KT Srinivasa Raja, the managing director of Ananda Bhavan, is jetlagged this Tuesday morning in February. He landed the previous day after a 55-day whirlwind tour overseas, across three continents. His longest stint away from home. “For the first time in my life, I was away for New Year and missed Pongal sales at the outlets,” he says, bleary eyed.
What started as a trip for his daughter’s convocation in Sydney quickly turned into a lengthy business tour, with partners calling to check locations to expand Adyar Ananda Bhavan’s international footprint. After checking on the outlet that was getting ready in Sydney, the next stop was Singapore, to meet his existing partner, then the US and finally Toronto.
His is a household brand in the South, with more than 140 outlets in India and nine overseas. Growing up, for most of us, festivals such as Diwali, Vinayaka Chaturthi or Krishna Jayanthi meant darting in and out of the kitchen to nick the goodies that our mother or grandmother fried out of gigantic vats. Now, no festival is complete without a trip to Adyar Ananda Bhavan, to bring back murukku that crumbles easily, the evenly sweet adhirsam or the ghee-soaked Mysore pak. In fact, the crowds at the stores, during the run-up to these festivals, resemble those in the US during Black Friday sales with customers jostling each other to shop their list before stock runs out.
The business that was built over three decades by Srinivasa, his father KS Thirupathi Raja and brother KT Venkatesan posted revenue of Rs.8 billion in FY19. It began as a sweet shop in 1975 in Malleswaram, a locality that still retains the old Bengaluru spirit. Here, in the ’70s, eateries that remain popular even today were opening for business or upping their game. Into this bustle came Thirupathi, who is from an agricultural family, and this was a second attempt at being an entrepreneur.
His first was with Guru Sweets, in 1965 in his hometown of Rajapalayam in Tamil Nadu’s Madurai district. Though there is a textile industry here, it is primarily dependent on an agricultural economy. After one bad harvest season, customers came few and far between, and soon it was shutters down for the sweets business. To tide over the bad patch, the older Raja decided to move to Bengaluru, where his friend ran a nursery. But, he could not stop thinking about being his own boss one day and decided to have another go at entrepreneurship.
That’s how he came to open Srinivas Sweets in Malleswaram in the mid seventies. In 1977, his wife and children joined him, and Srinivasa and his brother dropped out of school to help at the shop. “We couldn’t afford to pay the fees,” remembers Srinivasa, who was in Class X when the shift happened. From then on, he says he learnt everything about running a business from his father, from production and marketing to managing employees. Srinivasa’s biggest regret has been not being able to complete his schooling, and therefore, he helps children from his hometown finish theirs.
This time, the business caught on. Soon Srinivasa’s father and brother opened another sweets-and-savouries joint called Shri Ananda Bhavan in Chennai’s Royapuram. The younger Raja stayed back in Malleswaram. A decade later, in 1988, he too moved to Chennai. By then, the sweet shop had moved to a tony suburb called Adyar, and it was now named Adyar Ananda Bhavan. Today, most of the brand’s outlets are located in Tamil Nadu and Karnataka, a few in Andhra Pradesh and one in New Delhi.
Their inflection point had come in 2000. That was the year they opened a quick-service restaurant (QSR) A2B in Puducherry (then Pondicherry). They had opened chaat-and-juice counters in their outlets to draw the younger crowd, and had begun to notice that eating out was becoming a big trend. Families were frequenting restaurants. For their QSR, Venkatesan put together a menu that had a bit of everything for everyone. Even today, he handles the production, research and development of new dishes, while Srinivasa handles business expansion. Breakfast at the first QSR was a regular South Indian affair, lunch was quick meals for the office-goers and dinner was more elaborate with Chinese, North Indian and continental cuisines.
“It instantly doubled footfall in our outlets,” recalls Srinivasa. At that time, they had about 25 outlets clocking Rs.50,000-70,000 per day per outlet, and that revenue doubled once the A2B restaurants were introduced. Now, the restaurants business and the sweets-and-savoury business contribute almost equally to the overall revenue. While they are available at 80,000 retail outlets, a bulk of the packaged foods is sold through their own restaurants.
Building a legacy
The third-generation in the family has also stepped in. Venkatesan’s son Vishnu Shankar started overseeing marketing right after college, while Srinivasa’s eldest daughter Pooja has been handling finance. His second daughter has just finished her course in food science and management, and she is expected to strengthen the brand’s R&D efforts. With young blood pumping into the business, the management believes that it is the right time to scale up aggressively.
Therefore, Srinivasa’s business trip across three continents. The plan is to open 200 outlets in the next four to five years!
