Size of Indian food services market to reach Rs. 5 trillion by 2021
Soon to be flooded with a vast range of foreign food retail franchises, the Indian restaurant sector is set to contribute more than 2% of the country’s GDP by 2021, amounting to nearly Rs. 5 lakh crore. The industry will be boosted by an expansion of purchasing power and a wave of foreign investment.
A new report, compiled by consulting firm Technopak Advisors, commissioned by the National Restaurants Association of India (NRAI), has made extremely promising declarations for the future of the restaurant industry in India. The report, which is the third of its kind, conducts a nuanced analysis of data gathered from: a number of companies, over 50 CEOs, consumer research across 20 cities covering 2000 people, and ground research at restaurants.
According to the report, the Indian food services market was valued at Rs. 3,09,110 crore in 2016, having grown at 7.7% annually since the last report was published in 2013. Now, this growth rate is projected to jump to 10%, with the total value of the market soaring to Rs. 4,98,130 crore by 2021. The report states that in the last year alone, the industry generated 5.8 million jobs, and contributed taxes of more than 22,000 crore.
A number of factors are responsible for this exponential projected expansion. One important factor is the overall economic growth and a consequent expansion of purchasing power, which is not only set to boost the consumer market substantially, but also directly affects the tendency to eat out.
This is apparent in the forecasted figures for the next few years. A recent report from real estate consultancy Knight Frank on the 40 biggest up and coming cities in the world used eating out as a metric for growth in purchasing power. According to the findings, big Indian cities such as Bengaluru and Mumbai are expected to see increases of as much as 177% and 137% respectively on expenditure on eating out.
A flood of foreign investment
Therefore, it comes as no surprise that the market is set to be flooded with foreign competitors looking to tap into the growing industry. According to FranGlobal, a firm that connects big brands across the globe, the food industry in India will see $1 billion (Rs. 6,550 crore approximately) of foreign investment over the next five years. The firm revealed that 60 of the world’s top food and beverage brands have plans to enter the Indian market over the next five years, cumulatively opening between 3,000 and 5,000 outlets across the country.
Alongside large restaurant chains such as the celebrity-owned Planet Hollywood and pizza-chain Little Caesars, Indian consumers will have choices from across the world including Sarpino’s Pizzeria from Singapore, Ice Cream Lab from Dubai, and Hesburger from Finland. Commenting on the big plans that these brands are formulating, CEO of Fran Global, Venus Barak said, “All brands are addressing a different market. In a lot of cases, the brands are looking for master franchise holders.”
The enthusiasm was apparent from the comments of Alex Garland, Managing Director at Planet Hollywood for Europe, the Middle East and Asia, who said, “Planet Hollywood and the connection with Bollywood is a marriage made in heaven. The symmetry and compatibility between the two is very strong. We are delighted to have the opportunity to introduce our brands in this huge, exciting and dynamic marketplace.” The chain draws extra attention due to its illustrious ownership, which comprises Hollywood stars Robert Earl, Bruce Willis, Sylvester Stallone and Arnold Schwarzenegger.
The momumental gorwth forecasted has caught the attention of the consulting industry as well. Ashish Kasad, Partner and Leader of Consumer Products and Retail Sector Tax at Big Four professional services firm EY commented, “There is a huge opportunity in the sector and further growth is expected. Most formats have worked very successfully in India as long as the quality of food is good. The investment (by the new brands planning to enter) seems to be of a reasonable size and could be much more in the long run. There couldn’t be a better time.”
To be overcome
However, the NRAI report was not all positive in its assessment. According to the analysis, the organised sector comprised a mere 33% of this giant industry, which can be attributed primarily to a multitude of regulations that choke the industry, including extensive sets of required licences, and high tax brackets. In addition, the industry is plagued by high real-estate costs, inadequate supply chains, infrastructure and financing issues, as well as lack of policy support. On the last point, the NRAI strongly recommends a re-evaluation of government policy and a relaxation of the stringent regulations currently in place.
