In the last week of September, 20 senior managers of Speciality Restaurants Ltd, the company that runs well-known fine-dining restaurant chains Mainland China and Oh! Calcutta, were in London for an off-site. And for good reason. By the end of this financial year, Speciality Restaurants is all set to open its Bengali restaurant brand Oh! Calcutta at St James’s, a tony locality in central London that is also home to St James’ Court, a luxury property of the Taj Group, and Chutney Mary, London’s well-known Indian restaurant. Chatterjee and his team have met London mayor Boris Johnson who is said to be “very excited and enthusiastic” about the project.
The 20 executives also visited Scotch distilleries in Scotland. On their return from the day trip, they were treated to a home-cooked meal of Shorshe Macher Jhol (a curry of hilsa cooked in mustard paste), Bengali fish fry (fried hilsa), Bengali chicken curry and steamed rice—all of which was prepared by Anjan Chatterjee, the managing director of Speciality Restaurants.
“Unless you are a foodie yourself you will never understand the pain points of a foodie and understand how to feed people. Otherwise you can’t be in the food business,” says Chatterjee.
London is just one among many global cities that the 55-year-old is looking to expand his restaurant empire to. The company’s two-decade-old flagship brand Mainland China, which has 53 outlets across 23 cities in India, has already gone global with a restaurant each in Dhaka (Bangladesh) and Dar es Salaam (Tanzania) and another waiting in the wings at Doha (Qatar).
Many diners had been complaining, of late, that Mainland China had become highly commoditised in its offerings. For them, Chatterjee is rebranding select outlets into Asia Kitchen by Mainland China to offer them a pan-Asian cuisine menu. The move couldn’t have come at a more appropriate time. Dishes from the food-streets of Korea, Japan, Malaysia, Thailand, Singapore, and Hong Kong as well as a live kitchen format are being introduced to give the rebranded restaurants a distinctive look and feel.
Chatterjee is also keeping a hawk’s eye on international dining trends that are slowly catching up in India. “The other big thing that is happening is that from fine dining we are getting into all-day dining restaurant formats [like bistros, bars, and quick-service restaurants]. You can’t make a Mainland China an all-day format,” he says.
In the last 24 months, Speciality Restaurants has added a slew of casual all-day dining formats like Hoppipola, Mediterranean restaurant Café Mezzuna and a Chinese quick-service eatery Zoodles. Plans are also afoot to open more all-day dining formats where the beverage section (in particular alcohol) would take centrestage. One such concept cooking in the oven is a micro-brewery.
These developments at Speciality could be a reflection of the company’s jaded financial performance. An indicator of that is its share performance over the last three years. Speciality Restaurants went public in May 2012 with its shares getting oversubscribed by 2.5 times of the issue size. Its shares made a market debut at Rs 150 apiece, but as of November 13, 2015, it was trading at Rs 119.60, even though the company’s price-to-earnings ratio remains a healthy 57.31.
The man who is leading the shake-up at Speciality is Avik Chatterjee, the 23-year-old son of the company’s founder. His entry into the business is one of the biggest stories playing out in the company, perhaps bigger than Oh! Calcutta’s entry into London’s culinary scene.
On November 7, 2015, the company’s board approved the appointment of Avik—who has been working in the company since 2013 without any formal designation—as the head of innovation and new formats. “We were a Generation X company and now we are on our way to becoming a Generation Y company,” says Chatterjee, who credits Avik with disrupting his business model.
“I was always pushing for bars, but my dad was resistant at first. He used to tell me: ‘I’m a restaurateur and I’m going to make restaurants.’ I told him that the world is changing and people are also changing,” says Avik, who likes experimenting with global cuisines and has developed a flair for Japanese food. And thus the bar brand Hoppipola, catering to a young audience, was born in 2013 in the country’s pub capital of Bengaluru. The name Hoppipola, though, was Anjan’s choice and it means ‘jumping into puddles’ in Icelandic.
Avik’s initiation into the food business happened as a toddler when, he says, “my mom would carry me on her back on a baby carrier, while she would cook”. “She always reminds me of how we started and where we are now and that I should always be grateful for what we have,” says Avik, born and brought up in Mumbai. His sister (Harshita Chatterjee Deshpande), who is five years older, is a fashion designer in Pune. Besides running her own boutique Mairah, she also runs a small patisserie Pink Button, but is not involved in the operations of Speciality Restaurants.
Avik fondly recollects that it was his mother who would tell him that one day he would have to take over the leadership mantle. “She would say that my father has done so much and worked so hard and one day I would have to take it forward. But, my dad never really sat me down to tell me that this is what you need to do. His advice was: You choose what you want to do, it’s your life,” recalls Avik.
The foodie DNA runs in the Chatterjee family, right from Avik’s grandparents. “My father was one of the most hospitable people. He couldn’t cook very well, but he could sit with you and tell you what to have with what. My mother dished out the best Bengali mutton curry, which I miss even today,” says Chatterjee, who spent close to 18 years in Delhi, where his father was a research scientist at the Indian Council of Agricultural Research.
In the late ’70s, his father was transferred to Odisha from where Chatterjee completed an undergraduate degree in physiology. From there, he went to earn his catering degree from the Institute of Hotel Management, Kolkata, and in 1982 he joined the Taj Group as a management trainee in Mumbai. After working there for 18 months, he quit his job to do a marketing course in Mumbai and, in 1985, started his own advertising agency Situations Advertising and Marketing Services.
The agency continues to operate with Chatterjee as its managing director and boasts of clients such as Emami, Yardley, Tata Steel, Birla A1 (cement), among others. He doesn’t manage day-to-day operations, but still participates in client pitches.
