Aside from its distinctive, eye-catching branding, Bajeko Sekuwa favours word-of-mouth over other forms of marketing.
Photo: Roman Gautam
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The fast food frontier
In Nepal’s market, local entrepreneurship beats the multinational chains every time
(This is an essay from our print quarterly 'Farms, Feasts, Famines'. See more from the issue here.)
In late 1997, Nepali entrepreneurs realised their dream of opening Nepal's first international fast food chain. The Shangri-La Group, which also owns the high-end Shangri-La Hotel, bought a license to open a Nepali outlet of British fast food chain Wimpy, which would become famous in Kathmandu for its chicken burgers. Its arrival offered a chance for the young consumers of Kathmandu to sample Western fast food for the first time in their home town. Before then, the Nanglo Bakery Café and Nirula's, the Indian ice cream bar, were the only places with some degree of resemblance to an international fast food chain. Wimpy's London headquarters provided technical support, while the equipment was delivered from the United States.
For the first three months, Wimpy's monthly sales came to more than NPR one lakh (USD 1140). "The customers were mostly teenagers and people in their 20s," Samir Thapa, a hotelier who helped set it up, told me. "They were ready to pay 120 rupees for wrapped chicken burgers. This was something unheard of in Nepal and it was a huge success." But soon, logistical problems began to surface. Almost all the raw materials and ingredients had to be imported from India. As sales grew, the licensees scrambled to supply the raw products. "We had to ship a consignment of frozen french fries and chicken for three months at a time, and there was no place to store it." Thapa had just returned to Nepal after completing a Masters degree in hotel management from a university in Texas, USA. Prasuma, a Kathmandu-based company that sold raw meat products, agreed to lease its cold storage facilities. But the costs were so high that after running the franchise for a year, the Shangri-La Group sold it on. Reflecting on his experience, Thapa believes that the Nepali market back then was simply not prepared for an international chain of the kind that thrives on a massive customer base and rapid expansion.
Some symbols of Nepal's first international chain remain, and Wimpy's King Burger is billed, somewhat optimistically, as a 'gourmet café and bar'
The Shangri-La Group had purchased the license for five years, and Prasuma ran Wimpy's for the remaining duration. The license was never renewed. Soon after, a new restaurant awkwardly named Wimpy's King Burger opened on Wimpy's old premises, with the new owners trying to cash in on the British chain's brand. Although some raw products were supplied locally, lamb patties and frozen fries still had to be delivered from India, and this continued to be a logistical nightmare. Today, some symbols of Nepal's first international chain still remain, and Wimpy's King Burger is billed, somewhat optimistically, as a 'gourmet café and bar'. The menu has eschewed the short and simple burger-bar menu in favour of one that encompasses pasta, Tandoori chicken, and the perennial Nepali rice-and-lentils staple, daal-bhat.
In 2009, Nepal's first outlets of KFC – Kentucky Fried Chicken – and Pizza Hut set up shop only a few doors down from the ruins of Wimpy's. Given that first chain's experience, it is hard to imagine why Devyani International, the Indian behemoth behind these new franchises, didn't see the writing on the wall. The company has been beset by multiple controversies since it landed in Kathmandu, but was perhaps encouraged by the new sense of optimism in the city when it first arrived. This was three years after the end of Nepal's decade-long civil war, when the country was enjoying renewed stability enticing to foreign investors.
Both KFC and Pizza Hut were greeted with an increasingly familiar sight in Southasia's cities: queues of people waiting for hours to be served foods no longer new to Nepal's wealthier consumers, but nonetheless exotic in such luminous, highly branded surroundings. "It has been an exciting day after a long period of planning and preparation," KFC's country manager Vishnu Reddy told the Kathmandu Post. "We are happy and satisfied with the overwhelming response from the customers." Buoyed by the initial euphoria, Devyani, which on its website boasts of "presence in different … zones cutting across Indian subcontinent, Nepal and Nigeria," opened its second outlet in Kathmandu in October 2011.
KFC: Kathmandu Fast-food Controversy
KFC was founded during the Great Depression by a retired US army colonel, Harland David Sanders, whose bespectacled, goateed visage still beckons from the company's logo in over 100 countries worldwide. Closer to home, the Colonel's franchisee in Southasia, Devyani International, holds the license for over 300 outlets of KFC and Pizza Hut in India, Bangladesh and now Nepal. The company is a subsidiary of RJ Corp, known as the world's third largest bottler of Pepsi. Devyani even has plans to expand its fast food empire into Australia and Canada, led by the Indian Marwari business tycoon, Ravi Kant Jaipuria. Jaipuria's vegetarian family had initially objected to his decision to invest in a franchise based around the sale of chicken, but was persuaded by the brand's potential. Since then, he has also taken franchises with popular chains like Costa Coffee, Swenson's ice cream and the South Indian chain Vaango, which translates as 'please come in' in Tamil. Devyani's successes really began in the early 1990s, after India ended the 'License Raj' and encouraged multinationals to open new branches. Ever the entrepreneur, Jaipuria has also entered other sectors including real estate, healthcare and education.
