellogg's has done a lot of innovative and interesting Marketing over the years and some of them have been within the confines of the retail stores as well as outside through traditional and social media. At Retail Stores such as Food Bazaar, part of the 12,000 Crore Future Group, Kellogg's conducts sampling exercises of its corn flakes and oats to customers - normally a small portion is given to sample the product and apparently, there is a 30% conversion of users to buy the product, according to Ms. Smita (29), a product associate at one of the retail locations who has been promoting Kellogg's products for over 2 years now. Saffola provides samples of oats along with 2/5 Litre Oil packs to its customers and such exercises are undertaken at premium retail outlets to reach out to the relevant target segments. "Kellogg leads the ready-to-eat cereal category and is a major player in oats. It continues to innovate and invest. Kellogg's Oat-bites is the only ready-to-eat in the market. We expect to see sustained growth in breakfast cereals, driven by consumers' increasing nutrition awareness and spending power," said Sangeeta Pendurkar, MD, Kellogg India in an interview to Hindustan Times.

On Pongal day this year (15 Jan. 2015), which is celebrated as Harvest Festival in the South of India, Kellogg's put out an interesting advertisement on the first page of The Hindu - proposing readers to switch over to Oats pongal as an alternative to the traditional Pongal which is made out of Rice & Ghee. The idea had a mixed response among readers. My 73 years old aunt was happy to note that there was such an option from Kellogg's - she has been consuming Oats for a couple of years now and sensed that this could be tastier and crunchier as well. Some people felt that nothing can be replaced by the steaming hot traditional rice pongal which is consumed with a tinge of liquid ghee on it. 

From a "call to action" point of view, I felt that they could have done a bit more than just mere advertising. In today's context, Modern Marketing is all about reaching out to consumers collaboratively. Kellogg's could have perhaps provided free samples along with the newspaper, quipped someone. I spoke to a general marketing practitioner and he said most companies have refrained from such activities because a few retailers take advantage by buying newspapers themselves and hoarding the free samples. Also, logistically, it is a nightmare to attach a sample pack with every newspaper, especially at 3 am in the morning when the newspapers reach the distributors. Instead, Kellogg's could have tied up with a prominent retailer which could have provided free samples. This way, the brand could have collaborated with a Retailer to drive footfalls which benefits the latter as well while attracting massive visibility. The paper-cutting could have been used to redeem the sachets at the retail store. And perhaps the customer would have also bought a thing or two in addition to the free sample. The same Ad through the Kellogg's Facebook Page could have generated much interest to the internet addicts as well - they could show the Ad to the retailer to get a sachet too!

The upcoming years would be interesting times for Retailers and Brands. Its not about selling (products) to consumers anymore. Its all about engaging them for the long term. And we have just begun. 

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. 

EMIs to the rescue of Retailers

I have been receiving emailers from Bajaj Finance, one of the largest consumer finance companies in the country for a long time now, ever since I bought a couple of stuff using their services 5 years back. I still haven't unsubscribed to their mails, hoping that I get to gain a lot of insights into Consumer Behavior day in and day out. The one that I received today was a bit surprising... Even as I just finished my daily quota of early morning news releases, Bajaj Finance sends me an email that the newly launched iPhone6 can be bought using their services through EMIs, while Apple had announced earlier in the day that they have advised Retailers to discontinue the EMI Schemes specifically for the newly launched models due to overwhelming response and low stock quantity. Wonder where the communication channels failed between Apple, the Retailer and the Financing Company, clearly that there was an overlap of information to consumers which is misleading. Leading Retail chains such as Univercell, The Mobile store, EZone and a whole lot of smaller local resellers have been offering EMIs on the newly launched iPhone6 and 6 Plus.

Apple has been struggling in India, not because of a slowing market. Its quite the opposite. More and more people are embracing the Apple Ecosystem and this trend is clearly visible every time there is a new launch. For a country of over 1.2 billion with 300 million youth population, assuming a 0.1% population that would aspire to buy a new iPhone, Apple Inc has dispatched just 55,000 units of the newly launched model. This is quite amusing. Apple Sales have been scaling higher and higher in India over the last 2-3 years, yet the US Headquarters hasn't been giving the subsidiary and the market its due. In fact, it was the news recently that Apple India had to almost fight with HQ to advance the sales of the newly launched models ahead of Diwali to cash in on Festive sales. That the Sales would have been the same otherwise too, is another matter.

So why has Apple advised Retailers not to offer EMIs on the newly launched models? According to trade partners, the reason is three fold. To begin with, the company wants to create an atmosphere of desirability - EMI is the easiest way for youngsters to posess the product and Apple wants to keep it away from this lot of consumers. By not offering the EMI, only those who can really afford would end up buying the new models and it would command a premium in the market for a much longer time. Second, Apple and the Retailer would have to bear the interest costs partially since the EMI would be offered interest free to the consumer and it wants to minimise this cost at the moment. Third, Apple wants to clear the past inventory in the market; Models such as the iPhone 4 and 4S which were released over 3-4 years ago are still available to buy in the market and since there is no bigger market opportunity than India, Apple perhaps wants to clear the last lot of models asap.

