Advertising professional Anjan Chatterjee could not have asked for a better time to indulge in his favourite passion, food, and the next best thing that he likes to do with food: dishing out choice cuisine to fellow foodies. The 40-something Chatterjee, who owns some of the fastest growing restaurant brands in the country today, including Mainland China and Oh! Calcutta, says the sky is the limit for his ambitions in the restaurant business.
Over the next year or so, Chatterjee’s company, Speciality Restaurants Pvt. Ltd (SRPL), plans to rapidly scale up every one of its brands—including Only Fish, Machaan, Sigree, Mainland China and Oh! Calcutta—across major metros and tier II cities such as Chandigarh, Bhubaneswar and Guwahati, where he says there is a burgeoning demand for quality food. He plans to take the brand overseas, to cities such as London, New York, Chicago and Shanghai.
As Indians reap the benefits of a booming economy, they are eating out and entertaining like never before. Disposable incomes, extensive foreign travel and exposure to different lifestyles have resulted in a willingness to experiment with all things new, including food. And the hunger for cuisines other than the traditional chicken tikka, butter naan and biryani has resulted in the emergence of a brave new breed of food entrepreneurs who have everyone, from the masses to the well-heeled, eating out of their hands.
Take, for instance, the case of Riyaaz Amlani. The business management graduate, along with two other partners and Rs15 lakh between them, started Impresario Entertainment and Hospitality Ltd and launched Mocha—the country’s first Moroccan-style hookah bar and lounge—in Mumbai way back in 2001, offering a range from world cuisine. The company now has 14 outlets across cities; five more are planned in Delhi, Bangalore and Coimbatore, apart from some more in Mumbai.
Emboldened by the response to Mocha, Amlani and his partners have started other ventures: The Donut Co., and Salt Water Grill—the latter an upscale seafood place on Mumbai’s Marine Drive, a place for the city’s beautiful people to hang out and be seen, quite apart from the food on offer. Over the next two years, they plan to take the grill restaurant to Bangalore, Chennai and Pune and scale Mocha up to the 100-outlet level in five years.
Meanwhile, aspiring scientist-turned-celebrity restaurateur Rahul Akerkar, the name behind Mumbai’s trendsetting Indigo restaurant, and wife, Malini, are busy firming up plans to take the award-winning restaurant to other cities.
The couple is also planning to take Indigo Deli, their delicatessen chain in Mumbai, to other centres and is in the process of setting up Moveable Feast, an outdoor catering and banqueting outfit that will cater to the increasing demand for quality from companies and individuals who want to splurge on the good things in life.
As food consultant Karen Anand puts it, “Food is happening like never before in this country.” And this is a marked departure from the earlier trend, when fine dining was restricted only to the five-star hotels. “Mainland China first brought the fine-dining concept out of the five-stars as a stand-alone,” says Chatterjee.
The format offer of five-star value at non-five-star prices has caught on quickly. “The fact that so many players are coming into the segment with so many brands and different cuisines is a testimony to the potential of this segment”, says Chatterjee.
The potential is reflected in the growing demand and consumer preferences. “When I started the Salad Bar at Nelson Wang’s Piano Bar (in Mumbai) in 1989, only a select crowd knew about my kind of food but, now, entire families are out to try everything from Chinese, Italian and Mexican, even Japanese, Moroccan and Lebanese,” says Anand, who has set up a couple of high-end fine-dining restaurants for businesspeople looking to cash in on the food business.
These restaurateurs are not intimidated by the challenges they may face, or the money they will need to expand their businesses. Almost all the restaurant brands that have caught the fancy of consumers have raised, or are in the process of raising, money to fund their growth plans. Amlani’s firm wants to raise an initial tranche of $7 million (about Rs28 crore), and he is sure the money will be organized by the end of the year.
Food is now one of the main drivers of the retail economy—four out of every 10 rupees spent in a mall is on food—and the restaurant and food business has gained much-needed credibility among investors.
“Seven years ago, the food and restaurant business was viewed with suspicion, much in the same way the movie business was, and seen as a risky proposition,” says Amlani. But, now, banks and private equity players are fighting to get in on the action. “I have lost count of the number of cold calls I have taken in the past few months from funds and other investors wanting to give me money,” he says.
