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Serving up a storm

Nandini Lakshman

It is 1.00 p.m. at the Hyundai Motor factory in Irrungatukottai near Chennai. The place is abuzz with activity as managers and workers troop into the cafeteria for lunch.

With clockwork efficiency, meals are dished out between shifts, day and night. It isn’t gourmet fare, but the meals are functional. The cafeteria cooks up 3,500 meals a day, seven days a week.

So what’s common between the Hyundai cafeteria, the Shipping Corporation of India, McDonald’s, ICICI and a clutch of offshore oil rigs and ships? And don’t forget a couple of swank food courts at software parks, schools, hospitals and shopping malls? The answer is the Radkhakrishna Group, which this year will cook up an astounding 14 million meals in all corners of the country.

When it comes to food there’s hardly anything that the Radhakrishna Group hasn’t served up. It has 5,200 people on its rolls and it does the catering at 260 sites in 18 Indian states; it distributes and transports food for customers like McDonald’s; it has run the gauntlet in war zones and served up food for American troops in Bosnia.

Last week it opened Desi Deli, a swank cafeteria at Bombay Central station. What’s more, there are plans for more outlets at airports and on highways.

This is a company that has gorged itself on growth. The Rs 200-crore group is already reckoned to be one of the world’s largest food services companies. But it has gigantic growth plans.

By mid-2003, it will enter the food infrastructure game with a state-of-the art storage and distribution facility near Mumbai, the first in the country to support independent retailers.

That will be only the first step in a new direction. Over the next nine years Raju Shete, 41, the go-getting chairman and managing director plans to invest Rs 300 crore on 11 storage plants across the country.

Shete reckons that the Radhakrishna Group’s turnover will, by then, soar to about Rs 4,000 crore. At that point, the group will make another big jump into food exports.

The group is also moving in other directions. A year ago, it set up Unisol, a facilities management company. Unisol will perform tasks like housekeeping, maintenance, gardening and landscaping. The idea is to be a one-stop shop for customers.

This isn’t a rags to riches story but one of sheer grit. The Radhakrishna Group was set up by Raju Shete’s father back in 1966 and it started life as a marine caterer and ship chandler (they equip vessels with everything from a matchbox to an airconditioner).

From there it moved into the oil exploration business supplying food to rigs and the like. Now the company is into almost every aspect of the food business. Today, it is the only organised player in healthcare (hospitals), education (schools), business and industry, vending machines and industrial canteens.

So is the group largely a mass-based caterer? “No, we are fast becoming an integrated farm to plate food company, all set to change the way food is sold in the country,” says Shete sitting in a plush sea-facing apartment in suburban Mumbai.

Today, the group’s flagship is the food service company Radhakrishna Hospitality Services, an equal partnership joint venture for India with the UK-headquartered Compass, the world’s largest food service group. It accounts for 55 per cent of the group’s turnover and 60 per cent of profitability.

RKHS’ cash cows are the oil and maritime and business sectors, which together contribute 50 per cent to the topline. While margins in the first two range from 8 per cent to 10 per cent, the other businesses yield about 5 per cent. Says Sajjid Khan, CEO, RKHS: “We are quite a basket of companies more or less focused on food service.”

One arm of the group that has expanded swiftly is Radkhakrishna Foodland, which is in the distribution, logistics and food retail business. Most importantly, RFL is the exclusive distribution partner for McDonald’s, handling the movement and storage of its food and store supplies from source to point of sale.

It is also setting up the new nine-acre distribution facility at Kalamboli, the starting point of the Mumbai-Pune expressway. According to Sukesh Lal, financial head of RFL, 15 per cent of its business comes from RKHS.

Another joint venture is with French hospitality group Accor SA for the coupon business. These are largely lunch and laundry coupons that companies give their employees. On a personal level, Shete, whose dream was to be a seafarer, entered into a joint venture with Norwegian company Profafe for providing technical and mechanical support to ships. “This company is more of a hobby,” says Shete.

Shete made an early start in business. At 11, he was already getting up at 4.30 am to work part time with his father, before leaving for school at 7.30 am. They had the contract for the entire SCI fleet (about 40 ships) at Bombay port.

By the time he was 12, he had his first business card, and convinced his father to send him on a friend’s cargo ship for a three-month Bombay-Japan turnaround voyage. “This gave me an insight into what exactly happens at every port, what are the issues on board, how food was critical as that was the only thing to look forward to,” remembers Shete.

