Restaurants hit as consumers cut discretionary spends

With consumer sentiment low and macro economic picture gloomy, the $6-billion Indian restaurant industry is feeling the heat.

With consumer sentiment low and macro economic picture gloomy, the $6-billion Indian restaurant industry is feeling the heat. According to the National Restaurants Association of India, footfalls at restaurants across the country are down 10%, with consumers cutting down on eating out. Restaurateurs say the average spend at their outlets is spiralling down, too.

As the economy slows down, consumers do away with discretionary spends including eating out, leisure travel and purchase of white goods. This, of course, is not a very appetising news for those in the business of restaurants as they are already reeling under inflation.

?In last four to six months the growth of restaurant business has witnessed an impact. A weak consumer sentiment has resulted in lowering of household spend on eating out,? said Samir Kuckreja, president, National Restaurant Association of India.

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Kukreja, till recently, was the co-owner of Delhi-based Nirula?s chain of restaurants. He sold his minority stake to Malaysia-based PE firm Navis Capital last month.

Corporates, too, are resorting to austerity measures and not indulging in lavish luncheon meetings. ?We have seen revenue dip by 10-15% in the last couple of months. The major impact has been on corporate spending. Our restaurants are not as full during the lunch hours as they use to be earlier,? said Rohit Aggarwal, MD, Lite Bite Foods. Lite Bite Foods has about 65 restaurants across brands such as Punjab Grill, Asia Seven, Street Foods of India and Pinos.

It is the fine-dining and casual-dining categories that are more affected compared with quick-service restaurants. ?In recessionary times people downtrade by moving to casual-dining from fine-dining. We are witnessing that downtrading,? said Kabir Advani, managing partner, Bercos Restaurants.

Of the total restaurant market, around 7% includes quick-service restaurants. Average cheque size, too, has witnessed a dip of 10-15%, according to industry heads.

?Also, we have seen party and banquet business getting impacted by around 20%. If earlier a guest was booking for 400 people, they are booking only for 300 now,? said Vyoum Ghai, director, Suribachi and Buzz Restaurants.

Traditionally, May is a busy month for restaurants due to summer vacations and a surge in domestic travel. However, restaurateurs underline the fact that this year sales in May have been weaker than April. To stimulate demand and get more footfalls, restaurants have introduced value-for-money meals, and are stepping up their advertising and marketing initiatives.

?Though some players have already introduced cheaper options on the menu, others will have to follow suit to increase volumes. We are also mulling introducing entry price pizzas and meals,? said Sanjay Coutinho, CEO, Om Pizza and Eats. Om Pizza and Eats is the franchisee for Papa John?s Pizza, for Chili?s Grill and Bar in the west and south Indian markets and for The Great Kabab Factory at select cities.

The Indian restaurant sector is projected to grow to $10 billion by 2018. Almost 80% of the total industry is unorganised, according to the Food Franchising Report. Despite the economic slowdown, the unorganised share of the sector is estimated to witness a 5% growth, whereas the organised sector is set to see a 20-25% growth, the report said.

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First published on: 06-06-2012 at 01:31 IST