MNCs devour opportunities in India's food contract and support services sector

MNCs devour opportunities in India's food contract and support services sector

That is what MNCs have on their minds as they devour the opportunities in India's food contract and support services sector.

Vivek Trikha, Executive Chef of Sodexo Vivek Trikha, Executive Chef of Sodexo
On a balmy July evening 13 ye ars ago , Mrityunjay Sabrad was waiting for his wife to come back from work. She had the key to their house in Mahatma Gandhi Society, Kothrud, Pune. Still dressed in his work clothes and with limited options, Sabrad, a software engineer with Infosys, walked into an ice cream parlour next door where it would be easier to wait. He began to chat with the friendly parlour owner, Ram Mankari. Sabrad talked about the lack of lunch options at the new office Infosys had set up in the city. Wouldn't it be great if someone supplied the employees there with lunch?

Mankari, who also managed a restaurant nearby, decided to be that someone. Sabrad was happy to help him get in touch with the right people. "By August that year, I began supplying 30-odd employees of Infosys with lunch and snacks," says Mankari, who was just 26 in 1998. As the office grew quickly from 100 staffers to 300, so did Mankari's business.

Soon his Tirumala Hospitality Services was raking in Rs 90,000 a month, which in the course of the next 12 years rose to Rs 3 crore. It had 1,200 employees and 27 clients, including General Motors, Volkswagen, and LG Electronics.

In India, food contract and support services is a Rs 9,000-crore market


The Indian market is growing at 15 to 18 per cent annually

Half a dozen domestic players have been acquired by Sodexo and Compass Group

Radhakrishna Hospitality Services by Sodexo in 2009

Economic growth leading to rising aspirations
Tirumala, however, is no longer with Mankari; UK-based Compass Group, one of the world's biggest in the contract food and support services business, bought it for an undisclosed amount in August 2010. But its journey, right from that fateful July 1998 evening, can be seen as a parable for the evolution of the contract food and support services business in the country - right down to the onslaught of multinationals.

As Indian companies have grown, within and outside the country, so have their employees' aspirations. They want better food at work without having to cook and pack every morning. The resulting demand is music to the ears of the multinational companies in this business, constrained as they are by the saturating markets in the US and Europe. This sector in India is already estimated to have touched Rs 9,000 crore a year, of which nearly 80 per cent is in the unorganised sector. It is not a surprise, then, that Tirumala is just one of five entities Compass has acquired in India.

"The market in India is growing at 15 to 18 per cent compound annual growth rate compared to single-digit growth in some of the mature markets," says Sunil Nayak, CEO of Sodexo India On-site Service Solutions.

Nayak came to be a part of Sodexo when it acquired Radhakrishna Hospitality Services, of which he was the CEO, two years ago. Radhakrishna, founded in 1966 by Radhakrishna Shetty, was one of the few companies in this business with a pan-India presence, covering 22 states with 800 sites and generating an annual turnover of Rs 450 crore.

"Our focus will be on innovations," says Jeff Brades, Vice President, Marketing and Communications, Sodexo India On-Site. The company has discovered what many already know anecdotally: not only do young professionals dislike cooking and packing in the morning, they are also averse to going home in the evening and hitting the kitchen.

Employees of Medanta-The Medicity refuel themselves at their Gurgaon office
Employees of Medanta-The Medicity refuel themselves at their Gurgaon office
"The idea is to provide solutions that can improve the quality of life," says Brades. And Sodexo's financials, too. The company's revenues now stand at Rs 744 crore as it feeds some 700 clients from 1,100 locations. The list includes employees at Volkswagen, Nokia, Bajaj Auto, Tata Motors, Mercedes Benz, Hindustan Unilever, Microsoft, Dell, Transocean and British Gas. If this is not diverse enough, there is the Dhirubhai Ambani School in Mumbai.

As of now, one of every 11 Sodexo employees is in India; the company is headquartered in Issyles-Moulineaux, France. That does not make India huge in the company's global scheme of things, but it is a high-growth market. Many of the company's Fortune 500 clients are in India, more are on their way. But it is not that MNCs are having a free run in this field. Domestic chains will not let them. Mumbaibased hotel management company Sarovar Hotels and Resorts feeds future managers at the Indian Institute of Management, Ahmedabad, and fed those at the Indian School of Business (ISB), Hyderabad, for a decade till its contract ended on May 31 this year. Sarovar, also manages 56 hotels (of which it owns two) across the country.

"Right now, this (catering) is not the core operation for us, but it is a highgrowth area," says Ajay K. Bakaya, Executive Director with Sarovar. ISB now gets catered by Hyderabad-based Green Park Hotels. However, the bulk of the business is still with the neighbourhood auntyji. But you never know; one of them could already be cooking up a multicrore business plan like Pune's Mankari.