He abandoned his studies and took over the business, which was by then deep in debt at 17, when his father died. He had a single-minded approach to business and sent off unsolicited applications to foreign companies to represent ship chandlers in India.

“There was no other way to do it. Maybe the knowledge was not there, but I was ready to try. It was more to build credibility and also the fact that the early bird catches the worm,” he says.

In the bargain, he also cleared cars for clients, cleaned offices, became a real estate agent and doubled up as an interior decorator. “I wanted to make money and wanted people to tell me what I didn’t know so that I could learn,” says Shete.

Until the ‘90s, RKHS focused on just a handful of sectors. But with growing ambitions, it tied up with the Accor group which subsequently sold its food service business to another British company Compass.

Together they went catering worldwide, even serving troops in Bosnia and Rwanda under extremely hostile conditions. RKHS exited the global arena in 1999 to concentrate on the home market.

By then it had sealed a distribution contract with McDonald’s, liaising with its 30 suppliers. A year ago, RFL became the sole distributor and transporter for McDonald’s. “In a sector where margins are constantly under pressure, Raju has evolved strategies to keep costs low. That’s because he has learned from our international strategy which he has applied to us and others,” says Amit Jatia, managing director of Hardcastle Restaurants, the main franchisee for McDonald’s India.

In a way, the group’s foray into the distribution and logistics business is closely linked to McDonald’s. In fact, going by the initial experience of paying off his father’s debt, Shete has been obsessed with systems and process. Dealing with McDonald’s only enhanced that obsession. “Everything that will contribute to anything going wrong has to be within your control,” says Shete.

RFL has been investing in hi-tech multi-temperature trucks to transport its wares. There are plans to increase the current tally from 23 to 65 in the next two years. This is likely to come in handy when the Kalamboli facility goes on stream next year.

Is RFL’s current growth linked to McDonald’s in India? “We have supported McDonald’s and met their expectations. Anything else is fiction,” says RFL’s Sukesh Lal. Adds H Shriram, vice president, distribution and logistics, RKFL: “Our growth is not linked to McDonald’s.”

The group’s profits are at around Rs 10 crore. Over the next few years, it will have to cough up upwards of Rs 500 crore to fund its ambitious expansion plans. Shete says that it will be through internals and a personal cash infusion. For now, he holds 50 per cent in RKHS and the whole of RKFL. So is there an IPO in the offing?

“May be in the next five years, although I would hate to do it,” says Shete. Until then, he will continue to take his annual cruise holidays. For that’s the sector he is eyeing now.

Feeding the peacekeepers

It wasn’t exactly fusion cuisine. But it was a meeting of east and west in another way. In the ‘90s, Radhakrishna Hospitality Services wanted to expand outside India. At about the same time, French hospitality group Accor SA was searching for an Indian partner.

Together, the two companies set up a joint venture, Consolidated Services Ltd. The new company reached tables around the world. For RKHS, it was a steep learning curve in unfamiliar, and often hostile conditions. Take the time when it won a contract to supply food to 700 United Nations troops based in Kigali, Rwanda.

CSL already had developed a track record because it had worked with Brown & Root Inc, an American design engineering construction group, on their offshore barges and shore construction projects.

The operational hub was Dubai. All the material, including the pre-made food, was airlifted and then taken by land through war zones to the camps. “UN vehicles were at our disposal, but it was quite a logistical nightmare in the midst of the hostile conditions existing there,” says Shete.

Transportation was a problem, but the actual food was another nightmare. “There was the challenge of dealing with a multinational force from different countries with different cuisine requirements and habits,” adds Shete.

But the foray into a war zone was useful experience. A little later, Brown & Root won a contract to feed the United States contingent deployed as part of the International Peace Keeping force in Bosnia.

Brown invited CSL to submit a proposal for feeding the 20,000 US/Nato troops in Bosnia. CSL had only one week to submit the proposal and if it bagged it, just two weeks to implement the operations. The contract also stipulated that only Nato personnel had to be used.

By then, Accor had sold its food services business to the UK-based Compass Group. Compass was hesitant to take up the war ravaged contract, even as RKHS threatened to go it alone. “Seeing our enthusiasm, they relented,” says Shete.

Land Rovers, 18 of them, were airfreighted from London “for our own movement”. And material was moved through multimodal transport under severe climatic conditions. About 250 to 300 locals from Croatia and Romania, including chefs and volunteers, were trained.

How did they zero in on the people? “We spread the word around. It was recruitment on the ground,” says Shete.

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