India Food Services Sector Update

India Food Services Update January 2014 Evolving Times “In 2011, India Food services Story, and other select majors we saw some good published by Maple Capital Advisors had growth momentum. However, regulatory forecasted growth in private equity aspects as well as rising real estate costs are investments, inbound partnerships and still challenges in the industry. franchising activity in the food service sector The sector, however, is one of the fastest as well as a need for improvement in growing in the country on the back of rapid regulatory infrastructure. With over 30 transformation from unorganized to private equity investments over last 3 years organized” and strategic entry by Starbucks Pankaj Karna, Managing Director, Maple Capital Advisors Food Services Sector Today Emerging Trends & Challenges Private Equity & M&A Page 2 Page 3 Page 4 For the exclusive use of IMAGES group th until January 30 2014 Maple Capital Advisors 2 India Food Services Sector Update US$ Bn Food Services Sector Today Market Size Age Profile -‐ People Dining Out Food Service Sector in Increasing regulatory Above 40 years 18 to 20 years 11% 18% India, a USD n 50 billio pressure is also driving Industry growing at 16% change albeit creating p.a, fast transforming from challenges as well. The 31 to 40 years 31% 21 to 30 years unorganized (70%) to FSSAI registration drive is a 40% organized supported by step in the right direction Eating out Demographics increased investments from but execution might be an private equity and strategic issue as less than 10% of players in the market food business operators spanning from farm to the have signed up for it. table. Licensing complexity The size and especially for full service transformation is restaurants and bars is something that needs Format Share substantially iven dr by the youth (90% of whom are immediate attention. Supply Chain transforming below 40 years). The sector is supported fast Consumption is driven by by a 100% Foreign Direct The emergence of scale players convenience, aspiration, Investment (FDI) which has in logistics and y suppl chain has cultural shifts, changing been helped build supply enabled growth of players in retail landscape and chain and is driving quality the sector. Baker’s Circle, unparalleled access to and increased organized Cremica, Holyland Marketing are a few taking the lead. information backed by play in the sector. some innovative marketing There is significant private and product revitalization. equity interest in the space as well as strategic interest from Organized market has grown despite economic slowdown international players. The Organised market Tier2/Tier 3 towns Logistics and cold chain players today stands at US$ 13 bn and where rentals are still have also evolved, Snowman, is expected to grow to US$ 28 sublime will be important Radhakrishna Foodland, Gati bn (at a CAGR of 16%). There markets, both from growth kauser, Kelvin and Crystal are making investments and has been a significant growth in and profitability perspective growing to service the sector QSR, pubs/bars and casual given increasing awareness demands. dining. and consumer aspiration in The overall economic these markets. slowdown in FY 14 has impacted the sector with single digit same store growths even as new stores, drove overall growth. Maple Capital Advisors 3 India Food Services Sector Update F&B Brands No. of Facebook Avg. No. of No. of twitter fans interactions followers Pizza Hut 1,343,168 10,552 3,630 CafŽ Coffee 4,024,924 25,975 14,875 Day DominoÕs 5,804,901 199,679 26,217 Cocoberry 2,203,750 3,133 686 KFC 5,908,185 137,468 5,375 Hard Rock 119,623* n.a. 13,234 CafŽ McDonalds 1,135,831 10,038 n.a. Barista 244,120 1,178 1,608 Lavazza * Combined total of all stores Emerging Trends and Challenges Social Media, Mobile connectivity and Changing food service concepts from focused marketing are changing the way traditional institutional catering to the sector is reaching its customers. organized food service delivery and retail Companies like Domino’s use OLO by food service players at institutions (online ordering) applications for home (office, education and hospitals) are delivery and ustomers c are getting more gaining traction. accustomed to third party enablers like The sector continues to grapple with Zomato (directory and content services) high rentals and regulatory challenges -‐ (12 and Mydala and Groupon (discount and 15 licenses for a full service restaurant that deal sites). exists from state to state) are hampering The emergence of social media and fan efficient and quick rollouts. followings on facebook and twitter is Rising food costs and overall slowdown strong proof of st this. Mo chains and stand has impacted store economics in many alone restaurants are now thinking or cases store closures by chains. planning strategies on social media and Overall, it has been a year that has mobile to