Avinash Singh, Country Manager, ITW Food Equipment Group (FEG) India, discusses the company’s business strategy and sales model in India, and operational challenges and trends in the Indian foodservice industry, with Juhi Sharma
Tell us about ITW’s foray into the Indian market.
ITW India is the Indian subsidiary of Illinois Tool Works (ITW) based in Illinois, USA. The Food Equipment Group of ITW (India) forayed into India with the acquisition of established brands such as Hobart (ware washing) and Foster (refrigeration) in the late 1990s. It marked its entry formally with the setting up an office and network in January 2011 and began offering a wider portfolio of kitchen equipment brands. ITW India also operates in packaging machinery, engineered polymers, quality assurance products, power systems and electronics, industrial lubricants, and specialty chemicals.
What does your range of commercial kitchen equipment include?
Besides Hobart and Foster, we have Gamko bars, Bonnet and MBM cooking range and combination ovens, and Elro pressure bratt pan. Apart from Hobart and Foster, the other brands were selected from ITW’s international portfolio keeping in mind their potential in the Indian market. We decided not to bring in ITW’s exhaust ventilation hoods (Gaylord), for instance, because there are several regional players in this segment who are well-entrenched. Plus, importing them from America would make them less cost-effective as compared to local brands or those imported from South East Asia. Today, ITW India meets about 60 percent of a commercial kitchen’s requirements.
In fact, we conducted a market research to gain an understanding of Indian market’s segmentation of various equipment verticals, existing players across geographies, and the customer base. The research identified both the organised and the unorganised players. We cannot cannot control the former, but we can penetrate the latter. Based on this research we decided on the brands and products which would be well received in India.
Which is your largest selling equipment?
Currently, dishwashers and food preparation equipment contribute the most to our revenue – around 60 percent, followed by refrigeration (10 percent), and the rest by other equipments. Our dishwashing and food prep brand Hobart is a leading name in the industry, and is better known than our other brands. It is very efficient, for instance, an under counter, front loading model consumes only 1 litre of water compared to 2.3 litres in a competing brand.
What regulatory norms and standards do you comply with in India?
Within the ITW equipment group, we have the American and the European verticals. The norms, certifications and quality standards for both are different. India is open to both, but there is more acceptance of European standards and regulations. All our products are duly certified in Europe before being imported to India. So, we do not undertake any additional certification or testing here, until and unless a customer specifically asks for it.
Who are your clients in India?
We have been supplying to five- and four-star hotels in India for many years; our major clients are the Taj Group, Oberoi’s, ITC Welcome Hotels, The Leela, The Lalit, Jaypee Group, Hyatts, Marriots, Hiltons, Accors, and Starwood Hotels, and many more. These hotels were importing ITW equipment even before the Indian subsidiary was established. We are now expanding our presence to restaurants, canteens and catering companies. We have recently tied up with Starbucks for dishwashers and refrigeration; we are supplying to several American chains like Pizza Hut, Dunkin Donut, Chillis, Domino’s Pizza and Cinnabon. Pizza Veto is using our Foster refrigeration. Independent restaurant Prism in Bangalore has bought our bar equipment, ware washing and cooking range. We are in talks with several QSRs, namely, Nando’s, Nirula’s, Haldiram’s, and Bikaner.
Industry canteens in companies like Honda, Maruti Suzuki, HCL, Infosys, Dell, Wipro, etc, which cater to a large workforce, need to install equipment like dishwashers, combi-ovens and pressure brat pans. Another potential segment are worship centres like the Akshardham temple, Bangla Sahib Gurudwara, and Shirdi, where their kitchens cater to a large number of visitors and their own staff on a daily basis. There is an organisation called Akshaypatra, which provides mid-day meals to the poor; our equipments are being used by them. These are some lesser known segments using professional kitchen equipments. Today, everybody wants better and more mechanised systems to improve productivity with maximum hygiene and minimum operational costs. Segments which will come up soon are school and hospital canteens, prisons and stadium canteens. India has tremendous potential and this is just the beginning.
What is your sales model?
Many QSRs hire a kitchen planner or consultant, and we try to reach them as they are the ones who will recommend or facilitate the selection and purchase of equipments. Industry forums, trade shows and exhibitions are good places for showcasing products and meeting prospective clients.
In India there are a lot of local manufacturers, and most professional kitchens (other than five-star hotels), buy from them. These local players are largely stainless steel fabricators who make tabling line, refrigeration line, cooking range line, etc. But now due to awareness and knowledge of the efficiency and quality of international equipment, many restaurateurs and small hoteliers want imported equipment. Since these local manufacturers cannot produce the same quality, they are keen to become our dealers.
We have a list of some key local players who are also our dealers, and they comprise our ‘unit sale market’. We supply them a single unit of equipment or two units. When a customer approaches a dealer, he will offer the customer two types of equipment: one, his own, and the other from the ITW range. Quite often, the dealer combines our product with his local ones and offers a complete kitchen to the end user. Our service team supports the dealer in the installation and commissioning of the kitchen.
