Demonetization and Impact on Food Service Industry

I have been asked this question a lot recently. I have read some references, which point that the move has been negative for the sector. However, this is a part narrative of what is happening to the sector on account of this move. I, therefore thought of sharing my perspective on the issue.

Food Service is nearly ~$100 Bn industry with majority being unorganized and non-chain. Chained which would include cafes, QSRs, Fine dining etc. would be ~5% of this but growing at 15%+ CAGR. Therefore, unorganized (hawkers, standalone shops, dhabas, street stalls) players make up the bulk share and is a section not driven necessarily by processes and standards. The impact of the recent demonetization needs to be understood with this context in mind.

Chain players to benefit in the interim: Pre demonetization, the cash to plastic ratio for chain players was on an average 35:65. However this has flipped to upward of 70% in favor of plastic. Eating out is a discretionary but an important recreational need state. Even more so, as you go down the lower pop strata towns and where cash is more dominant. Demonetization curtailed eating out in the initial few weeks especially as old notes were not accepted in Food Service Sector. However, as consumption starts getting back to normal, there is going to be shift of transactions from small mom and pop stores not equipped from a POS or Credit Card standpoint or who do not want to incur additional cost per transaction (payment gateways) to the ones who do. This should ideally benefit chain players in the interim. My estimate is, this should yield atleast a 10%+ upside in the interim for the bigger players. The sections of the chain economy where the benefit might be little muted will be fine dining and Pubs where card transactions were already 50% upward and frequency of consumption on account of high ticket is lower. What will have to be seen, is the steady state cash use and related consumer behavior in the sector in the coming months.

Sales numbers starting to add up: Pilferage in terms of sale not being registered into the book when transactions happen in cash is rampant in restaurants. This happens many times by design in smaller players. In case of chain players, this is a major control issue and is a direct sales loss to the companies. There are multiple ways which have been employed by companies but none which are full proof. The natural push given to digital payments has short circuited this positively for the companies as it takes the control out of the executive who earlier handled higher volumes of cash. My estimate is that this itself should lead to another 5 – 10% upside in the sales realization of chains. Infact, players should incentivize customers to pay through digital media to further unlock the benefit of lesser fake sales.

Delivery landscape to evolve drastically: Food aggregators, Cloud kitchens and major independent players would have been hit in the initial 2 weeks of sales. This would purely be on account of COD and lack of card machines out there. Players are trying few innovative ways with support from wallets etc. to cut through these challenges which would lead to non-adopters of digital getting converted and increasing frequency of current users. This will lead to overall increase in aggregate sales with much higher penetration of online for players who have existing online (self or aggregator) infrastructure. The ones who deliver but are not integrated on food aggregators or who are there but do not have payment gateways sorted are already on the move as they have severely been impacted. Evolution of smaller players will take time and should benefit aggregators in terms of rush of players wanting to be on their platforms and integrated aptly.

Unmasking of real business models: Pre monetization, book realization of sales made by smaller players could be far lower than real. This would allow evasion of taxes and revenue share models which support the P&L. Minimum wages also as a concept does not work in the unorganized space for lack of tracking and enforcement. On the purchasing side, lack of invoicing enables saving of VAT other taxes reducing the overall cost of purchase. The entire influx and growth of such players has also resulted in rising real estate prices and personnel costs. In terms of the chain players especially the major ones, both the sales and input costs were majorly transparent. The real costs put pressure on running profitable operations. The move to digitize payments and ensuing GST should help a level field for big players to compete effectively. Digital inflow and outflow will help unmask the real business models of smaller players and should help enforce rules. I think, this will also result in smaller players to increase their food pricing which could also affect overall consumption.

It will be interesting to see what will be the stable state utilization of digital payments and ongoing consumer behavior once cash gets into normal circulation hopefully post 31st Dec. Having said that jugaad methods are already in play and use by vendors, small players and employees to undo impacts highlighted above. I will personally be watching the space closely.

* The views, estimates and opinions expressed in this post are completely personal and not those of my employer. Further it does not represent any plans or strategies of my employer.