Ankur Bisen, senior vice president, retail and consumer products, Technopak Advisors, says the growth opportunities are immense for a brand such as Adyar Ananda Bhavan. “These cuisines were earlier perceived to be regional, but because of migration, there are more consumers from these regions, especially in dense urban clusters. Also, the rise of takeaways in a convenient form, thanks to food tech companies, allows them to get introduced in the new markets they choose to enter,” he says.
It will be done by adding 10 to 12 outlets a year. (That is how many times a few people shop for clothes.) India will get eight to 10 outlets in the coming six to nine months, and the brand has Gujarat and Maharashtra on its radar. Besides its outlets in Singapore, Malaysia and the US, the chain is planning three more in the US, and one each in Sydney, Toronto and Nairobi. While the domestic joints are managed and operated by Adyar Ananda Bhavan, the ones abroad are run through franchisees. The latter puts in an investment of about Rs.10 million per store, and the brand helps with the training and staffing, taking 5-7% of the sales as royalty.
When a brand speeds up expansion, it risks a cash burn. While QSR chains such as Domino’s Pizza, Pizza Hut and McDonald’s have scaled up successfully in India over the years, Indian QSR chains, particularly South Indian ones (barring a few such as Adyar, Shree Krishna Sweets and Sarvana Bhavan) have struggled to do so. Shree Krishna Sweets, which started its operations about the same time as Adyar Ananda Bhavan, has about 75 outlets. Saravana Bhavan, which launched its first outlet in 1972, has about 120 (with two-third of its outlets overseas led by franchisees).
Because of this difficulty, A2B’s founders live by one central rule — for a successful restaurant business, its outlets have to break even at around 18 months. They ensure that overall expense is kept low by careful selection of locations. The 2% reduction in food wastage due to centralised sourcing has also helped.
Biju Thomas, CEO at Adiga’s, points to another trouble with expansion: “The challenge in scaling up, particularly South Indian QSR, is that the food served needs to be fresh. It doesn’t have a shelf life or a cookie-cutter model. Replicating the same taste at various locations across cities is a challenge.” He says the only answer to this challenge is to be meticulously process-driven and train staff rigorously at every stage of expansion. Srinivasa agrees and says that is why they manage and operate all their outlets, and send a team from India to initially train the chefs and the service staff at franchisee outlets abroad. “The success of any South Indian chain hinges on three things — hygiene, quality of food and quality of service. Even if one of them falls out of sync, it can compromise the scaling-up dramatically,” says Harish Bijoor, brand strategy specialist who runs his own consultancy firm, Harish Bijoor Consults.
Recently, a charcoal-black tower of a dosa was in the news. A2B was offering the crepe in activated charcoal, an ingredient assigned superpowers of cleansing anything, apart from the human soul. This constant innovation is a conscious strategy on the part of the brand, so they serve anything from millet dosas to cauliflower-rice pongal, for those on the keto diet. “Our consumers are beginning to become more health conscious,” says Srinivasa. That does not mean that Mysore Pak here will soon become vegan. Authentic traditional South Indian fare will continue to be their mainstay. But, they plan to stay on top of any trend that may be cresting. “Their success lies in the fact that as a brand they have managed to stay relevant, catering to the changing tastes of the customer and ensuring that they provide consistent quality across the outlets,” says Bijoor.
Adyar Ananda Bhavan that began as a four-man unit now employs over 15,000 people. “We are in transition from being a family business to being a professional-led business,” says Srinivasa. Adiga’s Thomas believes that having a professional management at the helm will be crucial. “It will make a brand more process-driven, will attract local talent and will ensure systems are in place,” he says.
The business, which has been self-funded till now, is finally considering bringing in private-equity investments. The money to be raised this way has not been decided, but the idea is to establish a base valuation for the business, before the expansion starts in earnest. “We have been growing our business through internal accruals and bank funding. But, that process is a bit slow. We are looking at raising PE investments before we go for our IPO in the next couple of years,” says Srinivasa.
The plan is to list when they cross Rs.10 billion in revenue; the business has been growing at about 10% over the past three years. “It is easy to run a successful 20-outlet chain where you are well-known in your area of influence. It is only when you look to scale up to 100-outlet network, standardisation, organisational training and issues about business building come into play,” says Bisen of Technopak. Indeed, for a business that was started to provide income for a single family, Adyar Ananda Bhavan has definitely come a long way. And, it hasn’t come this far being modest about its ambitions.
It has come down this road, of dreaming big and making it happen, before.