In case a client approaches us in a region where we have a dealer, we either direct him to the dealer or sell the equipment on his behalf and pass on the sales benefit to him. I want to leverage on this sales model and build a long term relationship built on trust with our network of dealers. This is important for our success in the market. We also give training to our dealers and their technicians on the usage and maintenance of our equipment.
The other sales model is the project business market, where hotels release tenders for their entire kitchen equipment and we submit our proposal and quotation.
I have noted that a lot of international QSR chains have tie-ups with equipment manufacturers in the country of origin for all their outlets across the globe since they prefer to follow a standard system across all their outlets. For instance, McDonald’s fryers across the globe are supplied by Frymaster or Pitco which have been manufactured keeping in mind the end product which is standard. So we too target restaurants who would like to source indigenous equipments in the regions they are present in.
Which is your best performing region?
Currently, we are present in Delhi, Mumbai, Bangalore, Chennai and Kolkata. Our best performing region is the North, which accounts for 60 percent of our sales, followed by Mumbai in the West which generates 20 percent sales. The South and East which contribute 10 percent each, are our focus now.
How much would a restaurateur have to invest for your equipment?
A hood type dishwasher which can wash at least 1,200 plates per hour, an investment of around Rs 2,00,000 is required; for a cooking range with four burners, Rs 1,70,000; for combination ovens with six trays Rs 4,50,000; and a standing refrigerator with two doors around Rs 1,20,000. This is just a minimum/average investment, but depending on the models and functionality, the prices would vary.
What is your marketing strategy?
We organise interactive sessions with chefs, operators, investors, planners, etc, and give presentations of our equipment and share notes with them. We also sponsor events and participate in exhibitions and tradeshows. Since 2012, our marketing strategies have also been aimed at brand building of our several brands. I want the foodservice industry to recognise ITW as a food equipment group that offers total solutions for commercial kitchens.
Who is your point of contact in the food service industry?
They could be chefs, F&B managers, purchase managers, chief engineers, and project heads in operational hotels. For new and upcoming projects, we could be dealing with kitchen planners, corporate managers, investors, restaurateurs, or administration heads in institutions. In some cases, the investor will decide on the brand along with operator of the outlet, and in consultation with the chefs. Nowadays, many food operators take the services of kitchen planners and consultants for the selection of equipments and their brands.
What is your assessment of the Indian market?
The market is in the process of maturing and organising itself; it is being driven not only by the international exposure, but also the growing trend of eating out and travelling locally for leisure. Another visible trend is that kitchens are moving from the back-end space to being visibile in the front. Restaurateurs want to show that they are cooking fresh and this is creating a culture of live kitchens. So open kitchens are being planned, and diners are encouraged to watch the dishes being prepared and to interact with the chefs. There is also a growing concern for conserving energy through use of efficient equipment. However, a typical feature of the Indian market is that people want to invest the least amount of money and want the most out of it! If you compare this market with other mature markets, then we are way behind them. Their quality of local products is so good that they don’t have to import from anywhere. When India reaches this stage we might have to manufacture locally.
What challenges do you have to deal with?
As importers, we have to convert the fluctuating foreign currency prices of the equipment into Indian rupees, after paying a heavy import duty of 28 percent.This makes the equipment expensive. Keeping the documentation simple and handing it over to the end-customer is quite tedious. The Indian government had come up with a concept called ‘free trade warehousing zone’ which is ambiguous, and yet to be established. Not having a proper and simple system in place is a hurdle in the smooth functioning of any business.
Another challenge is maintenance and service. We have trained our partners (dealers) to independently handle our equipments post sales, yet customers complain that service is available only within the warranty period. On customer demand we have set up a service wing called ITW Parts and Service with 21 technicians across India. We have to constantly keep them abreast of our products and even send them to our factories in Europe and US for a complete understanding of the manufacturing and servicing. In fact, training the technicians of local vendors is another challenge, and since attrition is high, we have to keep training new staff quite frequently.
Vendors selling so-called equivalent spare parts of our equipment for a lesser price has become a big problem. It is difficult to control such activities in a vast country like India. We now place a hologram sticker on every spare part sold through us to identify the original products of our brand, which customers are advised to check. To give you an example, our heating elements have an in-built fuse which in case of a thermostat failure will blow and save the equipment and surroundings from an accident, while its local equivalent heater poses a safety hazard.
What are your future plans?
We have designed a new combination oven specifically for the Indian market, which will be launched in the last quarter of this year. I have also selected a suitable model of pressure bratt pan for bulk cooking from our international portfolio, which we will introduce in India. We have recently launched dishwashers for the restaurant segment and are currently looking for dealers to facilitate bulk sales. We are also exploring opportunities in restaurants for our refrigeration systems. The refrigerators being supplied to the Indian market are imported from UK, and are very expensive. We plan to have them manufactured at our plant in China and then import them from India. These will be competitively priced and of the highest quality.
In the last fiscal, we registered sales of USD 5.2 million, driven largely by sales of dishwashers, food prep machines and refrigerators to hotels. For the current fiscal, we are aiming for 15 percent increase in the turnover. Now our focus is on strengthening our position in the food service segment, and three years down the line we will concentrate on retailing as well.