India’s broadband woes

India's telecom sector is often showcased as a success story in reforms, owing to the mobile revolution. Mobile phones in India have nearly reached the 470 million mark while the total number of phones crossed the half billion mark in September. However, in stark contrast, government policy on broadband and Internet penetration is now an admitted failure.
India barely reached 6.81 million subscribers in August 2009 up from 2.28 million subscribers in March 2007. Where Internet is concerned, DoT's presentation shows 14.39 million subscribers up from 9.2 million subscribers in March 2007 (see chart).

This points to a policy overhaul for increasing Internet and broadband access. Typically, broadband and Internet access go hand in hand with wireline penetration, but unlike most of the world, including developed and developing countries, India's wireline sector has remained stagnant at 38 million lines for many years. This is in sharp contrast to the fast-growing wireless or mobile phone sector. Unfortunately, however, broadband access on wireless at current data speeds in 2G has serious limitations.

Experts point out that cost of acquiring a PC in India is still high. Other challenges include prohibition of VoIP by ISP's which is awaiting Govt approval despite specific recommendations by Trai for nearly two years, and governments' inability to share its existing wireline infrastructure with private players for delivering broadband access.

Consultant Top 10 Lists

Top Ten Things a Consultant Shouldn't Tell a Client

1. That was my first guess as well, but then I really thought about it.
2. You should see the hotel I'm staying at.
3. Hey, I just realized that I was in junior high when you started working here.
4. I like this office space. I'll have them put me in here when you're gone.
5. My rental car looks nicer than that junker you're driving.
6. Sure it'll work; I learned it in business school.
7. So what do you need me to tell you?
8. Of course it's right; the spreadsheet says so.
9. I could just tell you the answer, but we're committed to a three month project.
10. What are you, stupid?

Top Ten Things You'll Never Hear from a Consultant

1. You're right; we're billing way too much for this.
2. Bet you I can go a week without saying "synergy" or "value-added".
3. How about paying us based on the success of the project?
4. This whole strategy is based on a Harvard business case I read.
5. Actually, the only difference is that we charge more than they do.
6. I don't know enough to speak intelligently about that.
7. Implementation? I only care about writing long reports.
8. I can't take the credit. It was Ed in your marketing department.
9. The problem is, you have too much work for too few people.
10. Everything looks okay to me.
    

Top Ten Things You Shouldn't Say at a Consulting Interview

1. I'm a t-shirt and jeans kind of person.
2. Do you pay overtime?
3. I hate flying.
4. I'm useless without ten hours of sleep a night.
5. There are lies, damn lies, and statistics.
6. Do you cover rental cars for collision?
7. Stanford taught me that working in teams is great for slackers.
8. I think three letter acronyms are for people too stupid to remember whole phrases.
9. Two words: family first.
10. Call it what you want, it still means firing people.
    

Top Ten Ways To Know You're Dating/Married To A Consultant

1. Referred to the first month of your relationship as a "diagnostic period".
2. Talks to the waiter about process flow when dinner arrives late.
3. Takes a half day at the office because, "Sunday is your day."
4. Congratulates your parents for successful value creation.
5. Tries to call room service from the bedroom.
6. Ends any argument by saying, "let's talk about this off-line."
7. Celebrates anniversary by conducting a performance review.
8. Can't be trusted with the car-too accustomed to beating up rentals.
9. Valentine's Day card has bullet points.
10. Refers to lovemaking as a "win-win".

Top Ten Ways to Know You've Got the Consulting Bug

1. Can't stop using words that don't exist.
2. Worried that he who dies with the most frequent-flyer miles wins.
3. Use so much jargon in conversation, friends think you're speaking a foreign language.
4. Constant urge to give advice on subjects you know nothing about.
5. Always-hyphenating-words-that-don't-need-to-be-hyphenated.
6. Keep seeing bullet points everywhere.
7. Can fit the thematic undercurrents of "War and Peace" into a two-by-two matrix.
8. Tired of having a social life beyond work.
9. A two-page story in Business Week is all it takes to make you an expert.
10. Firmly believe that an objective viewpoint means more than any real work experience.

