Currrent - Issue

IT'S CHOWTIME FOLKS
As India’s GenNext goes restaurant hopping in a big way, marketers are introducing novel dining out concepts and brands that go beyond the traditional taste factor
                                                                                                     By Srikanth Beldona in Purdue

  Let’s get the facts first: India has over one billion mouths. Emotions next: considering the number of times those people will eat out every week, the plate of joy of multinational and local restaurant chains runneth over. No wonder that culinary scientists are working overtime to fine-tune the flavors and feel of foods that Indians will consume.

The Indian food service market appears inviting and engaging. It is diverse and complex too, lessons that were learnt ruefully by multinationals that entered the country in the late eighties to early nineties. Growth expectations should also be pragmatic with realistic timeframes. A study sanctioned by India’s premier hospitality association, the Federation of Hotels and Restaurants Association of India (FHRAI), found that Indian consumers spend 2.4 per cent of their food expenditures away from home, compared to 46 and 36 per cent in the US and the UK. However, the National Readership Survey noted that nearly 70 per cent of Indian consumers still rarely eat out, reflecting the vast potential of the market. 

Increased disposable incomes, shrinking household sizes, growth in urbanization and a more informed teen generation are serving as key drivers of change. For instance, India’s per capita income grew by an astounding 46 per cent between 1992 and 2002. From this maelstrom of change has emerged an appetite for greater choices to "eat out" and "hang out." 

There are other interesting statistics coming out that are breaking traditional myths and  characterizations. An FHRAI study revealed that Kolkata ranks first in dining out among India’s metros. The survey found that nearly 260,000 people eat out more than once a week in Kolkata compared to only 175,000 in Bangalore, which stood second. Typically, one would have a thought that Mumbai and New Delhi were the primary markets for eating out. FHRAI said the people of Chennai were more likely to eat out compared to those of New Delhi. 

In many ways, the changes in Chennai reflect what will percolate down to smaller cities and towns. From "hot, humid and conservative" to "hot, humid and exciting", Chennai has seen an explosion of concepts and the inclusion of new cuisine over the past decade. This has been the theme of constant reflection among entrepreneurs, expatriates and the like about the city’s changing character. Home to brands such as Saravana Bhavan, Cascade, and the Red-E Food Court, the city is also home to a retail revolution that includes supermarkets, bakeries and food deliveries.

Chennai was also first to deliver the first successful bakery concept in Hot Breads. Hot Breads now has franchises in several other Indian cities as well as some in the US and the UAE. These are targeted at Indian emigrants settled abroad who seek traditional and authentic experiences that connect them to their origins. Locations are in New Jersey and Massachusetts in the US and Dubai which are home to sizeable Indian populations. Says Bhuvana Kalyanasundaram, a resident of New Jersey and a native of Chennai, "The items are very authentic and very much what I experienced when I was in Chennai."
EXPERIENCE IS KEY

As a country, India’s diversity across several dimensions is reflected through a culinary landscape, the breadth of which is comparable to the best in the world. However, it must be said that the presence of international cuisine is not new to India. Bangalore, for instance, has been long host to Cuban, Thai, Vietnamese,  French, Mexican,  American,
 
Vietnamese, French, Mexican, American,  Northwest Frontier and regional cuisine such as Gujarati. New Delhi, Kolkata, Mumbai, Chennai and Hyderabad are also home to several other international cuisine.

But more than just food, the market appears to reflect a growing demand for a diverse range of experiences. Experience here means a combination of cuisine, location, services and price. It appears that underneath the daily grind is a force of adrenaline seeking excitement, variety and a better quality of life. This has resulted in restaurant marketers bringing novel concepts and brands that go beyond the traditional success factor of taste to become more experience-driven Take Bangalore. As a hot spot for culinary adventures, the city has been much talked about. The city is characteristic of a pervasive culture that seeks experiences from pubs, cocktail bars, multi-theme restaurants and coffeehouses. Coffeehouse concepts such as Barista, Café Coffee Day and Qwiky’s have done exceptionally well. In spite of costing ten times more compared to the ubiquitous road stalls, these concepts have seen more than 100 per cent growth in locations over the past three years. Bangalore also has boutique-cum-restaurants for people to browse through handicrafts and the like followed with a fine meal.

  Red-E Food Court is also a classic example of success based on creating an experience combined with taste. Located at key locations, it serves a multi cuisine fare that includes Italian, Mexican, Oriental, Indian and SSS (soups, sandwich and salad).

Experience will also be important because of the increasing range and choice of locations. Traditionally, most food service businesses in India depended on stand-alone locations that may have derived some benefit from locations. This is changing because of developments in other sectors such as retail, entertainment and so on. Shopping malls, multiplexes, amusement parks and family entertainment centers are expected to witness huge growth over the next few years. Indian highways are believed to show promise for restaurateurs, a fact very commonplace in North America and Western Europe. McDonald’s, Barista and Nirula’s already have outlets on highways and are believed to be toying with the idea of expansion in this segment.

