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Wake-up Call

As business came to a standstill during last year's lockdown, food retail companies and restaurants embraced technology to stay afloat
twitter-logoAjita Shashidhar | Print Edition: June 27, 2021
Wake-up Call
Illustration by Raj Verma

Mumbai-based fine-dining restaurant, Bombay Canteen's Mother's Day Brunch, along with fancy cocktails and music, is something many upmarket residents of Maximum City look forward to every year. However, for the second consecutive year, Mother's Day had to be celebrated indoors because of the lockdown. Since restaurants are allowed to do home deliveries this time round, Bombay Canteen Founders Sameer Seth and Yash Bhanage saw an opportunity in recreating their signature Mother's Day Brunch experience at their patrons' homes.

They created a Mother's Day Brunch Box, which had a pre-curated menu that was delivered to guests who ordered from them. The highlight of the brunch box was a QR code, which took guests to a Spotify playlist - they could play their favourite music as they relished their brunch. Similarly, for Bombay Sweet Shop, their high-end sweet retail brand, the duo decided to have an Instagram poll on what should be the Mother's Day signature ice-cream flavour this year. Instgrammers voted for their popular Gymkhana Cold Coffee ice-cream, and they launched limited-edition Gymkhana Cold Coffee tubs.

Seth and Bhanage admit that had it not been for the pandemic, creating a fancy home-delivery experience would never have been their priority. "Delivery was an after-thought," says Seth. "We as restaurateurs were comfortable with brick-and-mortar. When we were making money, we didn't worry about technology. The lockdown has accelerated our focus on technology. It will only get better," adds Bhanage.

Reality Bites

The pandemic has been an eye-opener for the Rs 4.2-lakh-crore restaurant and food retail industry. It introduced them to a truth they had conveniently overlooked - adopt digital as a way of life or perish. The writing on the wall was clear almost six years ago when aggregators such as Swiggy and Zomato surfaced. Consumers overnight switched to the comfort of placing their food orders on an app rather than calling up the restaurant to place an order. Despite losing their home-delivery business to Swiggy and Zomato, restaurateurs didn't bother too much until the lockdown brought business to a grinding halt and aggregators slapped them with commissions as steep as 30 per cent. It left restaurateurs with hardly any room for profits. "It was like the frog in hot water. We didn't realise we got too late," says Riyaz Amlani, Managing Director, Impresario Entertainment and Hospitality (which owns chains such as Social, Salt Water Grill and Smokehouse Deli) and President, National Restaurant Association of India.

"Customers prefer aggregators as they get great deals from them, but all these deals are being given by restaurants. We are paying heavily to aggregators for services they provide, and we are not connecting with our customers or building relationships," adds A.D. Singh, Founder and Managing Director, Olive Group of Restaurants (which owns formats such as Olive Bar & Kitchen, SodaBottleOpenerWala, Monkey Bar and Fatty Bao).

The last year has seen every restaurant or food retail company launch their own digital platform. They have partnered with Shopify, Shoptimize, DotPe and Thrive, who help them not just power their respective platforms, but also market their brands. The goal is to reduce dependence on aggregators and take charge of the delivery business. After all, from a mere 5-10 per cent of revenues in the pre-pandemic era, home delivery is likely to contribute 25-30 per cent of overall revenues of restaurants and food retail companies. They certainly don't want to let that go out of their hands by paying steep commissions to aggregators. Also, restaurants end up paying an additional 5-7 per cent as marketing fee to aggregators, taking their overall pay-out to aggregators between 35-40 per cent per order.

Having their own ordering platform would mean much higher margins and better profitability. "Even after paying their tech platform, the payment gateway fee and the last-mile delivery (the likes of Dunzo and WeFast) operator fee, the commission will add up to just 10-12 per cent," explains Dhruv Dewan, Co-Founder, Thrive, a tech-enabling platform for restaurants. Dewan says he has worked out a revenue-sharing deal with restaurant owners. "We charge customers a three per cent commission. If a user pays Rs 100, Rs 97 will go to restaurant, Rs 3 will come to me." Thrive, at the beginning of the pandemic had barely 100 F&B clients. Today, it has over 3,000 on board.

Digital Bandwagon

Early movers such as McDonald's in the last one year have got close to 60 per cent of their revenue from digital offerings such as home-delivery, on-the-go and drive-in. The brand strengthened its McDelivery app. Amit Jatia, Vice chairman, Westlife Development (which owns the West and South franchise of McDonald's in India), says he realised that he was behind the curve five years ago, when the downturn reduced footfalls at his stores. "We had invested in creating the technology foundation three-five years ago, therefore, when Covid came about, we were able to pivot in 15-30 days and launched contactless delivery, contactless take-away and contactless in-store ordering," says Jatia.

Thanks to its timely technology intervention, the company reported a profit of Rs 2.09 crore in Q4FY21, against a loss of Rs 16.66 crore a year ago. "With consumers opting for home-delivery, there has been an increase in the average bill size too. We were pleased to see a healthy growth in our average share," Jatia explains.

