Cafe bars spread cheer in gloomy restaurant sector5 min read . Updated: 26 Apr 2016, 02:30 AM IST
As fast-food chains and fine-dining places see tepid growth, the concept of fine casual gains popularity in India
There is a new kid in town, and it’s the café bar.
Café bar? Is it a café? Or a bar? Is it a formal or casual dining place?
If you live in one of the metros, then in all likelihood, you have been to one or at least seen a café bar in your neighbourhood. A search on Zomato for café bars throws up close to a dozen options each in Mumbai, Delhi and Bengaluru. Most have come up in the past two years.
Some such as the Mockingbird Cafe Bar, which launched earlier this year at Mumbai’s Churchgate, explicitly call themselves café bars, offering coffee and cocktails along with a-la-carte restaurant service. Then there are others such as Farzi Café in Delhi’s Connaught Place, which is much more than a café, offering molecular food (dishes and cocktails inspired by laboratory experiments) but at prices that don’t pinch.
Simply put, café bar is the evolution of eating out, which has moved from fine dining to resto-bars to now an even more relaxed setting at more reasonable prices.
“In one generation, we have gone through four evolutions in restaurant business. What it took for the West 50 years, India is doing in 15 years," said Riyaaz Amlani, CEO and managing director at Impresario Entertainment and Hospitality Pvt. Ltd, which owns Smokehouse Deli and the Social chain of restaurants. Amlani says that a meal for two would cost on an average ₹ 1,500 at these café bars.
Affordable pricing has helped the concept find success at a time when the overall eating-out sector, which ranges from quick service restaurants (QSRs) to fine-dining restaurants, continues to see muted growth.
For instance, Zodiac Grill, which opened in 1989 at the Taj Mahal Palace and Hotel in Mumbai, shuttered in October last year. On an average, a meal for two people at a fine-dining restaurant such as Zodiac Grill can cost upwards of ₹ 6,000.
At the other end of the spectrum, QSRs such as McDonald’s, Pizza Hut, KFC and Domino’s continue to see tepid sales even as they offer discounts and promotions.
“Yum! Brands, which operates Pizza Hut, KFC and Taco Bell outlets in India, has most probably clocked 10 consecutive quarters of negative SSG (same store sales growth)," said Abneesh Roy, associate director, institutional equities, Edelweiss Securities Ltd, in a report on 21 April.
“No one goes to five stars; they are not renovating as for them, food and beverage is a small part of their overall offering. Fine dining has limited acceptability; you can’t keep going back to these places as often. QSR is also on its way down. They haven’t been able to capture the imagination of youngsters," said Zorawar Kalra, founder and managing director, Massive Restaurants Pvt. Ltd, which owns brands such as Pa Pa Ya, Farzi Café and Made in Punjab in the café bar space.
“It’s a mega trend; we will see this continue for the next four-five cycles with one cycle consisting of seven-nine years."
Café bars have raised the benchmarks not just in pricing but in ambience as well.
“These new places have risen above the bar as they offer good atmosphere, good food and more importantly, are reasonably priced, making them sustainable as people don’t mind going back again," said Siddharth Bafna, partner and head (corporate finance), Lodha & Co., a professional advisory services firm, while noting that the old concepts are passé.
As the concept gained popularity, the segment has seen competition quickly picking up.
For instance, Amlani, who launched the first Social, a café by day and bar by night, in April 2014, plans to have 20 Socials by August and 60 in three years.
Likewise, Massive Restaurants is a two-and-a-half-year-old company and has three of its five different concepts in this category and a majority of the expansion will be led by these concepts, said Kalra, who plans to have 15 restaurants by the end of September across the five concepts. The number will double next year, Kalra added.
Even A.D. Singh, managing director, Olive Bar and Kitchen Pvt. Ltd, which owns restaurant brands such as Olive Bar and Kitchen, Fatty Bao and Monkey Bar, is focusing on opening a lot more of affordable restaurant chains such as SodaBottleOpenerWala, Olive Bistro and Monkey Bar, where the average bill is ₹ 600 per head.
“This is the biggest growth area—concepts that are easily approachable with good quality offerings," said Singh, while explaining that this format is working as restaurateurs are working harder to have a sharper value proposition in terms of prices, product, service and music to bring in the customer.
Café bars, also called fine casual dining, work on lower margins and higher volumes.
“Food costs account for 40% of my operating profit for all my fine casual brands. We have not compromised on the quality of the ingredients and yet, we maintain the pricing. However, here the volumes are higher," said Kalra, while sharing that the operating profit is 20-25% for Farzi Café, but revenues are high due to large numbers.
Meanwhile, for his fine-dining options such as Masala Library, operating profit is 40% per store as the pricing is far higher.
However, there can be only one or two Masala Library restaurants in the country whereas other brands such as Pa Pa Ya have longevity of concept, said Kalra, while sharing that all the concepts get the same attention to detail in order to deliver the “wow experience" to diners.
Concepts like this are the equivalent of affordable luxury, said Abheek Singhi, senior partner and director at The Boston Consulting Group. “If a brand delivers 80-90% of the experience of a luxury brand at 50% of the cost, then it is a sure-shot recipe for success and we are seeing this happen across categories like snacking, apparel and lifestyle as well," he said.
To be sure, the café bars are also benefiting from the shift in social norms.
“Earlier, people did not do business meetings over drinks, but now, they are looking at the option instead of meeting at a coffee shop," said Amlani, who feels that coffee shops is a ’90s concept and the USP of a good coffee is no longer relevant as restaurants can offer good coffee with good food as opposed to cold sandwiches.
Also, the youth who have grown up going to coffee shops are now looking for a better quality experience, but they want it within their limited disposable resources.
“People are going out much more but disposable income has not increased that much. These are the first jobbers, second jobbers, they are going out," said Amlani, who feels that café bars have tapped into this segment.
Yet, India is way behind the likes of Singapore and Hong Kong when it comes to eating out. Moreover, the number of options are increasing at a much higher rate than the number of people joining the industry fold.
“As new formats come in, there is a division in the pie. The loyalty factor is going down," said Anjan Chatterjee, managing director of Speciality Restaurants Pvt. Ltd, which has brands such as Mainland China, Oh! Calcutta and Sweet Bengal in its portfolio.