So, if you are looking for a great deal on an older model of iPhone, now is the time. Rush to your nearest Retailer and negotiate a good deal, which I am sure they would be happy to offer. After all, an Apple product has a wonderful ecosystem and the older models too have a great experience to offer.

The iPhone Saga continues...

When I posted on my Facebook page at 11.35pm on the night of 16 Oct. 2014 that I was the first in the city of Chennai to receive a 64 GB Gold variant of the iPhone 6, someone sarcastically quipped "So?!?" Well. It was no big deal. Really. Anyone could have been the first one if they had put in the effort. And for me, it was pure fun. And a Retailer's delight too - to see how a Retailer delights his customers through completing a much anticipated and well hyped "transaction". In many parts of the country, the event was quite publicized and draw discerning customers to the Retail Stores - one retailer in Chennai had gone a step ahead to rope in leading actress Hansika Motwani to do the honours. India's largest mobile store chain, The Mobile Store took a full page Ad in national newspapers urging people to preorder and get the device in the midnight. Flipkart, India's largest ECommerce company along with rivals Snapdeal and Amazon was taking preorders promising one-day delivery. Crazy Apple Fans lined up the outsides of the Retail Stores, from UB City in Bangalore to Select City Walk in New Delhi's posh Saket area. I, however chose to skip the queues and chose to book with a low-key Retailer close to my workplace. I really took a chance with this Retail Shop, it is called Hello World located at Adyar, in South Chennai. They charged me Rs. 5,000 as booking charges 5 days before the original launch and assured to deliver the phone by midnight.

 On the day of release, I called then twice during the day to check if everything was as per plan, and they continued to assure that they were geared up for the event and I could come over after 11.30 in the night to collect the "piece". Yeah, ultimately its a piece, but a precious one though! I finished work, went home, had shower and dinner and drove back to the shop and reached around 11.15pm. There were 2-3 other customers who had turned up at that time. I was actually taking a chance, just in case they offered to sell the piece well before the time the invitation suggested. And in true Indian style, they did. They "sold" the first piece to me well in advance of the promised time but cautioned me not to activate the phone until 00.00 hours, lest I lose warranty.

I came back to my car, clicked a Selfie and shared on social media and whatsapp groups - small thrills, you see. And was greeted and responded by many people whom I knew and didn't. I really felt happy that the Retailer stood its purpose and kept us its word by delivering what was promised.

I came home and waited patiently, only to activate my new iPhone6 at 00.05 hrs. Its a delight to restart or swicth on an iDevice. And I love that experience absolutely. The finesse with which a product has been created and packaged - Hats off to Steve Jobs for this. I have been using Apple products for a decade now, with my first one being an iPod Nano 4GB. In the year 2004, it was a miracle to store over 10,000 songs on a single portable device that can be heard through headphones, on a car through an AUX Jack as well as played on a music system. And Apple has gradually grown its line-up. at the moment, I guess they have over 30 SKUs, some in sales in a few countries while some have been discontinued from production as well.

There have been a number of reviews about iPhone6 itself, so I am not going to get into the technicalities. Your favourite news websites are a better source than mine. So, I would urge you to read what you think suits you best. I am only going to share how it feels as a user, as a keen observer of consumerism, as a retailer and as a Retail Consultant who advises various businesses.

The iPhone6 is a tad bigger than the previously launched iPhone5S. The beauty of the earlier iPhones and iPods was that they could be managed using one hand, depending on what suits you. Not anymore with the new model. While a few can hold the device comfortably in one hand, most people, including a few women may find it difficult to use it on one hand. However, the flipside is the screen size looks much bigger. You get to see and read a lot more, especially on sites like twitter and facebook as well was webpages. While the default font size remains the same (it can be increased through manual settings though), one gets a feeling of using a non-Apple device. Maybe like an HTC or Sony. Samsung has launched various sizes appealing to various strata of people, just like how another Korean Automobile company Hyundai does. So, it depends on which other smartphone you compare it with. But interestingly the new model is lighter than the previous one, so the size is compensated with the pressure exerted by the palm.

Speed is immensely better in the iPhone6, but you would realise this only while using certain apps. And the likes of Facebook and Twitter have updated their own apps in line with the iOS8 Operating system, so the apps now open up and perform much better than in previous devices. Battery drains slower than before, although I haven't put the device to too much of use such as having a Facetime Call or watching a movie. Features like Near Field Communication (NFC) and ApplePay wouldn't be usable in India, for we dont have the relevant infrastructure here. Other than some basic cosmetic changes, there is nothing new in the device, although hardcore Apple Fans will tell you about the technicalities which I dont think will change the way we live! However, to each his own. 

At the moment, its been just about 36 hours since I have been using the phone and it seems to be working well and doing its job to its best. And my love for Apple keeps increasing by the day. As the saga continues...