If the above story sounds like one of unmitigated success, it is only because Devyani International has been careful, at least in Nepal, not to comment on its controversies. On a recent afternoon, Kathmandu's flagship KFC restaurant contained only a handful of customers, most of them Indian tourists. Orders were taken by typically young members of staff, while the chatter of the Nepali kitchen staff murmured above the sound of the fryers. Outside, the upscale, commercial thoroughfare on which the restaurant is located bustled with shoppers and office workers, but the eatery remained almost empty throughout the lunchtime rush. The chain's other outlet – located in a mall across town – wore a similarly deserted look. Half a dozen staff, resplendent in signature red uniforms, nervously waited for customers.
This low turnout comes in the wake of two incidents that rocked KFC's operations in Nepal, and almost resulted in its departure. Less than two years after their opening, KFC and Pizza Hut were forced to shut down their outlets for more than a month after a major labour dispute sent the company into disarray. On 14 August 2012, Devyani wrote an open letter announcing the temporary closure of its branches in Kathmandu. Copies were pasted onto the doors of its outlets, accusing the company's employees of threatening and beating their superiors, namely the human resources manager, Krishna Sharma, and other senior managers. "[The employees] had refrained from providing services to the customers according to the KFC brand," the letter explained.
This unusual item of correspondence divulged that, on the previous day, Sharma had been manhandled by a group of Devyani employees who seized the official letters he had been carrying outside the Labour Office. "These acts have put the lives of senior managers at risk. In order to maintain the safety of our restaurants and staff, we have shut down our services for an indefinite period." The letter also noted that the staff would not be paid in their absence, as per the company's 'no work no pay' principle, and warned that "the concerned persons will be responsible for any damage in the property of the restaurant."
But when I met Nawaraj Bhatta, the president of the Nepal Revolutionary Hotel and Restaurant Union's KFC and Pizza Hut branch, he dismissed the letter's allegations as baseless, and claimed the management had flexed its muscles in an attempt to thwart the establishment of a union. "After the closure, the management realised that it's better to allow us to set up a labour union, and it's only in Nepal that we have been able to do so," Bhatta said, adding with no small sense of triumph that the management now pays attention to the union's demands. "Earlier, we had to buy our shoes for uniforms, and working hours stretched up to nine hours without overtime pay," Bhatta elaborated. "Now, we have to work only for eight hours. We have also asked for a pay rise. They are positive about it."
The upscale thoroughfare on which the restaurant is located bustled with shoppers and office workers. Inside, half a dozen staff nervously waited for customers
I asked Bhatta, who is also a member of the Kathmandu district committee of the Communist Party of Nepal-Maoist – a radical group that splintered from the former-rebel Maoist party in June 2012 – how he reconciled his party's opposition to foreign investment in Nepal and his work at the international chain. His party, led by a senior Maoist ideologue, has protested against Indian investment in Nepal, deeming it to be against Nepal's national interests. The party has also denounced BIPPA – the Bilateral Investment Promotion and Protection Agreement that ensures the rights of foreign investors and guarantees them safety and equitable treatment – signed with India by a Maoist prime minister in 2011. In October 2012, the group temporarily shut down cinemas screening Bollywood movies, and 'banned' vehicles with Indian number plates from Nepal. Although my question seemed to catch him off guard, Bhatta eventually said that his loyalty rested with the party. "We will follow our party's decision. If our party decides to protest against it, we will go with the party. Ours is a party that opposed BIPPA," he said. "A company is not everything for us. But at the moment, we want KFC and Pizza Hut to stay in Nepal," he added.
Although India began to raise the issue of BIPPA with visiting Nepali delegates nearly a decade ago, it became part of the bilateral agenda only after the end of the Maoist insurgency in 2006. The discussions began in earnest during the visit to India of prime minister Girija Prasad Koirala in June 2006. When Maoist prime minister Baburam Bhattarai, who stepped down in March 2013 and is regarded by many as an ally of the Indian establishment, signed BIPPA in New Delhi, he remarked that he had "gambled" on the decision. Indeed, his deputy, who was also part of the delegation, opposed the agreement. Bhattarai had to persuade his comrades that the agreement was not against Nepali national interests.
