Food Service Industry in India - Key Drivers

Posted in Marketing & Strategy Articles, Total Reads: 2679 , Published on 03 August 2014
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India is one of the largest food producer of the world. The food service industry in India is the fifth largest industry in terms of production, consumption and exports. The growth is expected to be at a market value of USD 91.66 billion.The industry is divided in to 3 distinct categories


- Horticulture and Agriculture products which include pulses ,fruits, vegetables ,herbs and other food corps
- Processed foods and beverages which include baked foods , ready to eat food , alcoholic and non-alcoholic beverages
- Food beverages retail which includes bars, restaurants, hotels, stores, supermarkets

Image Courtesy : freedigitalphotos.net, Just2shutter


The food service industry is the major contributor to the GDP of Indian Economy. It contributed about 2.3% pf the total GDP which is more than the Telecom and film industry

Sno

Industry

Market Size( USD billion)

1

Retail

490

2

Insurance

68

3

Food Services

48

4

Telecom

39

5

TV

8

6

Hotels

6.5

7

Film

2

Table1: Industry wise market size


Fig 2: Slice of organized food Service pie


Till year 2005 the food service industry was governed by 13 different laws but in year 2006 the government of India has passed the Food Safety and Standard Act (FSSA) 2006. The government is also planning to allow 100% FDI(Foreign Direct Investment) in the sector. According to a report “Indian Food Service 2014” prepared by NRAI(National Restaurants Association of India) food service industry is estimated to be of Rs 247,680 crores and expected to grow to Rs 408,040 crores by the year 2018. This would be a result of about 11% (CAGR) growth. The industry comprise of both organized as well as unorganized sector. The Quick Service Restaurants (QSR) and hotels take up 66%, cafes 16% and rest by pubs, clubs, and lounges of the food service segment. There are more than 100 brands of chain restaurants with over 3500 outlets in India. Research has also shown that Indians has taken to Italian cuisines at a much faster rate than the Chinese cuisines.


Drivers of Food Service Sector in India


1)      Demand Side Drivers

a)      Demographics: India has a population of 1.2 billion with 50% below the age of 25 and 65% below the age of 35. The majority of food consumption is driven by the people in the age group between 18 and 35. With advancement of service sector in India, more people are employed in the IT companies resulting in higher standard of living and wallet size. Since people prefer to hang out with friends and families, the QSR are becoming the social hangout places for them. This change in social landscape has resulted in the growth of fast food restaurants

Fig 3: Fast Food Consumption by age group

 

 

b)      Income and consumption level:  Indian economy is growing at a rate of 7 % resulting in high income for the population. This increase in income has resulted in the high consumption level. This growing affluence and higher disposable income provide a great opportunity for food service industries. According to  a McKinsey global Institute study total household consumption is expected to be tripled making India 5th Largest consumer market by 2025

Fig 4: Indian Household Consumption Pattern


c) Increase in working women: The emergence of nuclear family and both parents working , the demand for ready to eat food has increased in India. With women working and higher family disposable income , the families prefer to eat out and hence growth opportunity for food service industry


2)      Supply Side Drivers


a)      Improved Retail formats: The emergence of mall format in India has also provided food industry a greater space for operation. Malls have allowed space for food courts. The visitors of mall are converted into customers for the food courts resulting in the higher growth for food industry

b)      Multiple Cuisines: With Indians preferring eating Chinese, Italian, Mexican etc. cuisines has resulted in more and more restaurants coming in the market. This foray of restaurants has created a positive impact on the Indian food service industry


This article has bee authored by Ankit Gupta from TAPMI



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