The late entrants are hurriedly rolling out their digital offerings. The likes of Bombay Canteen and Olive Group have rolled out digital-only brands. Bombay Canteen has launched brands like King Fu Canteen and Brun & Babka, an online bakery and pastry shop. Similarly, Olive group has launched Olive Pizzeria in Delhi, Mumbai and Bangalore as well as These Are A Few of My Favourite Things in Bangalore, through which it sells specialties of all Olive group restaurants. It has also set up a Cloud kitchen in Delhi. Similarly, Impressario launched direct-to-consumer platforms for the Social and Smoke House Deli Brands.

"Online is not a substitute for dining-in experience, it's a substitute for home-cooking experience. It's a very good add-on for companies that are in the food business to explore. Delivery is under 10 per cent of our overall revenue, but it has the potential to be a very valuable add-on to our company's revenue and profitability," says Singh.

Legacy restaurant and food retail brands such as Haldiram's and Bikanervala are also feeling the need to embrace digital. Haldiram's, says, Mangesh Panditrao, Founder, Shoptimize, has been investing in building its digital presence for the past six years. "They realised they were not as connected with the youth. But they were sceptical about digital as they were not sure about unit economics. These brands will not do business unless there is a profit in every transaction. But today, their average order value is Rs 1,300," explains Panditrao, who is the tech partner of Haldiram's Nagpur and Delhi arms.

Similarly, Bikanervala is getting ready to launch online ordering and its own app. "Pre-pandemic, home-delivery was less than 5 per cent, going forward it will be at least 20 per cent. We have to be ready for it," says Manish Aggarwal, Director, Bikanervala Foods.

Shridhar Poojary, MD, of Mumbai-based Shiv Sagar chain of restaurants, says he joined aggregator platforms only in 2018, out of compulsion. "Earlier, my staff used to deliver to people's homes, but when Swiggy and Zomato came in we started losing business as consumers had lot more options. But aggregators are taking away most of our profits, and that's the reason we are considering having our own direct-to-consumer platform." Poojary is even considering Cloud kitchens in order to cater to a wider audience.

With large parts of the country currently under lockdown, having his own delivery platform has been immensely helpful, says Ankush Dadu, Director of Bangalore-based restaurant chain Anand Sweets. "I have a 20-25 per cent margin which I am giving aggregators on every order. That's something I can play with. I am able to give a discount to my customer which she will not get from an aggregator and I am still able to make more money than what I make by selling through an aggregator."

Recrafting Experiences

Before Bombay Canteen launched its online service, the team got its delivery partner to pick up food from its kitchen and then deliver it back to them after an hour. Seth says the exercise was important as they needed to see whether the food retained its original texture and taste. "We realised that we needed to craft a fairly different online menu, as a lot depends on what can travel. Some of the more intricate dishes are temperature and texture sensitive and won't be able to travel," explains Seth.

Apart from exotic food, service and experience play a huge role in the success of a fine-dining and even a casual-dining restaurant. The biggest dilemma for most restaurants has been how to recreate these experiences at home. "You can't deliver a souffle or even sushi, as it can't travel unless it is packed with lots of ice. We did change menus, but the basics of hospitality (good food, service and storytelling) will never change. Whether it is coming from your kitchen to the table at the restaurant or from the kitchen to your home, there is no reason why a fine-dining restaurant can't enhance customer experience when it comes to delivery," says Amlani.

From creating pre-curated menus to coming up with special festival menus, restaurant chains are tweaking their original menus. SodaBottleOpenerWala, for instance, has come with a pav and roll menu, which is exclusively online.

Launching online health food menus is a fad among not just high-end restaurants, but also legacy restaurant chains. "A brand like Chitale Bandhu has sugar-free desserts on its menu, while the likes of Haldiram's are launching salads. Even if you order a channa bhatura, you will invariably get a salad as an accompaniment. Brands are understanding that there is a new set of consumers with a different set of needs," points out Panditrao of Shoptimize.

Having their own direct-to-consumer platform has also provided restaurateurs access to data, based on which they are able to tailor make menus as per customer tastes.

The Bombay Sweet Shop website for instance, enables customers to book a virtual appointment with the store manager, who helps them choose their sweets. "We even send samples so that customers don't have to give up on taste and trial of the purchase decision," says Bhanage.

The average selling price on Swiggy or Zomato for Anand Sweets is Rs 300, more than double on its website. "It dawned on me that people who come to the website are not impulsive shoppers. They are giving me lot more time, which means I can communicate with them, sell them more, sell them better and sell them personally. On an aggregator, the personal connect moves away," explains Dadu.

If restaurants across the country have their own direct-to-consumer business model, would that mean the death of aggregators? Certainly not, says Dewan of Thrive. "They have a decade of work ahead of them in terms of discounts, convenience and discovery. Restaurants can never challenge that. The idea is that a certain percentage, may be up to one-third, should come from their direct channels, so that margins make sense."

Panditrao of Shoptimize says that tech investment in the initial stages is as expensive as the commission that the restaurants give aggregators. "It is around 25 per cent initially, but in the long run it comes down to as low as 10 per cent per order because they have repeat customers and they don't have to spend as much on marketing."

In fact, Jatia of McDonalds advises tech adapters to partner with aggregators. "Build your own assets, be very strong digitally, don't be over-dependent on anybody, but try to look at aggregators as partners. Partnerships have always worked for us," he says.

Restaurateurs unanimously agree technology is here to stay even after life gets back to normal.

@ajitashashidhar

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