Devyani wrote an open letter announcing the temporary closure of its branches in Kathmandu and accusing employees of threatening and beating their superiors
Nepal has signed similar agreements in the past with countries like France and Finland. China is said to be lobbying for similar treatment, owing to its growing investments in Nepal. "Rarely has the interest of the general public been so intense on a bilateral economic issue, and support of the private sector as high as now," Kathmandu-based economics researcher Chandan Sapkota wrote in a newspaper column at the time of the BIPPA deal. He argued that the agreement would be in Nepal's national interests, and might help increase foreign investment by enhancing investors' confidence in the Nepali economy. He did, however, caution that BIPPA was "not panacea for all industrial ills". The agreement stipulates that in the case of war, emergency, internal conflicts or riots, the government can compensate the concerned firm. However, it has since been challenged in Nepal's Supreme Court, which has issued a stay order to the Ministry of Industries.
Undeterred, he commissioned an ad agency to create a logo: an image now near-ubiquitous in Kathmandu, featuring a smiling, topi-clad and mustachioed baje. He added new foods to the menu and hired a cashier. At the time, Bajeko Sekuwa had the capacity to serve up to 80 customers, with only 12 members of staff. The demand grew so much that it became difficult to serve the customers in good time, and so the eatery switched from using a manual to an electric fan to heat the coals. But many Kathmanduites – the housewives of the husbands who frequented the restaurant, those who were reluctant to travel to the other side of town for a bite of sekuwa – still had to be won over. "There was also a stereotype that a sekuwa place would be untidy, with drunkards lurking … we made it a high-end place where the customers would be served with food they only occasionally savoured," he told me.
Daily sales soon reached NPR 35,000 (USD 399). What astonished Chetan was that the old outlet, which he retained in order to point old customers to the new one, was not doing bad even as businessmen thronged the new venue. Both outlets ran for five years. Today, Bajeko Sekuwa boasts a banquet hall near a luxury hotel and several restaurant outlets in Kathmandu, and has plans to open 20 more branches across the country. Chetan is now in charge, while his father has parted ways to run a separate outlet with his new wife in his native eastern Nepal. "My father remarried after our mother's death ten years ago. I told him that some people might have ulterior motives, and it was good to divide the property," Chetan told me. His father agreed, and Chetan now owns the restaurants and brand name in Kathmandu outright.
I asked him what he thought was the secret of Bajeko Sekuwa's success. "Early on, we made sure that we created a loyal clientele. Its popularity had spread through word-of-mouth and every customer was a salesman for us." Although hundreds of Kathmandu eateries rely on word-of-mouth publicity, Bajeko Sekuwa in particular has mastered this art. It doesn't even have a website. It has never advertised in newspapers, on television or the radio. Bhandari told me they have developed a unique way of marketing their new outlet by directing their customers to the new location. "We used to post notices about new outlets a month ahead of the opening. But now we do so only a week before the launch. If we did it earlier, the enquiries at the new place would be difficult to handle," he said.
Coffeehouse culture
Himalayan Java's founder Gagan Pradhan had a hard time convincing his compatriots that coffee was a drink to savour. When he opened the first outlet in 1999, he was attempting something entirely new: introducing an exotic drink (coffee) and culture (café) in a tea-drinking nation. "We don't sip coffee. We don't have a culture where we sip cappuccino, latte or espresso. The market was dominated by instant coffee," the 37-year-old Pradhan told me when we met in one of his outlets in Kathmandu. "Back then, coffee was considered a luxury drink. People even thought that because coffee has caffeine, it may not be good for health."
But Pradhan wasn't easily deterred by difficulties. Armed with a hotel management degree from Australia and three months of coffee shop training in the US, he knew that success would come, albeit after some time. The tourist hub of Thamel was an obvious choice for his first outlet, because he knew a Nepali clientele alone would not be enough to sustain his business. Indeed, back then, more than 70 percent of his clients were either tourists or expats. A few Nepalis, unaccustomed to coffee culture, were disappointed; some even refused to pay. "When the locals thought about coffee, they thought about Nescafe; they were used to having something sweet. But our coffee was different; it was intense, very strong, and very bitter. And, they didn't like it," he recalled.
Pradhan's foray into the coffee business also coincided with a period when many Nepalis travelled to the West for study and work. For those who had developed a caffeine or coffee-shop dependency while abroad, Himalayan Java offered a welcome respite, and again word-of-mouth became a valuable source of growth. "Those who lived abroad for five or ten years know the business and beverages," Pradhan said. "When they come to our coffee shop, they bring their friends. And over cups of coffee, they will explain a few things. And that's how everything got multiplied. If I tried to convince them about the significance of coffee, they may not believe me. But when a friend or a brother explains about coffee culture, it's likely to be more convincing."
