Mr. Neeraj Jain, CEO, Pulse Foods India Private Limited, shares his views with Senior Correspondent Karan Mude on ‘Present and Future of Catering Services in India’. This is the fourth interview in the series.
Q. Why are so many foreign players interested in fast-food retailing in India?
Ans: India is among the fastest-growing economies in the world, with a burgeoning middle class and increasing disposable incomes. Also, the success or perceived success of MNC chains in the country, like McDonald’s and Pizza Hut, has led to more and more food chains to focus on India. The growing urbanization and exposure of the Indian masses to international cuisines cement the belief that India is ready to experiment with their taste buds. It is also estimated that by 2020 India will have the largest population of people below 25 years. All these factors are driving the international strategies of most global players, who often see India as the last bastion to be conquered.
Q. How has the growth of malls helped in promoting catering services?
Ans: India is in the throes of a retail and realty revolution. Today, malls are not just shopping areas but destinations in themselves. For anybody with a little free time to spend in plush environs, malls are an obvious choice. It has also been observed that despite the fact that not too many of the mall throngers are shoppers, the food business is thriving.
The growth of malls has also led to the creation of legal commercial spaces, which is very important given the fact that in most parts of the country there has always been a scarcity of such properties. Thus, the malls that provide the added attraction of high footfalls have become a convenient route for most companies in catering services to set shop.
Q. Where will this sector be by 2010 in India?
Ans: The sector is currently witnessing a growth rate of around 40%, which is one of the fastest for any sector. The ongoing retail revolution is only going to add impetus to the growth. So, we foresee the growth momentum of the sector being maintained and the CAGR of 40% should continue at least for the next five years.
Q. Where do you see yourself in the coming years? What are your plans for the future?
Ans: Pulse was set up to address a specific niche – that of providing quality, hygienic and standardized food in the “Indian food business” and popularizing quick-service format for Indian food. We have restaurants in Delhi, NOIDA, Gurgaon, Ghaziabad, Faridabad, Surat, Mumbai and Bangalore. We also opened our first international restaurant in London last year.
In the rapidly evolving scenario, we are targeting the international market in a big way. Today, we already have subsidiaries in the United Kingdom and the Middle East, and we are closely looking at other regions in the international market. We are targeting the food service sector, restaurants and “ready to eat” in the international market.
We see ourselves with over 600 point of sales (POS) across the world in the next five years. These will be spread across three formats of retailing: viz. restaurants, food courts, kiosks and carts.
Q. Facts suggest that 70 per cent of the catering service is unorganized and the prices they offer are much lower. What will be your pricing strategy in the future?
Ans: The unorganized sector is something with which every major player has to learn to live. There cannot be any comparison on price points with these players. The notion that their prices are much lower is a matter of perception and something derived out of compromising on food safety and hygiene. There is often a huge long-term cost associated with eating out regularly at these places, in terms of jeopardizing one’s health – a point that we tend to ignore.
As food safety concerns come to the fore, we are sure that prices in the unorganized sector will also rise and come at par with the organized sector. As for our prices, what we provide is value for money to our customers. This is done by providing them healthy food that is safe to eat, standardized, and served in hygienic environment at prices that are competitive.
Q. To be able to capture a major share in this sector you will have to penetrate tier I and II cities, which is when the real competition starts between other major players, the unorganized sector, and you! How do you see the competition developing?
Ans: As urbanization spreads and Indians have more disposable incomes, the trend that is emerging is of nuclear DINK (Double Income No Kids) family set-ups as well as nuclear families where both parents are working with one or two kids. This is bringing about a change in the eating habits of Indians, with more and more of them eating out regularly. And when one is eating out regularly, what one craves for is healthy food catering to Indian taste buds and something they can eat day in, day out without compromising their health.
At Pulse we serve exactly that; our food can be eaten regularly without any health concerns. Our offering is not for the strict connoisseur of food, but for someone who craves and wants nutritious and tasty food. We are the first chain of restaurants in India serving Indian food in the QSR format, food that is standardized and uniform across the entire chain. Our prices are also standard across locations.
As for competition, right now there is no real competitor to our offering either in India or internationally. However, as you rightly pointed out, competition is bound to come and increase over a period of time. We believe that we have the first mover’s advantage and the space is large enough for multiple players to coexist and thrive.
Q. The expansion spree has already started. Major players have started entering the airports. The railway ministry is also considering allowing multinationals in the railway stations. Where do you think this expansion spree will take the industry?
Ans: It is good that players have started expanding into hitherto untouchable locations, once considered downmarket and unviable. This expansion should serve in further expanding the Indian market, as more and more Indians from all strata of society will be exposed to the practices of large players. This will also serve in expanding volumes and with this the economies of scale will be consolidated, which will be a double bonanza for the Indian consumer who has long lived with the dread of eating unhygienic food at railway and bus stations and exorbitantly priced food at airports.
Q. What according to you are the most important things that a player entering this sector needs to do?
Ans: There is a lot of hype associated with this sector and anybody and everybody wants to ride the bandwagon of 40% CAGR. One must be careful before entering this sector. You have to have a sustainable business model and the wherewithal to sustain operations. This is especially true since the breakeven for any venture in this sector is anywhere from 3 to 5 years.
• One should remember that quality is something that cannot be compromised on. Today, everyone is willing to pay a little extra for quality and hygiene, and to succeed in this business, there are no shortcuts.
• If you are coming in through the franchising route, it is essential that the franchisee and the franchisor think similarly.
• Service orientation is another very important thing that needs to be taken into account.
• Consistency will win friends and get repeat orders.