Bangalore: Ashish Kothare stands at the bar sipping beer, staring at empty seats. There are barely 10 people in the pub. At this time, Kothare’s Legends of Rock in Koramangala, east Bangalore, would normally be thronging with at least 100 people, even on a week night, just a few months ago. But, today, the mood in the three-storied pub is somber.
While overall beer and alcohol consumption might not be affected, some see it going up in troubled times. Pub owners and restaurateurs in India’s tech capital Bangalore, and to a lesser extent in Gurgaon, outside New Delhi, are finding themselves at the epicentre of an economic slowdown especially in businesses such as outsourcing that are largely dependent on the health of western companies.
Pub owners say that as early as August they started noticing a declining trend, which has only sharply accelerated in terms of customer spending. Adding to the overall mood is the rather practical problem stemming from a recent smoking ban in bars and restaurants.
On the rocks: Legends of Rock pub in Bangalore. This early stage of downturn has already forced companies to reconsider expansion plans. Hemant Mishra / Mint
A smoker drinks for two hours and steps out three times inbetween for smoking which means (he spends) half an hour outside the pub, which relates to one drink, explains Kothare.
“My Bangalore business is the worst hit among all Indian cities,” says Anjan Chatterjee, chairman and managing director of Speciality Restaurants Pvt. Ltd, which runs 48 restaurants across Delhi, Gurgaon, Mumbai, Kolkata, Chennai, Bangalore, Hyderabad, Pune, Guwahati and Bhubaneswar, of which only two are in Bangalore. Chatterjee says, about 50% of his customers in Bangalore are information technology (IT) professionals. “And IT is one of the most affected areas (in this slowdown),” he adds. “Earlier, while a table would order an imported bottle of wine, today I find glasses of wine,” he says. “Instead of three starters and three main courses, I see one starter and two main courses.”
He says his Rs150 crore business (annual revenues) has slumped 5-7% owing to dull business in Bangalore and to a lesser extent in Gurgaon.
He isn’t alone. Poonam Bijlani, CEO new business of BJN Group, which runs at least 40 restaurants across Bangalore, Hyderabad, Gurgaon and Mumbai, is also seeing a dip in Bangalore business. “There is a slight drop in business in one-two of our outlets in Bangalore, but I cannot attribute any reasons for that,” she said. She declined to elaborate.
This early stage of downturn has already forced companies to rethink expansion.
Speciality Restaurants, which owns the Mainland China group of restaurants in India, and Bangalore-based Aditya Entertainment Inc. have, for instance, applied the brakes on their expansion plans.
Blame it on customers such as Bina John who says her visits to the neighbourhood pub have dropped from thrice to once a week. “Because of the whole slowdown, I’m very careful with my money now...I have put a lot of expenses on hold,” says the 22-year-old who works as a consultant with an IT services firm.
“In a downturn, people automatically cut on what can be called as non-essential expenses, like movies and eating out—things they can either do without or can reduce the frequency,” says Zahir Abbas, associate director, retail and consumer business, Technopak Advisors Pvt. Ltd, a management consulting firm.
Says Siddharth Banerji, managing director of Delhi-based, Kyndal India Pvt. Ltd, one of India’s largest importer and distributor of foreign spirits: “The gung-ho factor has gone. People are drinking more at home. Consumption level has not changed but the pattern has.” Liquor consumption in India has been growing at a pace of 12-15% per year with sales touching 180-190 million cases excluding country liquor.
It isn’t actual job losses but perception of what might happen that is causing restaurants to see empty tables, says Alok Chandra, founder of Gryphon Brands Inc., a Bangalore-based wine consultancy. His anecdotal estimate is that restaurants, pubs and hotels in Bangalore saw sales dip by 20-25% in October-November compared with last year.
Indeed, business has been down 20% compared with last year, says Amar Babu, partner at Aditya Entertainment. “I’m keeping my fingers crossed for December. I don’t even see any room for cost-cutting. I need 35-40 people to run a pub. I can’t fire them,” says Babu. He has already shelved plans to start two more pubs in east and north Bangalore for at least 12 months.
Speciality Restaurants, too, will not achieve its target of 100 restaurants by end 2009, says Chatterjee. We have withdrawn from 25-30 properties we had planned to lease for new outlets, he added.
Gurgaon, another IT hub is also seeing people curb spending and it’s not just the IT professionals. Swapan Mehra, a 27-year-old business development manager with a power company, says he has substantially cut back on going out since he isn’t expecting a bonus this year, which is usually 25% of his annual salary. He used to go out for dinner and drinks two or three times a week, he says, but he has reduced that to once a fortnight.
“All the people I work with are a little pessimistic about the future,” he says, “and we need to be a little more frugal.”
Aruna Viswanatha in New Delhi contributed to this story.