The Hindu Business Line : Are food chains awaiting retail FDI to set up shop?

Several global food and beverage chains have delayed setting up shop in the country over the last 8-10 months, despite announcing detailed investment plans and operational blueprints earlier.

Whether it is Britain's largest coffee chain Costa Coffee, or the fast food chain Dixy Chicken, both companies appear to have delayed their entry into India. Even Papa John's, the third largest pizza company in the US, has kept its India plans close to its chest and does not plan to arrive here till 2006.

Take the case of Costa Coffee. Last October, Whitbread Plc had signed a franchise agreement with the Delhi-based R.K. Jaipuria Group for opening Costa Coffee outlets across the country. Whitbread had also announced plans to establish its first roastery outside Britain in India.

However, about seven months down the line, not a single Costa Coffee outlet has been opened.

Mr Nick Williams, Costa's Franchise and Commercial Director, told Business Line in February that, "The launch day of the first store has slipped slightly and we now aim to have our first stores open at the beginning of May. With regards to the investment, both Costa and the Jaipurias are committed to this and Costa plans to have its own production (roastery) facility open some time during 2006."

Meanwhile, a senior Jaipuria group official said that Costa Coffee's foray into India has been delayed due to stringent training requirements of the operating model, and that the chain is expected to open its first outlet in Delhi soon.

Another British company, Dixy Chicken, had announced last October that it plans to invest Rs 20 crore over two years in setting up 50 outlets across India but the first store is yet to be opened. Dixy had planned to forge a 51:49 joint venture with a master franchisee in India for the purpose. Despite several attempts, the Dixy Chicken's Managing Director, Mr Abid Mahmood, could not be reached for comments.

Last month, Papa John's announced its intention to set up shop in India. It said the first store will open somewhere in 2006 but did not divulge any other details. And though Papa John's has also roped in an Indian joint venture partner, the company appears to be waiting to see whether the Government goes ahead with its proclamation of partially opening up the retail sector to foreign direct investment. Said Mr Grant Miller, Managing Director (International), Papa John's, "If foreign direct investment is allowed, we can invest in upgrading our systems in India. As of now, there is no problem, but the FDI permission would mean better scale of operations."

Retail consultancy KSA Technopak's Mr Arvind Singhal does not rule out the possibility that these chains are waiting for the FDI fine print before deciding on their course of action. "Also, India is an extremely expensive market, so I am not surprised that these chains are weighing the possibilities before taking the plunge," he said.

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