The food route to healthy profits

It’s not easy making profits anywhere, let alone in an extremely competitive aviation market. So, you are bound to take notice when an F&B operator in the sector generated 33 per cent annual growth consistently for about seven years.

Travel Food Services (TFS), an airport food and beverage operator, began in 2009 as a business unit of K Hospitality to tap into the business that new airports opened. There has been no looking back since. “I believe that India’s airport retail story has unfolded only in the last seven or eight years. Retail represents a major addressable opportunity because more Indians are travelling, they are travelling more often and they have more money to spend,” Sunil Kapur, Promoter of TFS and its parent K Hospitality, told BusinessLine .

“We have seen dramatic growth in passenger numbers in India, with last year being around the 15 per cent mark, and recent numbers suggesting it will strengthen further. We are confident that through a mix of winning new business as well as improving efficiencies in the existing ones, there are opportunities to extend the annual growth to well beyond the passenger growth numbers,” Kapur added. The company, with revenue of over ₹150 crore in 2014-15 is profitable despite investing upwards of ₹30 crore on each of the new lounges it is building at airports including the one at Mumbai International Airport, which won the award for the World’s Best First Class Lounge recently.

In just seven years, TFS already contributes about 50 per cent of the revenues of its 44-year- old parent K Hospitality, which runs food chains including Copper Chimney, Bombay Blue and Irish House. TFS is experimenting with ideas to increase its same-store sales at the airports. For example, it recently replaced a sandwich counter at the Mumbai domestic terminal with one that offers vada pav and masala chai. “In Mumbai, we opened a vada pav store with tea in a kullar and sales went up by eight times at that counter from what used to be a sandwich counter,” Kapur said.

Indian travellers prefer hot food as against their European or American counterparts, making it important for the operator to get hot food at every location within the airport. The task however, is tough because passengers end up spending more time at the gates where hot food counters are not there. “To solve this problem, we’ve got our guys with iPads at the Mumbai airport, who take orders at the gates and deliver from various food outlets anywhere at the airport. Soon, we’ll start this facility at other airports as well,” Kapur said.

Though bids for F&B and retail operations of new airports are coming up, TFS has put on hold its plans to raise $40 million in equity. “At this point, we are highly profitable and therefore we have enough access to debt capital. We would rather focus on creating our brand value at the moment instead of raising equity at low valuations,” Kapur said. TFS started by focusing on private airports and got into the space by bidding for the Mumbai Airport in 2009. It has since bagged contracts for Delhi, Kolkata, Chennai, Mangalore and Muscat in Oman.

It is now stepping into retail with its first outlets opening at the Bengaluru airport. “Both retail and F&B have similar skillset requirements, which is helping us enter the retail space without much operational issues,” Kapur said. The company is now eyeing the smaller airports that are getting renovated or are building new terminals.

“In India, there are 130 airports. We will bid for all. We want to be seen as a mass market company and we should be able to cater to people from all walks of life. So we are completely open to bid for all models,” Kapur said.

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