A lot, and more, has been spoken about the crisis that the pandemic wrecked on India’s F&B sector in the last one year. According to Anurag Katriar, President of National Restaurant Association of India (NRAI) and MD of deGustibus Hospitality, it is now time for industry stakeholders to tighten their belts and explore new opportunities whilst relooking at their contemporary offerings.
Speaking at the 5th India Nightlife and Convention Awards 2021 in Goa recently, he pointed out how nightlife is essentially about unwinding, partying, and socialising; which are an antithesis to pandemic-induced restrictions. Hence, the nightlife sector suffered more than other arms of the foodservice and hospitality business.
How has the lockdown and current restrictions in operating timings affected the country’s nightlife businesses?
The nationwide lockdown due to the pandemic brought the entire country to a standstill. Hospitality and the nightlife industry perhaps suffered the most, alongside tourism.
The subsequent unlock came with riders on capacity utilisation, restricted hours of operations, and initially, even the sale of alcohol was restricted. These factors hurt the nightlife more than anything else.
What factors can bring the F&B business back on track?
From a consumer perspective, the most important thing is to boost consumption. Two things are critical in this.
The first is to allay the fear of the pandemic transmission from the minds of the consumers. Secondly, F&B business is largely fuelled by discretionary expenses. Due to the pandemic, incomes have surely taken a beating in most sectors.
To mitigate the first problem, the ongoing vaccination drive will be a big factor. In the meanwhile, restaurants must do everything to give a consumer a sense of safety while they are dining out without taking away from the experience.
If the ongoing improvement in the economic indices continues, it will leave people with more disposable income for discretionary spends. Hopefully, a significant chunk of that will come into our sector.
What role can the government play in business recovery?
Government is a very important stakeholder in any business and it can be a huge help in bringing back business back on track. Restoration of the input tax credit on GST will go a long way in helping the cause of our industry as it otherwise puts a huge increase on our expenses.
We have been in continuous dialogue with the government in this regard. Similarly, we expect the administration to come up with an equitable and robust e-commerce policy.Â
Last, but not least, with time it would be important to restore the operating hours to normalcy. The shorter the work hours, the greater the chances of people crowding up. Extended working hours will let people freely walk in at any given time they want and not be restricted while crowding the place. In any case, if India has to become a $5 trillion economy, then we need to unshackle the business hours and allow commerce to take place for a longer duration.
What was some key business learning for F&B entrepreneurs from the pandemic?
Knowing the high-risk nature of our current business model and the fragility of our profitability were perhaps the biggest lessons learned from this pandemic. We always knew that the proportion of fixed operating expenses in our business is extremely high, which makes us very susceptible to any downward revenue fluctuation.
The pandemic strongly reinforced the point and forced us to make amends. We now understand that reducing the fixed expenses or converting some of them to a variable is a key requirement for survival under the circumstances.
Secondly, in our pursuit for aggressive growth, we did not realise that our business had accumulated some unwanted girth. Pandemic gave us an opportunity to reflect on them and cut down significant flab off our system.
Cash flow management is one of the biggest challenges in the F&B business. How can restaurateurs prepare their business for fiscal contingencies like the pandemic?
The margins in this trade are not very high and most restaurateurs keep deploying their earnings into fresh capital expenditure. This leaves us with very little scope to build a corpus for unprecedented contingencies like the current pandemic. This has to change.
The biggest lesson I have learned is to have sustainable and solid growth rather than high-risk aggressive growth. Another thing to be mindful of is to work in a positive cash flow if you are not losing money.
The reason why we do not have a positive cash flow is that we are diverting that to capital, or we are funding the losses. If we control these two things, look at things in isolation, and work for a more progressive approach towards our finances, it can only benefit in the future as the pandemic is not yet over.
Did the pandemic open any new business avenues for the F&B industry?Â
I don’t see many positive things that have come out from the pandemic except for the real estate cost coming down. Restaurateurs pay really high costs – some even pay the rent of what one would pay to rent a place at Madison Square, and sales are not in sync with the rent paid. Entrepreneurs need to start focusing more on how one can have slow and steady growth and make a profit.
Several bars and pubs were raided recently for non-compliance of social distancing rules. In such a scenario how can F&B establishments adhere to social distancing without losing out to business?
We need to understand the seriousness of the situation and adhere to the rules implemented by the government. The pandemic is still in play and we still have people testing positive due to these social gatherings. It is essential to keep the business going by changing the business models for time being by imbibing the social distancing rules set by the government. A relapse of the pandemic can hurt the entire sector in a very big way and we will have to wait for the times to change.
