Reliance Industries is trying to buy Subway, but why is India’s richest business tycoon now aiming for a restaurant chain?
Estimates say Subway’s set up in India, with around 600 restaurants, could be valued anywhere between Rs. 1,488-1,860 crores. Surely, in its big empire an added quick-service restaurant (QSR) would be loose change, right?
Subway will also fit into Reliance’s futuristic expansion meant for tomorrow’s India, where digital and retail are tipped to take center stage.
The fact that the Food and beverages (F&B) industry is a big one thus attracts attention. This is part of the trend of the great digital transformation of India. Every industry, every sector is getting digitized. The pandemic just accelerated it. Offline business, and F&B in particular, were previously left behind, but now it is undergoing rapid change.”
This is also why picking up an American sandwich maker, with its supposed claim of being “healthy” not to mention hygienic fits right in. Reliance with its money can actually make its own brand of the sandwich maker, just like he created Jio, but it is much easier to pick up a Western brand, considering the upwardly mobile aspirations of India’s restaurant-going crowd.
It is a valuable bargain as Subway going through a crisis of sorts globally due to dwindling sales and organizational restructuring, but the pandemic blow on the restaurant industry in India has also meant that the unorganized sector, primarily the standalone casual diners and neighbourhood eateries have all been worst affected. Some estimates say anywhere upward of 30 per cent of India’s restaurants may have shut down over the past 15-16 months. Subway works on the franchisee model in India, and not all of them may have a healthy bottom line after months of closure and restrictions.
Yet at the same time, the pandemic has proven to be a windfall for aggregators like Zomato. The Gurgaon food delivery unicorn’s IPO was a runaway success. Devyani International—perhaps India’s biggest restaurant operator which has brands like KFC, Pizza Hut, Costa Coffee, Vaango under its belt is next in line—is set to launch its IPO.
An Edelweiss Securities report says QSRs it will be the fastest-growing segment in the food scene in India in the next four years, with an annual growth rate of 23 per cent. Pre-covid, casual dining restaurants were the biggest category in India’s restaurant scene, with QSRs right below at nearly 20 per cent.
While the pandemic hit the restaurant industry hard, QSR chains were the first to recover trends. Organized QSR chains had the infrastructure and delivery services in place long before the COVID-19 crisis and aided them to swiftly adapt to government restrictions. So, despite dine-in services being impacted, QSR players were able to maintain growth and revenues doubling down on their delivery services,” the Edelweiss study noted.