My first exposure to Haldiram was in 1996 when they applied to UP State Financial Corpn for a Rs 3 crore loan to set up a factory in Noida. It was considered a very risky proposition and I was part of the committee constituted by iit alumnus Dr Trivedi who was then the CMD of UPFC. The other high risk project was by a startup called Motherson which was promoted by Chand Sehgal and his mother. They wanted to make cable harnesses for cars. The third fascinatingly was a crypto company. It is now 30 years. All three were funded. And UPFC went insolvent. Not because of these three – all three repaid fully – but because of other reasons – more political than financial.
The third company no one has heard of and is worth several times the other two combined. Motherson is the worlds largest maker of automotive cables. And Haldiram is still making Bhujiya. Success is very relative. And claims can be very misleading.
I don’t think Haldirams restaurant business breaks even as a standalone unit. In fact I would be surprised if it doesn’t lose at least Rs 100 crores pa, if not 250. McDonald on the other hand claims to make money – a claim I doubt seriously.
Starbucks makes a lot of money from the losses of Tata Starbucks. It is a search for a bigger fool which Starbucks found in Tatas or McDonald found in Vikram Bakshi.
The only people who make money in restaurants are bars and gourmet restaurants. For the rest, they just pay rent. If a location takes off, the landlord takes away most of the profit. We have 82 coffee chains in India with more than rs 100 crores invested by each. It adds to coffee drinking but what is being sold is a hangout venue rather than coffee.
Differentiation is hard. Narratives are made up. The global players have lots of money to lose. What is however real is that our youth save less and spend more – adding to surging toplines.
Now the market has four quick serve formats. Take coffee as an example – you have nespresso and sleepy owl pouches for home use, micro format retail like ab coffee, keventor or marcels, regular coffee shop format like the Starbucks clones and then the one shop wonders like Dewan in delhi. What is common to all four is that they don’t make any money. And make a lot of profits for landlords.
But back to Haldiram. Their main business is selling small packs of Bhuiya. Kids are addicted to them. They are unhealthy. The packing causes pollution and fills landfills. But they are very profitable. They go with drinks and it is energy on the go. Haldiram probably sells an additional Rs 2,000 crores because of visibility created by the restaurant business which lose money. Some of the loss is made up by sales like mithai bulk orders.
But for the rest, it is squeezing blood out of rock.
In the long term and at some scale – the spreadsheeet says you will make some money and a lot of valuation. Cafe coffee day promoter killed himself because he couldn’t.
In the end – most die before they make money.