Indian Telecom Market

Indian telecom market is currently the most attractive telecom market with a lot of interest being shown by foreign players.

The country was divided into 23 circles when the mobile phones were introduced in the country. Now DOT recognises Chennai as part of TN. Separate licenses were given out for each of the circles in 1994. The circles were classified as Metros, A, B or C depending upon the revenue potential for the circle with Metros & A circles expected to have the highest potential. The following table lists the current wireless penetration by Metro/

India is the now the second largest market in terms of mobile subscriber base after China but still it is at 32% teledensity and adding 10-12 million new subscribers every month.
Indian market is not only the most attractive but also the most competitive with over 7 operators in each circle and another five new operators likely to start operations in the near future. Nowhere in the world does any country have so many carriers. The dominant players are Airtel, Reliance, Vodafone, BSNL (state owned), Idea and Tata. Reliance and Tata offer CDMA technology while all the other players are in the GSM space. GSM has a 75% share of sbscribers and now even Reliance and Tata have either launched or in the process of launching nation-wide GSM services. Apart from the current players, there are several new players like Aircel, Unitech-Telenor, Shyam-Siestema, Etisalat that have got the license and spectrum to launch mobile services in several telecom circles. Shyam-Siestema is the only player to launch CDMA services while all the new operators are in the lucrative GSM space. The adjoining figure gives the market shares of the operators in India. It is a fragmented market with the biggest operator (Airtel) garnering only 24% share.

India is a predominantly prepaid market (93% of all subscribers are on prepaid) with low ARPU and high minutes of usage(MoU).The GSM ARPU is Rs 220 (~ USD 4.6) per month with a usage of 496 minutes per month in the quarter ending Dec, 2008. Similarly, CDMA ARPU stood at Rs 111 with a usage of 370 minutes per month. There is a wide disparity in the rural and urban teledensity with rural teledensity at 12% vs. urban teledensity of around 75%.

Regulatory has played a big role in development of Indian telecom market by brining in the competition at the right time and by removing bottlenecks. However, there are a few pending issues that still need to be resolved like the 3G spectrum auction and allocation, Mobile Number Portability and 2G spectrum allocation policy.

Given the low tele density in the country, the subscriber base is expected to grow at a brisk pace. Government expects the mobile base to cross 600 million by 2010 and most of the new additions are expected to come from rural areas where the mobile penetration is still low.
(All the data is sourced from COAI, AUSPI and TRAI which are the leading industry associations and regulatory bodies and ofcourse other secondary research)

Your Inbox and privacy after death

Saving that parting email from your first love in your inbox? Well, chances are, after you pass away, your spouse and the entire family will know about the long-held secret. This is because web email services like Hotmail and Gmail do not let users specify what should happen to their messages when they die. In fact, email services owned by internet giants like Google and Microsoft have a policy of keeping your data after you die and letting your next of kin or the executor of your estate access it. These services can hold tens of thousands of messages. Accounts with Gmail can hold up to 7GB — or roughly 70,000 emails with a small to medium picture attached to each and they archive the messages you’ve written as well as received. When it comes to deleting the data, Microsoft’s Hotmail will remove an account if it is inactive for 270 days, while Gmail leaves the responsibility to the next of kin. Of the top three providers, only Yahoo refuses to supply emails to anyone after the user has died. The user’s next of kin can ask for the account to be closed, but cannot gain access to it. A Yahoo spokesperson said the only exception to this rule would be if the user specified otherwise in their will. Meanwhile, social-networking site Facebook has recently publicised a feature called memorialisation that lets the family of deceased users keep their profile page online as a virtual tribute. MySpace, on the other hand, says it addresses the issue of family access to sensitive data on a “case by case basis”.

