Hotels, catering segment now a big deal for cash & carry

Hotels, restaurants, and catering or as it is popularly known, HoReCa, has started to become a serious growth driver for the cash-and-carry companies operating in India like Walmart, Metro Cash & Carry and LOTS Wholesale Solutions, on the back of rising disposable income and the pace of eating out picking up.

Experts believe stricter norms and food regulations are also one of the reasons why HoReCa businesses are now moving towards the cash-and-carry players.

While Walmart India and Metro Cash & Carry said HoReCa is a big focus area for them, LOTS Wholesale Solutions said the segment is growing 10% month-on-month.

"Currently, HoReCa contributes significantly to our business, and we believe that this segment will grow exponentially in the coming years. We are committed to our long-term sustainable and profitable business operations in India, and are making every effort to steadily improve our performance and the experience for our customers across our 27 wholesale stores in the country," said Arvind Mediratta, managing director and chief executive officer of Metro Cash & Carry India.

According to Mediratta, HoRe-Ca is a big focus area for the company. "Our estimate states that there are around 13 million Ho-ReCa businesses in the country; with this enormous potential and evolving need of the customers, there is a lot of opportunity and ample room for more players and formats to co-exist and grow in this segment," the top Metro executive said.

Walmart India's top boss acknowledges the growing importance of this segment for the company.

"HoReCa is a very important member segment for us at Walmart India cash-and-carry business. Our business with this segment is growing rapidly. We have deep knowledge of the markand a good understanding of the key drivers of growth for HoRe-Ca. We have been serving them for over a decade. We are in a unique position to fulfil their demand. This segment expects consistent quality, availability and on-time delivery. Our unique value proposition for our Ho-ReCa members centers around express delivery and customised solutions as per their needs. We have dedicated teams which understand their requirements and serve them accordingly," said Krish Iyer, president and CEO of Walmart India.

The latest entrant in the cashand-carry space, LOTS Wholesale Solutions has been seeing a healthy growth rate in the HoReCa segment as well.

"Being global experts in the food services industry, we understand the needs and demands of our Horeca customers. We have already acquired a large share of customers from the market and have witnessed strong growth from this segment. Currently, we are growing at a rate of 10% month on month in India," said Tanit Chearavanont, managing director of LOTS Wholesale Solutions.

Kirana/Resellers still continue to dominate, when it comes to their contribution, to the overall cash & carry business in India. However, the focus is gradually shifting to HoReCa as a business segment, suggests Harsha Razdan, Partner and Head, Consumer Markets at KPMG in India.

"This could be an alternate channel to expand, considering the sharp pricing that comes with Kiranas. Also if we look at Kiranas, the cash and carry players do end up competing with the large distributors of FMCG companies. Thus, working with the HoReCa segment could help avoid channel conflict issues, as this segment is the ultimate consumer as compared to the kiranas who are resellers," said Razdan.

HoReCa is $55 billion to $65 billion food purchase market in India, starting from corner street kiosks to upmarket premium star category restaurants, said Ankur Pahwa, Partner and National Leader- Ecommerce and Consumer Internet at EY India. According to Pahwa, currently 3/4th of the HoReCa market is focussed in Tier I/II cities and this provides significant opportunity for the cash and carry players as the volumes are higher and access is faster as compared to the kiranas.

Stricter norms and food regulations are also one of the reasons why HoReCa businesses are now moving towards the cash and carry players.

"While certainly a large part of Horeca segment is price conscious, however institutional, QSR, premium and hotels segment largely prefer the cash and carry players as they offer consistent quality, specialized assortment, single basket for ease of purchase. Regulations like FSSAI and HACCP are becoming more stricter and hence we should see a greater shift to the organized segment for purchases including from cash and carry players given the compliance requirements.

The HORECA segment will also help Cash and carry players drive higher margins with a focus on categories like frozen, private labels, nonfood categories. Cash and Carry players can achieve higher growth and profitability in Horeca segment by offering greater assortments, door to door delivery, mix of private labels and bulk packs but credit that is available from the traditional channels to HORECA will need to be addressed effectively," said Pahwa.

Understanding the importance and opportunities that HoReCa segment offers, the cash and carry companies are also deploying new strategies to grow the business.

"Players in this space are also adopting a variety of approaches like building relationships with top chefs at big hotels and providing them the required assortments to drive sales. At the same time, some cash and carry players are adopting aggressive strategies to partner with various start-up vendors to grow their assortment, primarily because startups are more amenable to introduce new items as compared to big food companies," said Razdan.

For Metro Cash and Carry, HoReCa also provides them with an opportunity to offer their own brands.

"Hotels, restaurants and cafés do fixed-rate contracts to regulate their food costs and that becomes easier to draw up with our own brands product range. HoReCa customers get same quality food at almost half the price of other brands, which eventually brings down the food cost dramatically. When it comes to papad, pickles, ketchups, vinegar, hakka noodles, or juices; HoReCa customers are not looking at brands and find our own brand assortment great value for money," said Mediratta.

LOTS Wholesale Solutions own brands Basis Plus and PlusMo has also seen great traction which has enabled it to create a brand connect with its customers.

The performance of the foodservice industry is forecast to accelerate, with an anticipated compound annual growth rate of 10% for the five-year period between 2017 and 2022. This is expected to drive the industry to a value of Rs 5,52,000 crore by the end of 2022, said a FICCI-PwC report.

Source:-https://retail.economictimes.indiatimes.com/news/food-entertainment/grocery/hotels-catering-segment-now-a-big-deal-for-cash-carry/69669805