Six years after setting up his advertising agency, in 1991, Chatterjee and his wife Suchhanda (now a whole time director and director-interior and design at Speciality Restaurants) started Only Fish in Mumbai’s Mahim area. He was the manager and she the chef at the 40x40 sq ft restaurant. In 1995, the brand was rechristened Oh! Calcutta, with a new restaurant at Tardeo and the rest, as they say, is history. As of March 2015 Oh! Calcutta has nine outlets across India.
Speciality Restaurants, however, is not Avik’s first entry into the restaurant business. In March 2012, with a funding of Rs 25 lakh from his father, Avik started an online midnight food delivery company Madbites. “From 12 am to 6 am we would deliver food. The menu included hot dogs, sandwiches, burgers, salads, and a few Indian items,” says Avik, who ran the business from a centralised kitchen in Powai.
To begin with, the startup dished out 50 orders per day, but by 2014 it folded up. “It was a midnight business, but we were paying rentals for the entire day… We couldn’t recover costs,” he explains.
His focus now is to identify and grow scalable restaurant formats that would insulate the company from external headwinds. And the diversification from fine-dining outlets to casual all-day ones is the key driver of this change.
Four to five years ago, there were not too many players in the casual all-day dining space except for quick service restaurant (QSR) chains such as McDonald’s and KFC. Today, many restaurant chains are targeting this space with multiple formats (bistros, bars, gastro pubs, etc) as diners are yearning for varied experiences.
“Restaurant brands that are housed in malls have already cashed in on this trend. I feel that he [Chatterjee] wants to target the middle-class audience who are more in number, but their spending potential is such that the average revenue per customer is lower,” says Bengaluru-based chef and restaurant consultant Nimish Bhatia.
In an all-day dining format, a restaurant leverages itself over the whole day unlike a fine-dining restaurant, where business is conducted during fixed lunch and dinner hours. “It’s all about revenue optimisation per cover [seat],” says Chatterjee. Besides, in the restaurant arena where the mortality rate is a high 50 percent, an all-day dining format helps a restaurateur overcome pricing challenges related to fixed costs.
Taposh Chakraborty, founder, Boutique Hospitality Consultants, says fine-dining restaurants are facing high input costs on one hand, and price resistance (from consumers) on the other. The high input costs, he says, are attributed to real estate costs accounting for 22 to 25 percent of revenue, raw material inflation being close to 20 percent, and manpower costs rising by about 12 percent year-on-year. “Their [Speciality Restaurants’] results are a reflection of high input costs and disproportionately lower pricing demand. Therefore, in the Indian context, their diversification into all-day dining formats is well justified,” says Chakraborty. For FY2015, Speciality Restaurants reported revenues of Rs 299.83 crore and a profit of Rs 9.45 crore, clocking a revenue growth of 14 percent and a decline in profit of 50 percent over the previous fiscal.
Besides, other than the flagship Mainland China brand, Speciality Restaurants has not been able to scale its other brand formats. As per the company’s latest annual report, of the 115 restaurants operational in India, Mainland China accounts for 53, Sweet Bengal (a confectionery chain only in Mumbai) has 18 outlets and Sigree, which serves cuisine from North and Western India, has 16 restaurants; Oh! Calcutta has nine outlets, as does Hoppipola. The remaining brands in the company’s portfolio of 15 are spread out in pockets across various metros.
But with the focus now shifting to all-day dining formats, scale is what father and son are talking about. For Zoodles, which competes in the QSR segment with the likes of McDonald’s, KFC and Domino’s Pizza, Anjan believes 100 restaurants are easily achievable. “We will be rolling out six additional Zoodles restaurants in Mumbai [from one currently] over the next six months. The growth of Zoodles will be 10 times faster than that of Mainland China,” he says.
Likewise, in the next two fiscals, he is planning 35 to 40 restaurants for Hoppipola, where an average bill value is Rs 550 to Rs 600 per customer. “In terms of revenue, Hoppipola has given more than what we expected. The break-even time period is very short. Even in a market like Mumbai that has higher rental costs, the Hoppipola outlet in Khar broke even in five months,” says Avik.
But, he is also looking beyond Hoppipola. “We are working on newer concepts such as micro-breweries, roof-top bars, and an Asian gastro pub,” he says. While he doesn’t divulge details, he adds that over the next five years the bar brands would account for about 30 percent of the company’s revenue, if not more.
Kanwaljit Singh, whose proprietary family office Fireside Ventures has invested in the food and beverage sector, believes Speciality Restaurants is on the right path. “I feel that going into all-day dining, causal dining, and QSR formats would offer a more repeatable and expandable business.”
But Singh also thinks that a “strong initiative” towards a delivery business model is critical, as some of the newer online food delivery models are proving. “The economic models are still not very clear. But, if you have a physical presence across multiple locations and if you could add a delivery model then you can sweat that asset even better,” he says.
It’s an idea the Chatterjees aren’t ruling out. The online food delivery space is on their minds, but they aren’t talking about their plans as yet. “The industry is seeing disruptions from the likes of mobile-based food apps and online food portals. I think it is very important for all of us to be alert and nimble-footed so that we are always ready for the next big leap,” says Chatterjee. That said, Mainland China and Asia Kitchen by Mainland China will continue to be the flagship brands of Speciality Restaurants, at least for now. And that shows in the promoters’ vision to revamp the brand. “In any restaurant business, the hardest thing is to keep up the consistency of food. Of course we can’t say that we have always maintained a 100 percent consistency level, but, wherever we can, our levels are higher than any other restaurant brand or chain in the market today,” says Avik.