4 hours from office to home, cars buses autos strewn everywhere, weather god at his fiery best, stranded & forced to have food at a road side tea joint, colony immersed in knee deep water, tip toeing in flood waters, new leather shoes screwed in T-2 days...getting under the weather again it seems and best no electricity with an early morning in offing...it’s amazing how a boring Monday evening can become so dramatic

WHAT'S HOT

One way to wield influence, is to be the dominant player in some area. Here are a few, and their niches:
--3M: Sticky notes, transparent tape.
--China Mobile: 70 percent of China's mobile phone market.
--Intuit: TurboTax has almost 80 percent of the consumer tax preparation software market.
--Microsoft: 90 percent of computer operating systems.
--Nielsen: TV ratings.
--Japan Steel Works: Ultraheavy forgings for nuclear reactor vessels.
--Jarden: Playing cards and toothpicks.
--YKK: Half of world zipper sales.

Gliding thoughts!

Ever wished that there was a cook-book for life? There could be a sweet tiramisu when you were in pain. Everything would have been ok by doing by the book. The world’s best chefs are some people who have made their own recipes and have become known for them. These were the recipes which were the first and became the last word. Many things they made, they didn’t have the slightest clue what it would be. Similar is life. You make your own recipes. Believe in them and when you strike gold; the world will know you by these very great actions. Believe in the recipe of life that you want to achieve. No problem if you fail. At least you tried. What’s wrong in failing anyways? Everyone does. But one day you will be able to show the world how your tiramisu tastes, the recipe for your life. Good or bad you should not care much.

Quality awareness about Indian Brands- Research Paper

"Local brands show what we are; global brands show what we want to be." – Consumer Insight

There is a general agreement that source of prowess of successful companies is the presence of big brands in their portfolio. Every company wants to create & own the ageless brands & does spend a lot of money towards this objective. Yet, many top executives are not very comfortable with following a structured approach to branding.

Our research on the past successful and unsuccessful brands says otherwise. On a careful inspection successful brands show a lot of common threads. These commonalities led us to model the consumer behavior model that is the ultimate reason for the existence of any brand. Kevin Keller captures the essence of branding when he says “A brand resides in the minds of consumers”. A brand should move beyond its physical character to acquire a perceptual character hence representing itself as a means to achieve what is sought by a customer.

In this paper, we start by discussing what a brand is from the perspectives of the organization as well as the consumer. This gives us the foundation for building the models subsequently. Next we build a model for consumer decision making process and bring in the perspective of the Indian brands vis-àvis multinational brands. We touch upon the importance of various parameters in building the Indian brands and stress upon them with relevant examples. It’s not just the initial creation of a brand but the reinforcements, evolution and revitalization that ultimately decides the winners in marketplace.

We have also conducted a primary survey to analyze the quality perception and understand the
consumer behavior and hence, help us arrive at the model. We conclude the paper by discussing a framework which could help build the Indian brand both domestically and globally.

To see my full article, please visit:
http://www.brandcameo.org/search_result.asp?text_search=chain

Marketing of Luxury Brands

Luxury branding is a whole new ball-game altogether, both from the perspective of the marketer as well as the luxury consumer. It therefore becomes important to view it both in relation and isolation from the ‘regular’ goods marketing.

To achieve the above objective, we first look at how luxury goods are different from regular goods and then go on to explore some facets and trends of the luxury goods as well as their market and consumers. This finally sums up into a SWOT analysis of the luxury goods segment, thereby helping in obtaining a bird’s eye view of the exercise at hand.

Considering that the luxury concept has shifted to the ‘new’ meaning, we delve into that aspect to understand the drivers for luxury brands presently, as well in the time to come. This is followed by a luxury potential determination of the Indian market both in terms of quantitative growth factors as well as qualitative initiatives.

Post identification of the mindset of the Indian luxury consumer, we have conducted a synergetic strategy building exercise, in an attempt to make sure that there are actionable points, which will go on to ensure the best interplay between the 3 most important factors for a luxury brand, i.e. the product brand, the brand / reputation of the service provider and the price-value relationship of the luxury brand.

To see my full article, please visit:
http://www.brandchannel.com/papers.asp?pageno=3#top