BRAND IT AND BECKON

  A Qwicky’s coffee pub in Chennai

  Amidst all this excitement in the Indian food service landscape is the noticeable growth and appreciation for brands. Smart restaurateurs appear to be leveraging their importance through careful cultivation that reflects the depth of opportunities in a country that wants to be "in." Red-E Food Court from Chennai is expanding its food court concept to Hyderabad, Bangalore and Kochi. 

Branding has become significant enough that co-branding is gradually emerging. Co-branding is typically an association of two or more brands that may exist "under one-
roof" or be spread over larger geographical arears.

For instance, Starbucks had a tie-up with Barnes and Noble Books and McDonald’s outlets were located inside Walmart super centers. In India, Barista Coffee and the Taj Group are believed to have struck a deal for highend coffees to be served in exclusive outlets inside the hotels. Inside Landmark, a popular bookstore in Chennai is an operational Red-E Food Court outlet. Traditionally, such co-branded arrangements have long flourished in the West and South East Asia, but are relatively new to India. The growth of branding and the enhanced breadth of location choices indicate strong potential for franchising. In North America and Europe, one of the driving forces of the restaurant industry has been franchising. Franchising in the restaurant sector in India has been relatively low-key, and presents tremendous opportunities for the future.

With a huge entrepreneurial pool to draw from, India’s restaurant industry looks poised to accept this mode of market development in a more emphatic way. Franchising also needs the support of widely available labor across the country. An FHRAI study of 2002 found that nearly 7,500 degree or diploma graduates enter the hospitality job market every year. Typically, the restaurant industry has been too unorganized to attract qualified professionals. The growth of established chains combined with enhanced quality of graduates can go a long way in improving this sector. 

A key concern about franchising in India has been the lack of a strong regulatory framework to deal with the franchiser franchisee relationship. Compared to North America and Europe, India’s legal framework is not as developed to resolve the intricacies of franchiser-franchisee relationships. 

In the restaurant industry, franchising is gradually becoming the mode of expansion for many   recent   players    such      as     Barista,

 
Barista offers a range of java flavors
Red- E Food  Court. Of course, McDonald's  also adopted this model after initial entry by ownership. 

The ingredients and the style of cookery can limit the extent of franchising. For example, replicating south Indian cuisine in a standardized format across numerous locations and maintaining consistency is far more difficult than assembling ingredients of hamburgers along an assembly line.

Nonetheless, Indian restaurateurs have shown a penchant for innovation here specific to the types of cuisine they handle. For example, Red-E Food Court has pioneered the "drop zone" concept that can serve as distribution points in various parts of the city. Drop zones are transient storage points in specific locations in the city aimed at improving reach and delivery times. While this does not satisfy those consumers who would have preferred to experience the meal within the outlet, it nonetheless caters to a key segment of deliveries. Other well-known restaurants such as Rangis have taken to this concept to expand their reach. 

In the West, a few food companies such as SYSCO and US Foodservice dominate food distribution, thereby achieving significant economies of scale. This value is transferred to franchisers who themselves depend on economies of scale to pass on value benefits to customers and stay competitive. Says David Caruso, corporate chef with Compass USA, "The key to competitive advantage in the US restaurant industry is procurement." 

Recent reports also suggest that McDonald’s is working with Indian farmers and suppliers to procure raw french fries of the same standard as in the West to eliminate expensive imports.
    LAST COURSE 

The Indian restaurant market is far from mature and is just defining itself to a new emergent consumer base of middle and upper class consumers. It is a known fact that the restaurant business has high failure rates. If failure rates in the US are of any concern, Prof. H.G. Parsa of Ohio State University says that the US restaurant industry has seen 60 percent (or less) failures within the first
three to five years of operation.  Attributes to failures in the restaurant industry are poor management, control and lack of adequate research .As for cuisine and experiences, the Indian tummy has room for a lot more. Greek, Mexican, Japanese and Cajun, to name just a few, are still to make inroads. Also, there are potential regional cuisine such as Gujarati, Rajasthani, Goan that haven’t significantly spread across the country. 

Another caveat is for firms to understand the cultural landscape. International marketers will know the mantra of "Think global and act local" also called "glocal". Glocal menus at McDonald’s include beef burgers in the West, panas in Indonesia, ayam goreng in Malaysia, falafel in Egypt and not to forget lamb burgers in India. Not that international chains need to modify their menus so radically, but the example shows how important glocalization is.

The culinary landscape of a country is strongly intertwined with its prevailing culture. Understanding the nuances of each city in terms of culture, market size and buying power is crucial. Especially in a country like India, which has more than 15 official languages and people of all known religions on the planet. 36 INDIA EMPIRE August 2004