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Feb, 04 2014

Got a sweet tooth for success?

Be it any season of the year, everybody just loves to binge on a cup of a freshly brewed coffee or a sumptuous scoop of favorite ice-cream or a fat free yogurt. As India is turning out to be the hottest destination to make investments, several global bran

Swanky cafés, frozen dessert parlours and bakery shops have surprisingly casted its spell on consumers and have become a preferred places to hang out for almost every age group. With opening up of new business concepts, one stop shops that serve gourmet style goodies have become ideal choice for franchisees.

Cafés set to spread aroma all over

The key raison d'être behind the augment of café culture in India is due to  increase in the disposable  income, altering consumption patterns of consumers and the ingress of foreign brands in the Indian market. The coffee industry is regarded as one of the biggest and fastest growing sectors and has certainly seen a transition. No one says no when it comes to relishing a cup of freshly brewed coffee at a nearest cafeteria. As coffee and tea consumption in India is flourishing exponentially, it is believed sooner or later, unlimited volumes will pick up in this under-penetrated market with a huge growth potential. For potential investors in this sector, there are opportunities galore as coffee giants are all set to expand via the franchise model pan-India. Looking at the current size of the market and the business that is being done by the current players, UniqueBrew believes that market is set to grow at 40-45 % per annum and is anticipated to grow to around Rs 2,200 crore by 2017. The organised café market in India, which grew almost six fold in the last five years to $230 million currently, is likely to hit $410 million by 2017, maintaining a compounded annual growth rate of 13-14%, according to a report by consultancy firm Technopak Advisors.

Currently, The Coffee Bean & Tea Leaf, Australia's Gloria Jeans Coffee, Di-Bella Coffee, Nescafe, Hindustan Unilever's Bru World Café, Brew Berrys Café and Uniquebrew Café have chosen franchise model for expansion. Besides that, Costa Coffee is also there which has entered the Indian market through master franchise route but has presence via company-owned stores and Coffee Day Xpress which used to franchise earlier has recently put a pause on its expansion via franchise route.  Also, Starbucks the iconic coffee retail brand from the US made its India debut last year. To stir up more action in coffee chains' biz, Hardcastle Restaurants plans to bring its coffee retail format McCafe to India. More than 150 McCafes are expected to be set up in the next five years. To keep the cash registers ringing, new business concepts such as lounge, café, express and kiosks have been launched to attract franchisees. Stating further on what they have in the offing, Nirav Parmar, Founder, Uniquebrew says: “We provide an authentic Italian Café experience offering premium coffees, authentic International fast food products, enjoyable spaces where there is a relaxing atmosphere in every store. For a franchisee, Uniquebrew offers franchise opportunities via four formats: UniqueBrew Street Cafe, UniqueBrew Food Cafe, UniqueBrew Italian Cafe and UniqueBrew Sports Cafe.” Whereas, Brew Berrys Hosptality Pvt Ltd offers business opportunity through three business models covering Café - a standard format; Snack Bar which is referred as smartly designed Quick Serving Counters (QSCs) and Street Café, an open kiosk concept of Brewberrys.

Scooping icy profits

Another flourishing segment in food and beverage (f&b) industry is frozen desserts - ice-creams and yoghurts.  Age is no bar; everyone loves to scream for ice-creams. According to research and consultancy firm Technopak Advisors, India's frozen desserts market (including ice cream, frozen yogurt, gelatos and sorbets) was estimated at $450 million in 2009-2010 and is expected to cross $900 million by 2014-2015.” So far, India's Ice-cream industry is dominated by the domestic brands like Amul, Mother Diary, Kwality Walls, Vadilal Industries Limited, Hokey Pokey Ice-Creams, Milky Way, Pabrai's Fresh and Naturalle, Gelato Vinto, and Pastonji. The segment of premium ice-cream market is getting hotter  with new players out to liquefy the competition, high-end global ice-cream brands like Haagen Dazs, London Dairy, Movenpick, Unilever's Magnum, New Zealand Naturals and Baskin Robbins have made a mark in the country. Seeing the industry's potential, Ben & Jerry, a wholly-owned subsidiary of Unilever, is also expected to enter India soon.

Commenting on how ice-creams industry evolved, Akshay Batra, COO, Gelato Vinto says: “Ice cream industry has emerged as the fastest growing dairy favourite. The players in this industry have come up with novel ice creams, including the non-alcoholic, whisky-flavoured ice cream for premium clientele for parties. The key trends which have been noticed are biggest international players entering market with increasing their outlet numbers, availability of large number of options from traditional kulfi, to new gelato and flavoured yogurts, increase in health consciousness among urban population, involvement in fat- free dessert, reducing impact of seasonality such as going out to have an ice cream during winters.”

Highlighting the business opportunity, Rohan Mirchandani, CEO, Hokey Pokey Ice Creams, says: “Our first priority is to ensure that franchisees understand the business and the value proposition we offer to consumers. If a franchise partner is not passionate about the business nor do they understand the value proposition, we urge them not to apply. We offer three different models- kiosks, parlours, and cafés. However, a franchise will only be awarded depending on the partner's business goals, commitment, and within area restrictions.” With the market size of 3,000 crore from the organised and  unorganised sector, India's ice cream industry still has lot of potential for growth. The industry is seeing a growth of 35% on Year-on-year (YOY) basis which makes it an attractive destination for International brands.