But no one comes to a café just to sip coffee. Himalayan Java is often filled to capacity with customers both foreign and Nepali deep in conversation, either in their own cocoons or mingling, as if sipping coffee was the last thing that they had come to do. In the semi-darkness, everyone is engrossed in something: one young man checks his Facebook while another scans a copy of the Nepali Times. A group of giggling girls in their high heels arrive, only to be turned down by a polite waiter because there is no table available for the four.
An army of creative and influential people slowly began to patronise Java after its launch. Among them was Abhi Subedi, a well-known Nepali litterateur and professor, who afforded the coffee shop some publicity through his newspaper columns. Coffeehouses like Java also featured in Narayan Wagle's best-selling Nepali novel Palpasa Café. In a 2004 column in India's Outlook magazine, Daniel Lak, a former BBC correspondent in Nepal, called it "Asia's greatest cafe." Subedi said he was happy to find a place that had the ambiance of the cafes he had frequented as a student in Britain. "I was always looking for a coffee place in Kathmandu. I was very influenced by the coffeehouse culture of Britain even before I went there as a student towards the end of the seventies," Subedi told me when we met at Himalayan Java. He told me that creating a space where youths could come and spend time socialising, thinking and debating was an act of courage and imagination. "It was entirely dedicated to the youth. People like us were a minority, almost rarity in those days. I stuck on because I had found a coffeehouse, and started by a son-like young man," he said.
The locals were used to sweetened Nescafe. But our coffee was different; it was intense, very strong, and very bitter. And, they didn't like it
Ushering in an exotic drink like coffee was no easier in other parts of Southasia. "Be it India or Sri Lanka, in this part of the world, tea came first," Pradhan said. But tea also has a disadvantage: it doesn't come in as many varieties as coffee, which Pradhan describes as a "social beverage". Three years prior to the launch of Himalayan Java, a young Bangalorian businessman named V G Siddhartha opened Café Coffee Day in his hometown. Popularly known by the acronym CCD, India's largest coffee chain has now expanded to more than a thousand branches across the country. "Although some of our competitors use Italian products, there is an increasing emphasis on the use of local products and CCD has promoted homegrown coffee," Pradhan said. "The use of local products provides an edge to any company in a developing country, because people encourage it out of nationalistic feeling, which is strong in Southasia. It will also help promote local farmers."
Tejendra Nath Shrestha, president of the Restaurant and Bar Association in Nepal, said that changes in lifestyle in urban areas and exposure to the outside world has led to a strong influence of Western culture. "Although our culture is strong, if you walk Kathmandu's streets, you see young people in Western outfits. And that outlook has influenced their food habits as well." He echoed Thapa when he said that Nepal's economy wasn't strong enough to sustain international chains, but argued that they should be free to fire their employees if they don't follow the company's policies. "If you hire someone and he or she isn't doing the job well, you have the right to fire." He added that the multinational chains thrived by virtue of profits made by a few outlets that draw huge crowds. "But in Nepal's case, where you see only a couple of outlets, that is not the case," he said.
Pradhan attributes the success of his coffee chain – which now includes a dozen franchises, including ones in Washington DC and Toronto – to passion and patience. "For me it's the passion for the business, the art. If you don't enjoy what you do, don't get involved. I believe in that," he told me. "I have seen a lot of people who invest and expect a quick return. You have to have patience for at least three to five years. That's the strategy I adopted back then. I knew it was a tough business, but the reason I was sticking around was there were hardly any other coffee shops in town. I thought that if I can only tap one percent of the tourists who come to Kathmandu, it does justify my business."
Attracting tourists might have been Pradhan's initial concern, but before long, he began to target the Kathmandu's upper-classes. But there was a problem: Thamel, his district of choice, had gained some degree of notoriety as a seedy place, dotted with dance bars and massage parlours. Subedi shared an anecdote with me which illustrated the mindset of Pradhan's customers. At a conference, a female participant told him she had placated sensitive family members opposed to her frequenting Himalayan Java by mentioning him as a regular customer. "I was surprised and delighted to hear that. I guess it has changed some perceptions," Subedi told me, clearly flattered.
Although Pradhan is aware of the obstacles in running and expanding his chains – "We require three products to run a coffee shop: water, electricity and good-quality milk; and all three are at a premium here" – he has expanded his operation to other areas, including coffee merchandising and barista training. Himalayan Java now buys coffee from farmers in several districts of central Nepal. The green beans are roasted, and afforded a shelf life no longer than 14 days. They also supply coffee to movie theatres, hotels, restaurants and embassies in Kathmandu. "We don't have enough coffee to export, that's why we are focusing on the local market," he said. Those Nepali customers who grimaced at the bitterness of Pradhan's product might well be smiling now, with cups of coffee in their hands.