Size of Indian food services market to reach Rs. 5 trillion by 2021

15 November 2017

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. 

Size of the Indian food services market

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.

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Indian consumer market to surpass $1 trillion by 2021

15 October 2018

India’s retail sector appears to be on track for substantial growth over the next few years, in addition to a drastic shift in its composition. According to a new report from global professional services firm Deloitte, the sector will reach an approximate value of $1.2 trillion between 5 and 8 years from now. 

Digital disruption is a common theme globally cutting across sectors at the moment, and its manifestations in the retail sector are several and multifaceted. The most direct of these is the advent of online retail and the subsequent emergence of a host of new avenues for producers to sell their goods.

India is expected to have 850 million online users by as early as 2025, which creates tremendous potential for online commerce in India. Big Four accounting and advisory firm PwC already predicted massive growth in India’s ecommerce sector two years ago, when the share of online shopping constituted nearly 35% of monthly purchases.

Indian e-commerce market

Last year, the Boston Consulting Group released a report that predicted that 40% of the purchases in India’s fast moving consumer goods (FMCG) segment would be conducted online by as early as 2020. Deloitte’s new report on India’s consumer market has reaffirmed these claims.

As per the report, India’s ecommerce market grew by a compound annual growth rate (CAGR) of nearly 50%. Over the next three years leading up to 2021, Deloitte predicts a CAGR of 32% to take the total ecommerce sector up to a value of $84 billion. By 2026, this figure is expected to reach $200 billion.

However, digital enhancements have a number of less direct influences on the retail sector as well, which generate a range of other opportunities. Packaging is one major area in which digital innovation can be leveraged to increase speed, reduce costs and broadly increase appeal based on data analytics.

Indian retail market

The shopping experience itself is expected to change drastically in light of digital advancement. Augmented Reality and Virtual Reality technologies are now being leveraged across the globe to create a digitally interactive shopping experience, termed alternately as ‘immersive retail’ or ‘connected retail.’

Other new forms of retail include free product trials at home and what the report terms as ‘peer to peer’ marketing. Broadly, Deloitte categorises this wide variety of developments under the umbrella of ‘modern retail,’ which is expected to contribute 25% of retail revenues in India over the next five to eight years.

This number is significantly higher than the expected contribution from ecommerce, which stands at approximately 10-12%. Underlying all these developments, however is substantial growth in the overall retail sector in India, which is expected to reach a value of $1.2 trillion by 2021.

Evolving parameters in the consumer domain

The substantial growth is presumably on the back of growing income levels per capita and other demographic trends. One of these patterns, for instance, is the increase in the number of households with a corresponding decrease in the size of these households, leading to a larger pool of disposable income.

Between 2011 and 2017, India’s retail market grew by a CAGR of nearly 14% to reach a size of nearly $800 million. This figure is expected to increase by nearly 11% till 2021 and subsequently at nearly 8% to reach a value of $1.75 trillion by 2026, according to Deloitte’s report.