monetize customers and continued and reaffirmed sector enhance store economics. opportunity belief while enhancing focus As the industry matures and business on osts, c service, prudent expansion and environment improves, India continues to customer focus. attract global chains. Burger King, Taco Bell, Starbucks are the most recent to enter the country and multiple casual dining/pubs/bar majors are enhancing rollouts across the country. Maple Capital Advisors 4 India Food Services Sector Update Private Equity in the Food Service Sector The Food Service Private Equity Some of the key Sector has seen strong deal investors have invested pointers that Private equity activity in the last 3 years, across all stages eg. growth today are seeking in Food with over 30 investments capital by ICICI in Devyani Service include; totaling USD 250 mn Foods and Arisaig Partners 1. Scalable model invested in early and in Westlife Development. 2. Casual and QSR growth stage companies. segments. Prominent on early 3. Proven store In the ame s period stage/venture were Sequoia economics in atleast the sector saw few exits, in Faaso’s, Helion in Spring a few locations. given most companies are Leaf Retail(Mast Kalandar) 4. Knowledgeable in the growth phase. Exit by and Mayfield in BTB management team TVS Capital in Om Pizza, Marketing(The Beer Café). with execution track Navis Capital’s exit from record. Nirulas to A2Z Excursion The sector also saw 5. Early adoption on Group and Sequoia’s exit consolidators and hands on organized supply from Amalgamated Bean managers like Everstone in chain and Coffee Trading Co were the Cuisine Asia having Blue operations/sales key exits in the 3 year Foods and now Burger King management. period. Specialty Foods was (in the form of a Joint the only IPO, where the Venture) raise investments initial PE remain invested. through Verlinvest . The number of scale Apart from Private players (USD 100 mn or equity the sector has also more in sales) are still in low seen family offices active as double digits, prominent in case of Lite Bite Foods being Café Coffee Day, and its portfolio of brands Jubilant Foods Hardcastle eg. Punjab Grill, Subway, Restaurants and Devyani SFI, Zambar, Fresco, Baker Foods. Street etc.. The next three years Overall, despite are thus likely to see a economic slowdown the spectrum of players sector has seen good targeting listing or investor interest, at all subsequent rounds of PE stages of investment given investing. the confidence on demand side and sector shift from unorganized to organised. Maple Capital Advisors 5 India Food Services Sector Update Private Equity Deals in the Food service Sector -‐ 2011 2013 Date Target Investor Deal Value ($ mn) Percentage Sought (%) 16-‐Dec-‐13 Speciality Restaurants SAIF Partners 4.02 4.28 2-‐Sep-‐13 Moshe's Fine Foods New Silk Route PE Asia 1.43 N/A 15-‐May-‐13 BTB Marketing (Beer Café) Mayfield India 4.5 35% 15-‐Apr-‐13 Barbeque-‐Nation Hospitality CX Advisors 20.11 29.75 6-‐Feb-‐13 Dana Choga Foods And Hospitality SAIF Advisors N/A N/A Vrinda Foods & Hospitality (Dana 16-‐Jan-‐13 SAIF Advisors 1.84 N/A Choga's Kitchen) 3-‐Dec-‐12 Spring Leaf Retail (Mast Kalandar) Footprint Ventures, Helion Venture Fund II 6 32.8 JSM Corp (Hard Rock Café, Shiro, 12-‐Oct-‐12 PI Opportunities Fund I 25 N/A Pitstop) 11-‐Oct-‐12 Coffee Day Resorts Brand Capital 8.5 1.08 28-‐Sep-‐12 Olive Bar and Kitchen Aditya Birla Private Equity 7.54 33.34 18-‐Sep-‐12 Poncho Indian Angel Network Services N/A N/A 4-‐Aug-‐12 TMA Hospitality (Ammi's Biryani) SAIF Advisors 7.2 N/A 10-‐Jul-‐12 Om Pizzas and Eats TVS Shriram Growth N/A N/A 25-‐Apr-‐12 Adiga's Fast Food New Silk Route N/A N/A 1-‐Mar-‐12 Vasudev Adigas Fast Food New Silk Route Advisors 38 51 8-‐Feb-‐12 Cuisine Asia Verlinvest SA N/A 20 20-‐Dec-‐11 J.S. Hospitality Services (Pind Balluchi) Everstone Capital 20 45 12-‐Oct-‐11 Faaso's Food Services Sequoia Capital 2.71 27.1 30-‐Sep-‐11 Spring Leaf Retail (Mast Kalandar) Footprint Ventures, Helion Venture Fund II 3.2 29.32 29-‐Aug-‐11 Goli Vada Pav Ventureast Proactive 4.7 33.96 Impresario (Mocha, Smoke Grill, Beacon India Private Equity Fund, Mirah 27-‐Jul-‐11 10.77 28.71 Prithvi Café, Smoke House Deli) Hospitality and Food Solutions Pvt. Ltd. 2-‐Jun-‐11 Brand Calculus Franchising (India) Helion Venture 0.33 6.6 12-‐May-‐11 Devyani International India Advantage Fund 55.7 10 Westpoint Leisure Parks McDonald’s Bay Capital, Indus Hospitality Fund, Tree Line 31-‐Mar-‐11 N/A 22 (South & West) Asia Master Fund Indian Cookery (The Yellow Chili, 15-‐Feb-‐11 TVS Shriram Group N/A N/A Khazana and Indi) 23-‐Feb-‐11 Cocoberry Ajay Relan 1 8 Maple Capital Advisors 6 India Food Services Sector Update M&A in the Food service Sector 2011-‐2013 The sector has seen select M&A Most international strategic either where PE funds are exiting or players while quite keen on the India consolidating.

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