The organized restaurant sector in India has witnessed a double-digit growth during the year owing to consumer upsurge in eating out and ordering. This is accompanied by the change in the profile of consumers dining out— they are getting younger and are from more diverse backgrounds. After battling the turbulence caused by policy changes with demonetization and the highway liquor ban, this sector is now experiencing growth. Moreover, a cut in GST from 18% to 5% has further given a boost to the markets in this segment.
In the context of the above case:
(a) Identify and explain the related dimensions of business environment being discussed above.
(b) Explain the terms 'opportunity' and 'threats' with the help of examples given in the above paragraph.
Answers
Answer:
After battling the turbulence caused by policy changes with demonetisation, the highway liquor ban and denial of input tax credit, our industry’s perseverance is paying off and we are seeing green shoots.
The organised restaurant sector has witnessed double-digit growth in the just-concluded quarter, which is owing to consumer upsurge in eating out and ordering in,” said Rahul Singh, president of the National Restaurant Association of India which represents over five thousand restaurant brands, and founder of beer chain The Beer Cafe.
In the past two years, the eatingout sector had been grappling with consumers cutting back on discretionary spending, the ban on liquor sales along highways and the introduction of GST. Last year in November, the government scrapped input tax credit, which accompanied the cut in GST to 5% from 18% that jacked up capital expenses and rentals by 15-18%, industry officials said.
However, with consumer sentiment improving, companies said they are hopeful of sustaining the growth momentum. Anjan Chatterjee, founder and managing director of Speciality Restaurants, the company which runs Mainland China and Oh! Calcutta restaurants, said: “The profile of consumers dining out is increasing — they are getting younger and are from more diverse backgrounds. That is helping top lines; bottom lines continue to be under pressure because of GST but it’s the new benchmark we have to adapt to.”
Westlife Development, which operates McDonald’s restaurants in West and South India, reported a more than six-fold jump in year-on-year net profit to Rs 7.9 crore for the quarter ended September 30. “It shows the consumer is looking for value and quality. We are running our stores to the best of our ability, following all regulations,”
CPRL grew 25% in same-store sales in the quarter. Jubilant FoodWorks’, which has exclusive operating rights of US brands Domino’s and Dunkin’ Donuts in India, too, reported same-store growth of 20.5%, and 60% increase in net profit at Rs 77.7 crore. “Worries on cost push driven by rising fuel, impact freight, delivery costs and competition for delivery manpower from food aggregators and e-commerce companies could keep the stock trading sideways,” said Rohit Chordia, a Kotak Securities analyst.
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Explanation:
a) economic environment
