Building supply chain is tough in India: Sameer Sain

Interview with Co-founder and Managing Partner, Everstone Capital

Everstone Capital, the India-focused private equity firm, has a wide exposure to the food and beverages sector, with investments in Capital Foods, Blue Foods, F&B Asia Pte Ltd, etc. The firm, with assets under management of $2 billion, has joined hands with Burger King for its entry into India. Sameer Sain, co-founder and managing partner, Everstone Capital, in an interview with Reghu Balakrishnan, talks about the rationale behind the company’s investments and its strategies. Excerpts:

Many global food brands have already established themselves here. How do you differentiate Burger King’s entry?

Burger King is the second-largest fast-food hamburger restaurant brands in the world and one of the most prominent and scalable quick-service restaurant brands not yet present in India, despite strong presence in most Asia-Pacific regions. Also, Burger King has a very distinct approach to its cooking style—it focuses more on freshness and uses a healthier and tastier concept of char grilling. The flavour brought out through this method of cooking has been the history and legacy of the very popular tandoor food in India. Burger King has been a pioneer outside India, through its strategic initiatives around menu development and catering to local palettes with understanding of consumer tastes and preferences.

The food and beverages segment is among the most attractive sectors for Everstone. What do you think of the potential in the sector through the next couple of years?

In absolute terms, food consumption accounts for the most in the composition of Indian private consumption expenditure—more than 60 per cent of the retail spending in India. Also, India has a large and growing middle class, with increasing disposable income spent on eating out. Increasing urbanisation is driving enhanced consumer awareness of, and demand for western brands and products. Specifically, the preference for international food is being driven by changing lifestyles and exposure to global trends through media and travel. We think we are just at the beginning of what will be a large and organised food market in India. We’ve seen early successes in the fast-food market and quick-service restaurant space. However, few companies have been able to achieve a large scale.

What are the challenges?

I see two-three major challenges in the food sector. Primarily, building the appropriate supply chain is a very difficult task in India. There is lack of good real estate, and though we see some modern real estate, most of it is high-street and unorganised and the set of infrastructure required for this business is not easy to come by. We do have menu challenges, in terms of catering to many different tastes and preferences, due to the sheer cultural divergence in India.

What are the exit options from food and beverage investments? What are the strategic sell-outs?

At this stage, it is too early to discuss exits. We are solely focused on building a long-term and profitable business. Historically, such businesses have seen success in capital markets.