Good News for an otherwise battered sector in 2021. The Zomato IPO has hit the market and has been received by investors very well. In fact, it was oversubscribed a whopping 38 times on day 3 of launch. That’s the biggest investor response since the Coal India IPO.
Now, that says something about a sector which didn’t exist 10 years back. The Restaurants or Hospitality industry is not new in this market. This sector existed for centuries and thrived in all phases of economy. Now, one tiny fraction of this industry (Booking the order and delivering it) has been carved out as a spin-off sector. And this spin-off sector is valued at much higher rates than the conventional industry players.
Just to put things in perspective, let me show you the valuation of 3 companies.
- Indian Hotels Company Limited: The Tata Group company which operates Taj group of Hotels, resorts, spas etc along with other brands. It was founded in 1868. It is South Asia’s largest hospitality company by market capitalization. They have developed properties across all major parts of the globe and considered a benchmark in hospitality by many.
- Jubilant Foodworks: It is an indian food service company which has master franchise rights for Domino’s Pizza, Dunkin Donuts etc for India and neighboring countries. Starting in 1996, this company operates more than 1,300 pizza stores, 30,000+ employees and a vast supply chain across India. They produce and sell the largest number of pizza in this country.
- Zomato: The company was formed in 2008 as a restaurant listing company. Slowly, the company became a food aggregator platform and started online ordering and delivery services. They have hardly any assets and largely exist only in digital space. By the end of 2019, this service was available in 24 countries and 10,000+ cities. The delivery boys are not even employees of this company, they are outsourced agents. They haven’t made any profits since inception.
Now, let’s compare the yearly revenues and market capitalization of all these three companies.
What do you see? Surprising, isn’t it. The company which owns and operates the largest asset base in the lot (Indian Hotels) is least valuable when it comes to market capitalization. Incidentally, they also have the highest annual revenue (approx. Rs. 4,600 crores for FY 20). These 3 companies are sort of leaders in their respective categories – Hotels, Food Service, and Foodtech. Their revenues and market capitalization are inversely proportional (remember the laws of physics in school days) in comparison.
This is the lard fact of today’s world.
And it will not change whether you accept it or not.
For, Stock Market behaves on possibilities of the future rather than glories of the past.
And the future has a clear preference for services rather than assets.
If you are a Restaurant / Cloud Kitchen owner, now you need to think hard about your future. So far, you have been running this business according to conventional practices – invest in nice interiors, Profitable Menu, Good quality food, fancy cutlery etc.
I am not saying that this is no longer relevant. But, there are some more factors which have become relevant in today’s world. Questions which never crossed your mind.
Who orders your food? (Your Target Segment)
What and How Frequently? (Customer Engagement and Behaviour)
How much does it cost to attract a customer? (Your COA or cost of acquisition)
What do you do to increase sales in the next 2 hours (Is that even possible? Yes, if you follow funnel approach)
And many more, which is not covered by your glitzy interiors, expensive kitchen equipment, fancy cutlery and polished leather bound menu.
But these questions were never asked before. So, you have never looked for an answer. Now there is a new class of entrepreneurs in the market. Who are not only asking these questions, but also working with the answers.
Through Technology.
Which helps you not only in asking these questions, but providing meaningful insights and answers as well.
But here is a problem. The only technology that you are aware of in your restaurant is the ubiquitous billing machine. That too, if you have one.
And, maybe a Facebook or Instagram account. Which is managed by someone else. And you have never done anything else than to post some pictures or festival greetings on these social media pages.
That is why you are clueless with the new paradigm.
That explains your dependency on platforms like Zomato and Swiggy. Incidentally, these foodtech companies are leveraging the technology by asking and answering the questions I mentioned above.
You want to do it and start focusing on the “invisible” part of your restaurant. You may do it manually, you can have a tool for the same, you can have an enterprise wide ERP tracking the same. The choice is yours. But you have to start somewhere, that is critical.
If you have no clue how to start, don’t get disappointed.
I will start with the first step.
In my next article.
Till then, let me know what you think.
Wish you all the Best
Randheer
P.S. At Food Kindle, we conduct various course specifically designed for entrepreneurs in Food Industry. While you are here, why don’t you check that out our courses as well.