Published in India Food Report

1. | 412 | INDIA FOOD REPORT 2016
P. RAJAN MATHEWS
VP – MARKETING & SALES, DESAI BROTHERS LTD. – FOOD DIVISION (MOTHER’S RECIPE)
I
ndia is the biggest consumption
market in the world. Based on the
projections extrapolated from the
Third Economic Census conducted
in 1990, it is estimated that there are
approximately 500,000 restaurants in
India in the organised sector. This figure
is expected to increase rapidly as a result
of the changes in demographic and
economic factors, which have a significant
impact on the restaurant industry in
India. Increasing urbanisation and rising
disposable incomes are characteristics
that are common across several emerging
economies, particularly in Asia.
However, the pace at which this has
taken place in India in the last few years
is likely to continue over the next decade
and will outpace most other economies
in the region. In particular, Merrill Lynch
estimates a growth in urban consumption
at potentially 20 per cent per annum in
nominal terms (16 per cent in real terms)
for at least the next 5–7 year period.
In addition, higher disposable incomes
among consumers, particularly in the top
25 cities, and the trend towards eating out
are combining with growth in organised
retailing to fuel growth in the food service
sector. There are 10 million households in
India with an average household income
of Rs. 46,000 per month and two million
households with a household income of
Rs. 115,000 per month. Eating out has
emerged as a trend, which is prevalent
within this elite group. Two of out of every
five households in this group eat out at
least once a month. There are 100 million
17–21 year olds in India, and six out of 10
households have a child that was born in
the post-liberalisation era and has grown
up with no guilt of consumption.
Growth in eating out culture
Urban Indians spend six per cent of their
income on eating out, whereas American
consumers, by comparison, spend 46 per
cent of their food expenditure on away-
from-home meals. Nuclear households,
rising affluence, more and more working
women, food shows on TV and social
media, increasing international travel, a
very large young population are some of
the factors that have ensured that by 2015
the Indian restaurant industry is likely to
become
Rs. 62,500 crore plus, up from the current
Rs. 43,000 crore.
If Indian restaurants industry hits the
same percentage of GDP as in the US, then
this figure would be a stupendous
Rs. 1,80,000 crore. The untapped potential
is really mouthwatering. The average bill
per person in a quick service restaurant
(QSR) ranges between Rs. 70 and Rs. 300,
while for casual or fine dining it is between
Rs. 750 and Rs. 3,000. The QSR business
returns 15–25 per cent margin while the
other segment enriches the owner at
20–40 per cent.
The Federation of Hotel & Restaurant
Associations of India (FHRAI) estimates that
there are approximately 2.2 million or 22
lakh hotel and restaurant establishments
in India. FHRAI further estimates that of
the total figure, approximately 500,000
restaurants qualify as establishments in
the organised sector with more than 20
seats, an entrance door, a menu card and
waiter service. As the number of lodging or
hotel units within these figures would not
be more than 20,000 or 30,000, it can be
presumed that the entire figure of 22 lakh
can apply to the restaurant sector.
The bakery market in India is estimated
at more than Rs. 2100 crore and is still
the cheapest form of ready-to-eat food.
The bakery industry in India is mainly
concentrated in the states of Andhra
Pradesh, Maharashtra, West Bengal,
Karnataka and Uttar Pradesh. About 60
per cent of bakery production takes place
in the unorganised sector. There are
around two million unorganised bakeries
operational across the country, comprising
small bakery units, cottage and household
type manufacturing, characterised by low
levels of packing and distribution mainly in
the neighbouring areas.
Categories of food service customers
The Indian food service industry can be
broadly classified as follows:
Star properties
Fine dining restaurants – International
cuisines/Asian cuisines/Indian cuisines
Casual dining – Indian/regional/multi-
cuisine
Quick service restaurants/cafés –
Indian/International
Industrial/institutional caterers
(Sodexo/Compass and various Indian)
Party and marriage caterers
Bakeries
Own account enterprises

2. INDIA FOOD REPORT 2016 | 413 |
DEVELOPING A VISION AND STRATEGIC PLAN8
Organised sector sales in food service
industry
The food services industry comprises two
distinct market segments: the organised
and the unorganised. The organised
segment comprises 20 per cent of the
total industry. This segment grew at an
estimated rate of 25.6 per cent in fiscal
year 2011 and is expected to grow at a
rate of 30 per cent in fiscal year 2012
to 2016.
