Thursday, January 1, 2009

The Ant And The Grasshopper: A Modern Winter's Tale

Published on Wed, Dec 31, 2008 at 19:22 , Updated at Wed, Dec 31, 2008 at 19:29
Source : Network18 business magazine

Elizabeth Flock, Forbes-Network18


How the ant learnt to save


When I enter Hotel Shashikant in Andheri East, it is lunchtime. A solitary patron is digging into his hot meal. Four employees hover around ready to take orders, but there are few takers for the modestly-priced South Indian or Chinese cuisine.


Started by his father in 1975, the restaurant is now managed by Shashikant Shetty who is only 35. The restaurant ambience is modest, and there is a lot that could be done to fix it. Even in the A/C section, the paint is peeling and the sofa covers need to be changed.


Shetty explains that he stopped doing the regular monthly maintenance on the restaurant about a year and a half ago for a reason. “I saw that I needed to tighten my belt, so I have put these things off and just concentrated on giving proper service.”


The restaurant-owner saw the bubble growing in the economy and knew he needed to take measures to deal with the situation when it popped. He attributes his foresight to the kids that frequented his bar in the evenings with big rolls of money and huge limits on their credit cards. “They would say they were going out to an expensive nightclub, three nights in a row, spending 4,000 rupees each night. They were only 18, 21, and they would have their own bike. They were just going totally crazy with uncontrolled spending. And they had no savings.”


Shetty knew the importance of saving. Growing up in a middle class family, he says he was taught to save from an early age. His family was always conservative with money, he explains.


“Watching my parents and seeing how they acted, I learned to save. I kept telling my mom, we can indulge ourselves a little. But her credo was, if not necessary, then why do it?”


It hasn’t been easy for Shetty to run the business, even before the downturn, and perhaps that is why he learned to be frugal early on. Shetty says there are a lot of hardships in the restaurant industry. First, the growing popularity of street food—and not just snacks, but full meals—has been a huge source of competition. Restaurants cannot compete with food that is so cheaply made.


“Restaurants also have the lowest margins, but the highest cost prices,” says Shetty. “I am always asking myself why all of us [restaurant owners] are selling food so dirt cheap. But the roadside vendors force us to.”


Second, the last year, and especially the past few months, has seen his costs rise exponentially. The electricity bill has jumped from Rs. 40,000 to Rs. 80,000 a month since last May. Shetty says he was expecting the climb because the bill had been rising since last year.


“I tried to prepare by doing a lot of changes in electrical systems, rewiring them and changing tubes to curb costs. And it did help for a couple of months. But when the cost has gone from three to13 rupees per unit at night, what do you do?”


Other costs have also been spiralling. Gas has gone up 300 percent in the last six months, says Shetty. Raw materials have gone up 45-60 percent. Grains have gone up 100 percent and livestock 30-40 percent.


“I can understand that the fuel crisis meant oil and petrol went up. That means transport costs went up, and so did our veggies and raw materials. But the vat excise duty keeps changing every three months. There is no relief from the government in this industry.”


The 20% increase in the VAT excise duty in the past months has meant drinks are too expensive to order in a bar, and instead people are buying their drinks at wine shops, explains Shetty. (A beer at a wine shop is Rs. 70, while at Shashikant it is Rs. 100). He has tried to accept this reality and offset it by pushing his home delivery business.


Even so, sales are dropping. In the past few months, Shetty says Shashikant has seen a 20-22 percent drop in sales. Shetty has been forced to respond by raising the prices on the menu. Drinks went up first because 60% of Shashikant’s business is the bar, and there was a 30% increase in the food menu as well.


Shetty has also made a loan application in the last few months for Hotel Shashikant.


“I wanted to take a bit of an overdraft to run the business in a better manner. I was going to renovate. I also thought then I could buy in bulk and save money that way.”


But Shetty has been unable to get a loan, even from his bank with which he has had a relationship for three years.


“Restaurants and hotels are high risk so the bank doesn’t lend to us,” Shetty explains. “For the last six months, I have no liabilities except a car loan and have been trying to get a loan from all the reputed banks. But they tell me my profile doesn’t fit. They don’t mind taking my money, but they won’t give.”


So Shetty has continued to do what he knows how to do best: save. He says when shopping for groceries, he used to get specialty items but now he won’t. He has also reduced eating out and other outings. The last vacation he took was in January, and there won’t be another one soon.


“I am saving because I expect sales to fall further—this is only the beginning. December, the biggest month, will be especially lousy for everyone. I’m not badly affected by the recession yet. I have notches in my belt to tighten. Even now, I could afford to take an expensive holiday or travel first class. But I won’t.”


Perhaps it is in the Shetty’s blood to save. Or perhaps survival instinct is guiding him.


“If this restaurant shuts down, I have nothing. It is my life and soul,” he says.







The grasshopper who still flies high


Franz Almeida’s got style. There’s no denying that. As he swaggers down in his Giorgio Armani three-piece suit, you can’t help but notice the panache of a New York model. His cordovan skin is an exotic shade that suggests an amalgam of ancestors from Lisbon to Mumbai.


This half-Portuguese, half-Indian Mumbaikar gave up having his face in print for something far more exciting: flight school. A former street fighter, Almedia hasn’t lost the instincts that taught him to survive fist fights.


