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Meatballs in an IKEA store: Why non-F&B businesses are betting on food | Business News

Eight million meatballs, four million baked samosas, dal makhani and biryani. That is the amount of food IKEA India’s restaurants have sold since the Swedish furniture retailer opened its first store in 2018. In line with IKEA’s business strategy globally, food and beverage (F&B) is an essential complementary addition to its core business of selling ready-to-assemble furniture in India too.

IKEA is not alone in generating a healthy F&B revenue stream, which is now an appetising non-core diversification for companies across various non-food sectors, including airlines, cinemas and theme park operators.

PVR Cinemas, the country’s largest multiplex operator, earned Rs 1,145 crore from the sale of F&B in its multiplexes in FY23, exceeding the entire operational revenue of Pizza Hut and Barbeque Nation, which was Rs 700 crore and Rs 1,074 crore respectively. During the same period, IndiGo raked in Rs 766 crore from in-flight sales, primarily from F&B sales.

Since F&B sales are the primary drivers of India’s consumption growth, especially after the post-Covid reopening of the economy, companies with core non-F&B businesses are looking to buttress their F&B verticals in the pursuit of better customer experience and improved profit margins.

ikea, food and beverage industry

PVR Cinemas, which merged with INOX Leisure in February this year, reported an increase in its F&B revenue share to 32 per cent in FY23 from 27.8 per cent in FY19. INOX’s F&B revenue share in FY22 was 27.3 per cent compared to PVR’s 31.4 per cent.

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Earlier this year, company officials had indicated that PVR plans to boost its F&B revenue share to 35 per cent of total operating revenue. For comparison, AMC Theatres, the largest chain of cinemas in North America, had an F&B revenue share of 33.6 per cent in 2022. PVR-INOX did not respond when asked for comments.

In absolute terms, PVR’s F&B revenue stood at Rs 1,145 crore in the latest fiscal year, a threefold increase from the year before when it was Rs 381 crore. “Growth in F&B spend per head was driven by increase in consumption at cinemas and commodity-linked price inflation,” the company notes in its latest annual report.

As recently as last week, PVR-INOX tied up with Costa Coffee to offer coffee and related beverages in its theatres. Currently, Costa Coffee operates 112 stores in India, with an operational revenue of Rs 102 crore. PVR also sells F&B products outside of theatres through its subsidiary Zea Maize Private Limited, which clocked in Rs 49 crore in FY23 by selling under its brand name, 4700BC.

Globally, IKEA generates F&B revenue worth over $2.5 billion. In each of its three India stores — the first of which opened in Hyderabad in 2018 — IKEA operates 1,000-seater restaurants with offerings starting from Rs 30.

Ankit Ghai, IKEA India’s Country Food Manager, said, “Our 1,000-seater restaurants, across our stores in Bangalore, Mumbai, and Hyderabad, are among the largest in the country. We have sold 8 million meatballs since our first store opening as well as 4 million baked samosas, dal makhani, and biryani.”

IndiGo’s revenue from in-flight sales, primarily F&B, exceeded Pizza Hut’s operating revenue by Rs 66 crore in FY23. Pizza Hut, a restaurant chain with over 500 outlets across India, clocked Rs 700 crore in the latest financial year against IndiGo’s F&B revenue of Rs 766 crore, which accounts for only 1.4 per cent of its total operating revenue of Rs 54,446 crore.

As IndiGo ran almost 6 lakh flights using 304 aircraft during FY23, the average F&B revenue generated per aircraft stands at Rs 2.5 crore. In comparison, average revenue generated per Pizza Hut outlet stands at Rs 1.4 crore. While IndiGo did not share segment-wise gross margins in its financial statement, Pizza Hut’s margins were reported at 74.4 per cent, amounting to a gross profit of Rs 520 crore. IndiGo did not respond when asked for comments.

Imagicaa World, one of India’s largest amusement parks, generated Rs 60 crore in F&B revenue in FY23, a share of 23.9 per cent of its total operating revenue. Over the last five fiscal years, Imagicaa’s F&B revenue share has averaged around 25 per cent, with a peak of 26.7 per cent in FY19.

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As per global standards, F&B revenue for theme parks accounts for 35 per cent of the total operating revenue, on a par with entry fee revenue share. In India, however, theme parks are heavily reliant on ticket sales, which on average account for 77 per cent of the total operating revenue. For instance, Wonderla, which has three amusement parks in Kochi, Hyderabad, and Bengaluru each, has an F&B revenue share of only 17.5 per cent whereas entry fees account for 71 per cent of the total operating revenue.

In its latest annual report, Imagicaa acknowledges that the “share of F&B, retailing and merchandise sales is low in India. However, this mix is changing and the revenue mix is expected to be aligned to international trend”. The report adds that “by providing guests additional and enhanced offerings at various price points, the Company can increase spending in its parks”.

India’s F&B market size is expected to double to over $600 billion by 2029 from the current size of almost $300 billion with a Compound annual growth rate (CAGR) of 11.05 per cent, as per an industry report.

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