The size of the unorganised segment
is unknown as it comprises roadside
eateries including dhabas, which are
the most common form of food outlets
in India. Such unorganised players lack
technical and accounting standardisation
commonly found in the organised
segment. In the last few years, there
has been a shift to restaurant chains
and franchise outlets, which belong to
the organised segment. This segment
is currently dominated by a handful
of players, which control over 3,000
outlets. Five-star properties, fine dining
restaurants, casual dining restaurants,
QSRs/cafés, industrial/institutional
caterers and party and marriage caterers
belong to the organised segment of the
food services industry.
Recent trends in food service
Increase in International food chains:
During the past two decades, many
international food chains have entered
India as they perceived it to be a potential
market with scope for expansion and
growth. Some international brands
have become household names in India,
including McDonald’s, Pizza Hut, Domino’s,
TGIF, KFC, Ruby Tuesday and Subway. At
the core of such international brands’
success is an awareness of local tastes and
habits of the Indian market.
Evolving cuisine: According to NRAI Report
2010, customers are generally satisfied
with the dining options currently available.
However, food companies (international
and domestic) are consistently reviewing
and reinventing their menu offerings
to better cater to the evolving tastes of
the Indian market. Food companies are
increasingly offering more than one cuisine
in a single outlet to appeal to a wider
population segment. Restaurants serving
Asian cuisines may combine one or more
of the following: Indian, Chinese, Japanese,
Thai and Vietnamese. In addition, the
Indian population is increasingly seeking
new cuisines and industry players have
been exploring regional cuisines including
Peshawari, Gujarati and Bengali, fusion
cuisines including Chinese-style pizzas and
International cuisines, including Italian,
Lebanese and Mexican. Furthermore,
international cuisines are moving toward the
mid-market pricing segment rather than the
top tier pricing segment traditionally found in
five-star hotels serving International cuisines.
New locations: New opportunities are
emerging in the organised segment at
locations where a high density of people
congregate, including shopping malls,
travel terminals, office complexes and
medical institutions. In particular, shopping
malls are becoming a customary place for
congregation and customer spending in
shopping malls is increasing. These malls
tend to favour efficient formats such as
kiosks and food courts, which are most
suitable for fast food restaurants and
casual dining.
Growth drivers for food service
Changing demographic profile:
Demographic change facilitating growth
in the food services industry includes
the large and growing young working
population (median age of 24 years). Over
65 per cent of India’s population is below
35 years of age and the age group between
21 and 40 years constitutes the majority of
those who eat out regularly.
Further, the proportion of nuclear
families is also increasing with
approximately 1.5–2 per cent of joint
families giving rise to nuclear families
annually. There is also an increasing
proportion of women in the workforce
(17 per cent in 2005 compared with 14
per cent in 2000) and a growing trend
of double-income households. All these
factors are contributing to an increase in
dining out in India.
Rising income levels and growing middle
class: Over 17.5 per cent of the world
population resides in India and the middle-
class segment of the Indian population
comprising households earning an annual
income of Rs. 200,000 to Rs. 1,000,000
is expected to grow significantly. In
addition, the increasing population of the
middle-class coupled with the increasing
proportion of the population living in urban
centres (29.50 per cent in 2007–08) is
leading to an increase in dining out as a
lifestyle choice.
Changing food habits & dining out:
Around 50 per cent of the Indian
population dines out at least once every
three months. According to the NRAI
Report 2010, dining out is typically used
as a standalone social activity, which is
enjoyed mostly with family (43 per cent)
and friends (30 per cent), and is only
occasionally combined with other social
activities such as shopping.
In a study based on individuals who
eat out regularly (at least once in three
months), only 10 per cent indicated
that their last dining out experience
was due to special occasions such
as anniversaries, engagements or
promotions.
Gwoeii / Shutterstock.com