“Sometimes you gain, sometimes you lose,” he says with a shrug of his shoulders. A captain with Jet Airways, Almeida traverses the world treating himself to the best that countries across the planet have to offer. And here comes the cherry: his company subsidized his excesses.


Jet Airways, Almeida’s boss since 2001, liked to put their long-haul pilots in 5 star hotels and give them $100 a day to spend on frothy beer in Brussels and Peking Duck in Hong Kong. Jet lag was alleviated by downy pillows and yielding mattresses. His lifestyle as ‘Captain’ meant flying to New York for a juicy steak and falling asleep after a nightcap of room service champagne.


But Almeida’s luxurious routine burst open like all the other bubbles in the past months.


He wasn’t on the firing line of 1900 yellow-jacketed, tear-streaked Jet employees in October. But his daily bonus has been halved, and he now sleeps on stiffer mattresses in 3-star hotels. No more chocolates on pillows. No more nearly unlimited dim sum.


A salary cut on the horizon rubs salt in the wound from “father”, as some Jet-ers call founder chairman Naresh Goyal. Not to mention the oceans Almeida lost in the US stock market when it plunged.


You would think that the slowdown in the airline industry would have impacted his lifestyle. Fat chance.


The man is still spending like Dick Fuld, without the fall. He continues to nosh at chic brunches in South Mumbai. He still sips a martini, or a few, at the members-only Prive night club. And he shows this reporter the rare Portuguese tiles he plans to install in his bathroom.


The lion’s share of his salary goes (and will continue to go) to feed the appetite of his lifestyle. “I spend my money on the way I live, where I go, what I eat, and what I wear. Oh, and the vacations I take.” His next vacation may be to Rio De Janeiro for the Carnival festival, where the women are sirens, he tells this reporter with a grin.


Almeida knew he wanted to live the beautiful life ever since he was a kid. Growing up in Mumbai in a well-heeled family, Almeida dug the socialites and Bollywood-types around him, observing where they went, what they ate, what they liked. In the city of dreams, he too had one: to own a chain of plush, luxury hotels or a restaurant like Indigo, the swanky restaurant and bar behind the Taj Mahal Hotel in South Mumbai.


He hasn’t done that, but his lifestyle approximates it. Almeida hangs out in only the trendiest joints. His apartment on Carter Road in Bandra is a stone’s throw from the sea. He’s got a Rolex that rivals James Bond’s.


Like Bond, Almeida also needed adventure with style. He started flying because he loved the thrill of it. Conveniently, flying was also good for extravagance.


Almeida, on the last Sunday I meet him, is finally casual. A T-shirt reads: ‘Will fly for food.’ His startlingly Obama-like looks are attracting a gaggle of girls sipping lattes outside Café Coffee Day. But Almeida doesn’t stop for coffee. He already runs on two things: extravagance and flight.


Flying, Almeida says, is his life. Without meaning conceit, he tells me that he wanted to be a pilot because, “I wanted to live on a fine line between naïve solitude and instant death.”


Ever the prodigal son, his spending will keep treading that fine line too. Like the grasshopper, he will lavish his funds until winter comes and they run out.


Maybe winter hasn’t come yet for the tough ex-street fighter with arresting model-good looks. Maybe the captain won’t ever meet his fall. Because if he does, the Armani suit will have to be retired, and as for his T-shirt—Almeida really might be flying for food.



Elizabeth Flock is an associate reporter with the new business magazine to be launched by Network18 in association with Forbes, USA.


http://www.moneycontrol.com/india/news/features/the-ant-and-the-grasshoppera-modern-winter-s-tale/373366

3 comments:

  1. Bangalore, often termed to be the Silicon Valley, holds a major chunk of the responsibility of transforming India into an economy to reckon with that it is now and a prospective superpower in the near future. The excellent weather, the warmth of the people, and the beauty of nature have always put Bangalore on the high ranks in a travelers’ book. In the past decade or so Bangalore has become the IT capital of India and immediately the city saw a phenomenal spurt in its tourism sector. Bangalore was no longer a leisure traveler’s delight, but the city became a major financial hub. Soon delegates from all over the world had to visit the city. In keeping with the taste and travel inclination of the international delegates and business travelers a number of world class luxury and business hotels in Bangalore were opened. Big names in the hospitality industry like the ITC Welcom Group, the Taj Hotels etc have multiple hotels in Bangalore. Only recently Taj opened its 5th property in this beautiful south Indian city. A few months back ITC Welcom Group also opened its 2nd property in Bangalore. The hospitality industry is also opening budget hotels in Bangalore that have a fine mix of business and luxury in a flexible budget.

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  2. Are you for real about this Almeida guy? The guy sounds like a giant jackass full of himself??? Give me a break - the dude's just an airline pilot! Not even a Z-grade bollywood celeb. Did you really just compare him to Obama, James Bond and to Dick Fuld??? Even those three would be red-faced if they were talked about in such terms.

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  3. I think an apology is in order to the author. For some reason, I started reading the article from the middle and hence didn't get the contrast between the two stories. The comparisons to the aforementioned personalities are more sarcastic than flattering - I get it.

    But Almeida still comes across as a conceited fool -- and maybe that was the purpose of the article :)

    In all honesty -- this is a good piece and apologies again for the earlier rant about the writing.

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