The Food & Beverage Business
Helping Entrepreneurs Succeed....
The great appetite for consumption in India is best represented by the retail and hospitality sector. Developments that offer accommodation, food & beverage, shopping, entertainment, working spaces etc. under one roof, are referred to as Multi-use Integrated Retail Developments.
Initially present in tier 1 cities, these developments offered two or three business formats under their brand offer – typically malls and eateries, with or without a multiplex. With the escalating costs of real estate and shortage of large parcels of land in tier one cities, the focus has now shifted to tier two and tier three cities. They incorporate multiple forms of retail businesses such as hotels, restaurants, malls, multiplexes, business centres and even residential townships all under one roof, supported by consumers with an interestingly high disposable income from a promoter perspective.
Retail Business operators, land owners, property developers and sponsors collaborate to create these developments in a variety of ways. Often, “Special Purpose Vehicles” (SPVs) are formed to fulfil specific temporary objectives while isolating the financial risk of bankruptcy or taxation. The complexity of such arrangements requires to be well thought through and drafted with the help of financial experts.
From a consumer’s viewpoint such a space can be a treat. Accessing facilities for work, rest and play without moving out of the premises can be addictive. The MGM Grand Hotel at Las Vegas for instance has a mix of gaming, boarding, lodging and entertainment in its mix. Its core business is gaming! While each of the other aspects of the mix have their own independent patrons and bring in a substantial revenue in terms of cash, these are essentially auxiliary to the main business.
Many developers in India are promoting multi-use integrated retail development today, but very few of them have defined one business as their core business. Even fewer have defined the target market for each of their independent businesses. Instead, they have used the approach that certain socio-economic classes will be their target market, who will patronize all their business. Most promoters are looking at generic marketing communications for their entire development rather than individual businesses.
In the absence of a definitive core business around which other businesses revolve, it remains to be seen how the consumer will respond to this. While the promoters of these developments may envision the viability of this business holistically, each business vertical should ideally carry its own weight in terms of return on its apportioned investment. Thus if each vertical is not nurtured in regard to its respective target market and birth purpose, it might drag down the overall profitability of the development. Either way, consumers are in for a variety of options to choose from, to spend their time and money.
This concept of an integrated multi-use space may well be derived from H.G. Wells’ idea of an arcology, which he first wrote about in 1899. An arcology is an enormous self-contained habitat of extremely high human population density containing a variety of residential and commercial facilities. Recently, Dubai-based design firm Timelinks released plans for a gigantic eco-pyramid named the Ziggurat with similar characteristics.
Multi-use integrated retail development is certainly an interesting business model to watch out for. It leads the pack of businesses driving imminent retail growth and lifestyle changes of citizens in Indian non-metros... often spoken of as the Real India.