November 02, 2007

The Onsite catering opportunity

The Outlook Business edition dated September 20th, 2007 had a coverage on the emerging Onsite catering opportunity and the experience of those already in the game. Some excerpts:

Says Vohra (Gurpreet Vohra, CEO of Tulip Caterers): "I serve 20,000 meals a day and the cost of each varies between Rs. 25 and Rs. 50. It is very important to check the price and quality of the raw materials each day. This business is all about high volumes and low margins.

Says Asitava Sen, Senior Vice President at Technopak Advisors, a global management consulting firm: "Onsite catering has now become an attractive business proposition. The draws are captive customers, young employees in the payroll, scope for up-gradation of traditional canteen facilities and better economies of scale."

Says Sunil Nayak, Radhakrishna Hospitality Services: "It makes sense to invest in onsite business. We make an initial investment of between Rs. 60 Lakh to Rs. 1 Crore and serve a meal for Rs. 50-Rs. 75. We have recovered the initial investment costs in under 18 months." The onsite model works better for caterers in contrast to its offshore variant where high cost of logistics becomes a hampering factor. Storage of freshly cooked food is also a deterrent. Usually in a catering contract, water, electricity and garbage clearance are taken care of by the company. The meal is subsidised.

Reveals Manit Gokhale, Proprietor of Lambodar Caterers, a Mumbai-based company that serves companies like VSNL, Crompton Greaves and Goldman Sachs: "This business works on high volume. Let's say, if I serve 5000 meals at a site on a day and the average cost is Rs. 50 then I get Rs. 2,50,000. However, if I do 100 meals, the investment costs in manpower and food is not recovered. So, in the first case, one can earn 15-20% margin."

Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of information and networking services to the Private Equity and Venture Capital ecosystem in India. View sample issues of Venture Intelligence India newsletters and reports.