Yogurts for hale and hearty

From metros to tier II and III cities, Yogurt have nowadays taken over “dahi or curd” as a result of the healthier benefits linked with it.  It will be surprising to know that yogurt industry is set to become a 1,200 crore industry. Growing at a compound annual growth rate (CAGR) of about 40-45% annually, the organised yogurt industry is likely to touch the mark by 2015 from the current level of Rs  750 crore as a low-fat  even no-fat  alternative as mentioned by  last year's research report released by Associated Chamber of Commerce and Industry of India (ASSOCHAM).

Considering the Yogurt's industry potential, several global chains including South Korean brand  Yogurberry, Singapore's Berrylite, Canada’s Kiwi Kiss, Italian Brand Yogola and Spanish Frozen yogurt brand Smooy have recently made their India entry. So far, Cocoberry is the only Indian brand that has casted its spell on customers and they just love to relish the new version of curd. Cocoberry considers franchising in tier II cities only if the franchisee has a strong local presence and a good site and in locations where it would be administratively difficult for them to handle. Cocoberry works closely with their franchisees in areas like capex and site finalisation. The brand is open to appoint more franchisees but will be selective in this regard. While, Italian Brand  Yogola offers two different kinds of models. The difference between two models is that kiosk model suits only for shopping complexes and food courts and standalone model is individual outlet.

Baking benefits

As per a report by Technopak Advisors, “The overall bakery market, valued at around Rs 8,500 crore and growing 12-15%, is estimated to reach Rs 15,000 crore in 2014-15.” Few brands or chains catering to bakery industry include Bakesmiths & Company, Australia's Cookie Man, Birdy's, Monginis, Au Bon Pain, Puffs & Rolls, Delhi-based CCDS Bakers Warehouse, and Australian Chain  Muffin Break. Enlightening as how bakery is touted as a best business proposition, Yasir Ahmed Hamraz, Founder -Director, Bakesmiths & Company, says: “Confectionery and bakery industry has a widespread acceptability across cultures. The industrial bakery scene has matured significantly. Quintessential confectionery and bakery retail is highly fragmented and hugely unorganised. Presence of 85,000 + bakeries, approximately, (in India) of which the lion's share belongs to the unorganised sector. Consumers, by and large, discern the fact that bakery products are much healthier than other “fast-food” items. It goes without saying, that bakery and confectionery retail is indeed a prolific business proposition for entrepreneurs.” From Super Donuts, a North-Indian brand to US based Dunkin Donuts to Singapore's Mad Over Donuts to The Donut Baker to Krispy Kreme Doughnuts, the donuts' industry in India is new and revving up revenues quickly. Putting his point across as how the concept of donuts evolved and how it is regarded as the safest option for franchisees, Ketan Kalra, Founder, Super Donuts, says: “The advent of doughnuts in India has just begun over the last one year. Super Donuts have been the first and the only organised retail brand in North India that has introduced the concept of Donuts as a popular eatery. The industry is growing at a much faster pace. The investments are comparatively low to set up a doughnut outlet than a bakery and the return on investment in a doughnut outlet gives faster returns and growth.” Super Donuts is open to franchise across Punjab, Haryana and Himachal Pradesh. The brand has designed multiple options for franchisee to choose from including multi-units with centralised kitchen, single unit with kitchen and mini outlets.

Combating challenges

Be it cafes, ice-cream or yogurt parlours and bakery chains, every segment in f&b industry has its own share of challenges.  In f&b business, customisation is the key to success but if not maintained region-wise, the brands tend to lose their market. Besides that issues related to staff and quality management are crucial aspects, maintaining the brand's standards, ensuring product quality, fall in profit margin due to the generator costs and rising price of imported materials and unavailability of right location for business are some of the challenges that every brand goes through.  “Cost of real estate and escalating rentals is a major challenge. Other challenges include local licensing (differs from state to state), logistics. As a prospective franchisee, one should focus on acquiring a good location. Choose a brand wisely, understand the potential of your venture, and check the performance track record,” Ankur Gupta, Director, Brew Berrys Hospitality Pvt Ltd.

Targeted expansion

Currently, the Indian Café market is estimated to be around Rs 1,250 crore and UniqueBrew Café aims to get around 5-7 % of market share by franchising. On the expansion front, UniqueBrew's vision is to get critical mass of 20 units by the end of 2014-15. Brewberrys, another player from café industry is looking forward to increase its footprint with a mix of company-owned and franchise stores. However, Minimelts is looking ahead to spread its reach to AP, NCR, Maharashtra, Chhattisgarh, Kerela and Gujarat during this fiscal year. In case of Gelato Vinto, the brand aims to have 2-3 company-owned and 25-30 franchise outlets by 2014. Switzerland based -Global Franchise Architects (GFA) which owns Pizza Corner, Cream n Fudge, The Donut Baker and Coffee World has over 100 stores in India and plans are afoot to launch more stores soon.

 

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