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Indian food services mkt to grow at 10%, reach Rs 5,52,000 crore by ’22
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Thursday, 16 November, 2017, 08 : 00 AM [IST]
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Our Bureau, New Delhi
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The food services sector has emerged a key segment in the Indian economy. The Indian food services market (which comprises both the organised and unorganised segment) is estimated to be worth Rs 3,37,500 crore in 2017, and is projected to grow at a compound annual growth rate (CAGR) of 10 per cent over the next five years to reach Rs 5,52,000 crore by 2022.
This was stated in a report titled Indian Food Services Industry: Engine for Economic Growth & Employment - A Roadmap for Unlocking Growth by the Federation of Indian Chambers of Commerce and Industry (FICCI) and Technopak. It highlighted the overall potential of the food services industry in India and captured the emerging trends in the industry.
The report was launched by Pawan Kumar Agarwal, chief executive officer, Food Safety and Standards Authority of India (FSSAI), at Foodzania, the food service retail conclave organised by FICCI in New Delhi. Two mega-metros, Mumbai and Delhi and the National Capital Region (NCR), contribute to 22 per cent of the overall food services market, with both holding a share of 11 per cent each.
The share of the six mini-metros (Pune, Ahmedabad, Bengaluru, Chennai, Hyderabad and Kolkata) in the food services market is 20 per cent. The Indian food industry is poised for huge growth, increasing its contribution to world food trade every year. In India, the food sector has emerged as a high-growth and high-profit sector due to its immense potential for value addition, particularly within the food processing industry.
The food services sector was estimated to have generated direct employment for 5.5-6 million people in the financial year 2016, and this is expected to increase to 8.5-9 million by financial year 2021. Indirect employment has witnessed a CAGR of four per cent between 2013 and 2016, and is expected to grow at a CAGR of six per cent till 2021.
A high percentage of the working population is young and well travelled, has double incomes and is experimental, besides being tech savvy. They are eating out more than their predecessors, driving the growth of the food services market. The availability of organised retail spaces is helping in the consistent growth of Indian and international brands across different formats.
The impact of the market as a whole on the entire ecosystem, right from real estate to agriculture, kitchen equipment to supply chain and employment, is significant. However, certain challenges, such as the availability of quality manpower, a high attrition rate, the high real estate cost, the fragmented supply chain, overlicensing etc., act as headwind for the growth of the industry.
The Indian food services market space is attracting significant interest from domestic as well as international private equity and venture capital funds. The large number of investments can be attributed to the fact that the food services market is a domestic consumption-driven story with great growth potential. Some key trends, like virtual kitchens and ready-to-cook (RTC) players, are gaining traction in the Food Services space.
Ordering in has become an integral part of the eating experience, and several logistics players are providing last-mile delivery to restaurants. Thus, food services is emerging as a key contributor to the Indian economy, including employment generation, skill development, growth in the allied industries, entrepreneurship and tourism and creating experiences for the Indian consumer.
Underlining the importance of the food services sector, Sanjaya Baru, secretary general, FICCI, said, “India’s overall retail opportunity is substantial, and coupled with a demographic dividend (a young population, rising standards of living and an upwardly mobile middle-class) and rising Internet penetration, strong growth in retail and e-commerce is expected.”
“The Indian government’s ambitious Make in India, Digital India and Start-up India initiatives are indeed giving a great stimulus to the food services retail sector,” he added. It is imperative for the government and regulators to recognise the contribution and role of the food services industry and take measures to create a positive policy framework for the industry’s growth.
Saloni Nangia, president, Technopak Advisors, said, “Hopefully, the Central government and the various state governments will provide the requisite policy and fiscal support to enable the food services sector to grow steadily, and thereby, make an even more positive impact by way of creating more employment and meeting the changing consumer needs more efficiently.”
The food services sector has still not got the status of an industry from the government, which further makes it difficult to attract the desired levels of investment. For the rapid growth of the sector, the government should grant industry recognition to the food services sector and facilitate the easy availability of working capital loans to the players through policy formulation.
The food services industry in India opines that policy formulation by the government should have more active involvement of industry bodies [such as the National Restaurant Association of India (NRAI)]. By actively involving stakeholders in policy making, transparency in decision making can be achieved and a realistic and effective policy can be formulated.
Efforts have to be made to remove the various factors that are impediments to the growth of the industry and impacting the smooth functioning of business operations. Some key areas that may help the food services industry to achieve its true potential were discussed in the recommendations section of the report.
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