Business of ingredients

Restaurant brands outsource these food ingredients from different suppliers or FMCG companies and generally have an institutional tie-up with these companies for bulk delivery of packaged food ingredients and other products. Such deals have terms and conditions on which both parties, ie, a supplier and its client (restaurant), agree to abide by and have a specific supply schedule.

Kushagra Nagrath, Chief Operating Officer, Alchemist Hospitality, says, “A restaurant business is quite heavily dependent on packaged goods, such as proprietary sauces, dairy products like cheeses and milk, masalas, noodles, Arborio rice, Japanese and Thai food – the list is endless.” With the increasing number of restaurants, there has been an increase in demand for the ingredient businesses. Some of the leading FMCG suppliers for the food service industry include Gowardhan Dairy, McCain Foods, Mrs. Bector’s, Cremica, Amul, Dr. Oetker, AgroTech, Vadilal, Coca Cola India, PepsiCo India and many more.

Suhas Misra, Chief Operating Officer, Hector Beverages Pvt Ltd, which supplies Tzinga energy drink to restaurants, says, “Restaurant clients are very big for us; we have tie-ups with several regional and national brands such as Mast Kalander, Café Coffee Day, Café Express, Café Buddies and so on. Delivery of products to these clients differs from client to client. Typically we deliver products once in a week. It totally depends upon the aspects and the needs of the restaurant.”

Institutional tie-ups: the necessary route

While consistency is a key emphasis and an obsession in a restaurant business, another essential ingredient to the recipe for restaurant business is the protection of intellectual property rights. The recipe of a particular restaurant brand must be protected from being exposed or exploited. Having an institutional tie-up with a supplier gives the restaurant operator a guarantee of secrecy and exclusivity of recipe supplied to them.

For FMCG players, having an institutional tie-up with restaurants means demand of bulk delivery of products from single window, capacity utilisation and fixed schedules. Working closely with restaurant companies also help FMCG brands in developing, innovation and customising products that help both the parties in understanding the market demands better, which further helps in upgrading marketing strategy for supplier’s retail business.

“As a company, our main objective is to serve great tasting energy drinks to the consumers. Associating with restaurants helps us to reach our target audiences as some of these chains are very youth centric and are placed at crowded places such as metro stations, high streets, shopping complexes, etc. Supplying products to organised food servicing chains contributes about 10 to 12 per cent of revenue in overall company sales,” says Misra.

For restaurants, having an institutional tie-up serves as single source for several items and ingredients. It provides supply chain flexibility, scheduled delivery of products and consistency in quality and quantity of products at each and every outlet. If needed, the supplier and restaurant brand, both can work together for customising the product as per the consumers’ needs. Quality, consistency, credit rating, ability to do research and development and supply management – these are the qualities which a restaurant brand seeks in its supplier.

Uniformity is necessity

The food and beverage offerings at any restaurant need to be appealing enough to churn consistent and sustained profits – a golden rule of food servicing. But at the same time, once the brand is established, the more effort should be on maintaining uniformity of that particular product’s taste at each and every outlet. Speaking over the same, Nagrath says, “It is important to get the base sauces right, especially for Oriental cuisines for an authentic taste and flavour. Indian guests are very well travelled and extremely knowledgeable about their food. This makes them extremely demanding and they will not settle for anything that is below par. Therefore, sourcing the right packaged products, brands, shelf life, etc becomes extremely critical.” Alchemist Hospitality owns and manages six restaurant brands in India – The Second Sin, Spice Water Trail,  Zazen, Kink, Café Amor and Kebab Khan, each catering to a unique target group and each providing a unique culinary and lifestyle experience.

Using the same recipe and food ingredient brand at all outlets helps in maintaining high standards in food quality and ensures every serving has the consistency in taste and presentation. It helps everywhere. Whether you have a franchised outlet or a chain of outlets, your franchisor store operator do not have to choose their products or source a supplier for most part as arrangement would be already in place for them. The inconsistencies in product taste can result into decline of restaurant’s overall sale performance. Every ingredient and item needs to produce the products promoted in the menu board and is delivered directly to the each outlet. But problems can arise when the supply of some foods is short or inconsistent.

Challenges in maintaining uniformity

“As mentioned earlier, in FMCG the taste and the quality differs from brand to brand, therefore, the brand selection is key, along with shelf life, continuity of supply and a good distribution-supply chain network,” says Nagrath. A product by two different brands might be similar but is not the same, and therefore, it might alter the end product. In the food business, organic brands are something that are most sought after.

“Earlier, a lot of imported stuff used to come from Dubai, as the city was the largest consolidator, and from there distributers would pick up and that is how the network grew. Now a lot of suppliers import directly as the availability and usage has increased, not only in the restaurant space, but also in the domestic space. Cold storage, dry storage, FIFO (first in, first out), and a strict check on expiry dates are pertinent,” added Nagrath.

Way forward

Supply chain, logistics and warehousing are important factors in timely delivery of products or ingredients at a restaurant, which further helps in maintaining uniformity in taste and look of products served at the restaurant. Thus, better warehousing, proper transportation, ie, refrigerated trucks, cold store, door-to-door supply are something that is going to be the key for distribution and eventually the strongest in this segment, which can provide an end to end solution, and is going to come out on top. In the coming years, we will see a lot of global players joining hands with local partners and foray into a new methodology to supply chain and distribution management in India.

With the growth of the labour costs in India, the packaged ingredient sector will see a major boost. It is becoming a necessity and it is also about convenience. The ingredient product category will see a huge growth over the next three to five years, especially in the domestic sector, in tier II and III cities. “Though in the restaurant business, we still would like to hold on to organic and fresh produce for as long as possible,” concluded Nagrath.