Are Indian investors waking up to the power of the on-trade?
As the world begins to take notice of India’s bars, local investors are eyeing the financial prospects and entrepreneurs are stepping up.
That was a topic of discussion at a roundtable ahead of the second India Bartender Show (IBS), with speakers including the event’s co-founders, Vikram Achanta, Yangdup Lama and Minakshi Singh.
Arijit Bose, the founder of Bar Spirit Forward in Bangalore, which this year was named the best bar in India, was also in attendance.
“Post Covid, over the past four or five years, because the industry has been doing so well, investors are taking a chance,” said Bose.
As the industry comes of age, Bose thinks bartenders and bar owners are realising that investment is an option. “They’ve figured out they don’t need to be a single person owning a bar. You could work with investors, whether that’s a single investor, which I personally think is dangerous, or six investors, which everyone else might think is dangerous.”
Investor profiles are also changing. Rituparna Banerjee, co-founder of Kolkata’s Nutcase Etc, who has 15 years’ experience in the industry, believes hospitality was once treated as a vanity asset by high-net-worth individuals.
“You know, they wanted to have a restaurant or own a bar, but they were never looking at hospitality as a professional investment, where they really wanted to make money and see the venture take a step beyond,” she says.
However, today’s investors – especially now that there are options for smaller investors to pool their money together in a “very structured, professional manner” – are starting to look at value at a macro level. “They want to build brands with long life. That long-term investment vision has definitely come into the industry.”
Banerjee also agrees with Bose that having multiple investors seems a less risky strategy than going all in with one. ”It’s very important who you have as your partners. Like life partners, business partners are the most important relationships that we are going to have. That’s definitely something we all need to be more careful about.”
The majority of those investors are Indian, with Bose estimating the sector to have an 80:20 split in terms of local funding versus international. “For most of us, it’s simpler to process and work that way.”
He believes that over the past five or six years, the Indian government has made a concerted effort to keep investment “as clean as possible”. “Everything has to be accounted for. Business practices have become better, which allows for international investment.”
Boses adds that there is another category of ‘non-resident Indians’. “You can do business in both parts, and there’s a fair amount of that which exists here.”
Banerjee has a similar perspective, adding that even when non-resident Indians are getting involved, the preference is for them to invest from an Indian entity rather than an international post. “The paperwork and regulatory framework needed for international investment is so high that individual entrepreneurs prefer to work with local investors. As entrepreneurs, we have very little time to spend on admin and legal.”
Lama cautions that his businesses, along with Bose’s and Banerjee’s, are not necessarily the norm. “When you look at a bigger number of bars – let’s say India has 10,000 bars. Around 9,000 out of those 10,000 bars would [operate] on a split of 50:50,” he says, adding that most investment in the bar industry comes from “liquid money lying in people’s homes”.
He agrees, however, that the investment outlook is changing. “As we progress, it’s getting better. The people who want to get into the business of bars as investors, their understanding is getting better.”
This has created a more nuanced understanding of the costs of running an on-trade business. “It’s not about how much you spend on lighting, furniture or interiors. It’s about a holistic spend – that understanding is getting better,” Lama says.
“The whole idea of the bar business has evolved and become more mature, therefore the investor is looking at it through a different lens. In due course, you will see a good blend of investment from within and outside of India – absolutely.”
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