Indigo’s Akerkar is looking beyond venture funds and corporations for funds. “We are talking to high net worth individuals who are interested in investing in the company, and hope to have the money in place in two months,” says Akerkar, who is the managing director of deGustibus Hotels Pvt. Ltd, which owns Indigo.
Chatterjee’s Speciality Restaurants is in the process of diluting 20% of its stake to an overseas private equity partner to expand at a faster pace. It also is looking at going public and raising money through an initial public offer in the next three years. During this period, the firm plans to invest about Rs100-125 crore in the business.
There is more money to be invested in food now than even five years ago, agrees Anand, cautioning that the stumbling block could be the inability to get the back end of the business in place. “We are a long way away from getting world class in service, training of staff, supply chains and sourcing,” she says. While it takes only a day to import smoked salmon for Anand’s Kolkata project, it takes three days to source corn from Pune. “The alternative is to fly it in, but the freight costs will play havoc with my budgeting,” she points out.
ICICI Venture’s director, investments, Bala Deshpande, a former food industry professional, could not agree more. Growing disposable incomes and lifestyle changes, she says, will continue to drive the consumption industry in general, and the eating-out and restaurant segment in particular, making it “a great investment opportunity”. She adds, “But for the rest of the value chain in the food business to become a viable proposition to potential investors will take a long process of getting their act right.” ICICI Venture had made an early investment in restaurateur Sanjay Narang’s Mars Hotels and Restaurants, but exited the project.
The links in the value chain themselves pose a substantial business opportunity. Beacon India Advisors Pvt. Ltd, a $200 million venture fund, is not looking at opportunities in restaurants alone. Companies in every segment of the value chain, including supply chain, food processing units and the cold chain to transport perishables, are on its radar, says the fund’s co-founder and managing director, Deepak I. Shahdadpuri.
Shahdadpuri, earlier with Gem India Advisors, another venture capital fund, invested in Bakers Circle, an Uttarakhand-based bread brand which is the bread supplier to fast food chain Subway. “It is critical for Subway and other chains dependent on their bread to get the right bread at the right time without fail, and our business is to ensure that these companies deliver,” he says.
Over the past six months, Shahdadpuri and his team have met at least 10 players in the restaurant value chain, and he says the business has huge potential. What he looks for in a firm is a good management team, a good business plan and a scalable model, with all systems and processes in place, including the supply chain. “There has to be a great fit between the promoters and the investor because any difference of thought between the two parties can be a ticket to disaster,” he says.
Chatterjee says that while it may be easier to get investors today, they still look for value in “institutions” and “brands”. “The fact that not too many players have been able to create a national brand in this segment, and most of it is still unorganized, affected the fund flow till now. But, things are changing,” he says. In January, SAIF Partners, a growth capital fund, acquired a 20% stake in Chatterjee’s SRPL for Rs90 crore, valuing the restaurant chain at Rs450 crore. The capital will be used to increase the number of restaurant outlets across the country, from 40 to around 100, by the end of 2008.
The changing business model involves changes in the restaurant set- up, too. For the Akerkars, “corporatizing” the company is “a tough call”. They had sought to keep their “individuality” in the highly competitive, and crowded, food business. “Each of our clients knows us personally and comes to Indigo as much for the food as to meet us,” says Malini Akerkar. Growth and expansion, however, would mean putting professionals in place to handle the processes and systems.
“If it has to be done, it has to be,” she adds. And Indigo will still have their personal touch. “Rahul will continue to be the creative backbone, and he still decides our new menus every time they are developed.” Indigo’s all-black cigar lounge, its wine evenings and its cappuccino souffle draw the rich and the famous in Mumbai, and its business has now grown to Rs13 crore a year. A size that is difficult to manage without “corporatization”.
Amlani’s Impresario Entertainment, too, is scaling up rapidly. It had revenues of Rs18 crore last year and expects to touch Rs40 crore this year.
Chatterjee, too, followed a model which focused on ownership, never taking the franchise route. “We followed a path of consolidation and steady expansion till now, with funds being generated from existing business and the facilities that we enjoy from banks.” The profit generated was ploughed back into expansion.
SRPL has been getting inquiries from various investors for some time. “They approached us for investing in our company. We held out till now as it was critical for us to strengthen the company first and then go for investment. Fortunately for us, we didn’t have to scout for investors,” Chatterjee says. His restaurant business had a turnover of Rs85 crore in 2006-07; this year, they targeted Rs125 crore.