Get set for restaurant sector boom this year

Kolkata will see at least 40 restaurants, fast food chains and coffee joints in 2008 with an estimated investment of close to Rs 30-40 crore.

Restaurant chains like Yum Brands, Coffee Pai, Subway, Flurys, Oh!Calcutta, Mainland China, Marco Polo, and several first-time food chains, will nearly treble retail presence in the city this year.

Yum brands-owned Pizza Hut, which currently has about two outlets in the city, will set up three new outlets this year – two in Rajarhat at City Centre II and The Terminus mall, and one at Sector V.

The Sector V outlets are expected to open by March this year while the Rajarhat outlets are targetting the Durga Puja season.

Pizza Hut serves over 300,000 customers every week in India, informed company officials.

Kentucky Fried Chicken or KFC too will open a 70-seater restaurant at New Empire which will be the first KFC in the country run by specially-trained, hearing impaired employees.

KFC will also open five more outlets in Kolkata by end-2008, again at The Terminus mall and City Centre II in Rajarhat, and two others in south Kolkata.

Among coffee joints, Café Coffee Day, the coffee chain owned by Bangalore-based Amalgamated Coffee Bean Trading Co, plans to open around 15 outlets in the city in 2008, in Salt Lake's Sector V, South City Mall, and in other locations, at an average investment of Rs 25-30 lakh an outlet.

Coffee Pai, the vegetarian restaurant in the city, will open two more outlets in Homeland Mall and at Samilton Hotel.

Popular sandwich chain Subway, which opened its first restaurant in Kolkata in 2005, also plans to open around seven restaurants in 2008, in locations like Dalhousie, beside Ruby General Hospital, in South City Mall, and in other locations.

Flurys, the popular restaurant on Park Street, has opened an outlet this year in the South City Mall and plans another in Rashbehari in south Kolkata.

The much-awaited South City mall will also see four speciality restaurants offering Indian, Chinese, Spanish and Thai delicacies. It will house a 4,640 sq ft Thai eatery 'Benjarong', 'Zara' and 'The Spanish Tavern', among others. Blue Foods will host the food court with 13 different cuisines from India and abroad. Spread over 30,000 sq ft, Foodtalk will host brands like Café Coffee Day, Kookie Jar (4,000 sq ft), and Subway.

Mainland China too has opened shop in South City spread over some 10,000 sq ft.

'Sigree', an Indian restaurant, will open a 5,165 sq ft outlet in South City.

The recently inaugurated Silver Arcade on the Eastern Metropolitan Bypass too will see a 100-cover Oh! Calcutta and a 180-cover Mainland China.

The popular restaurant Marco Polo which serves Continental, Indian and Chinese foods, will open a new Marco Polo Pot House, a high-end lounge bar in Salt Lake's City Centre this year.

Dabur: Not enough juice

Over the past year Dabur has underperformed the BSE FMCG index by about 25 per cent, ever since it announced a foray into the health and beauty retail space. But it’s not simply the retail venture, that will require investments and, therefore, could post losses for some time, that is cause for concern. The FMCG firm, which sells everything from juices to shampoos and mosquito repellents, faces severe competition across categories both from national and store brands. In an increasingly cluttered market, it would need to spend more on advertising to sustain the brands and push new launches,besides, keeping prices competitive to ensure adequate volumes. And that could impact top line growth and consequently margins.

Even without too much competition, top line growth at the Rs 2197 crore Dabur has been slowing, the growth varying between 11 and 20 per cent in the last four quarters. Only one quarter of the four has seen higher growth than the corresponding quarter of the previous year.

For the December 2007 quarter, the growth at 14.7 per cent was slightly lower than that in Q3FY07 driven by a strong increase in top line from the shampoo, toothpaste and foods businesses.

In fact, the growth in the September 2008 quarter at 12.4 per cent was way below the 21 per cent seen in the September 2007 quarter.

Operating margins in the last four quarters have fluctuated between 14 per cent and 18.5 per cent. In the December 2007 quarter, the margins were flat at just under 18 per cent despite lower input costs and price increases.

Overall, the consumer healthcare and homecare categories saw sluggish revenue growth. Looking ahead, while Dabur has several growth businesses, it is perhaps present in too many categories to ensure adequate focus.

At the current price of Rs 100, the stock trades at 20 times estimated FY09 earnings and is expensive given that earnings are unlikely to grow at more than 18-19 per cent in FY09 and FY10.