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Pkgd food boom in Tier-2 & Tier-3 cities in India
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Thursday, 18 June, 2026, 15 : 00 PM [IST]
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Dr Prashant Sahni, Devank Choudhary & Divyansh Choudhary
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For generations, food in Indian households has represented far more than daily sustenance. It has embodied tradition, regional diversity, and cultural identity. Recipes passed down through families have long defined the rhythm of Indian kitchens. Today, however, this deeply rooted culinary heritage is undergoing a structural shift. The market is moving decisively away from traditional scratch cooking toward convenience-led consumption, fundamentally reshaping not only what people eat, but how they engage with food. This transformation is unfolding alongside robust growth in India’s food processing sector, which is projected to reach US$535 billion by FY26 (2025–26), expanding at a steady annual rate of approximately 8%.
The industry already contributes nearly 14% to manufacturing GDP and accounts for around 13% of total exports, underscoring its economic significance. Within this broader ecosystem, the packaged food segment has emerged as a key growth engine. Valued at US$116.85 billion in 2025, it is expected to reach US$175.61 billion by 2031, growing at a CAGR of 7.03%.
Boom in Quick Commerce
Despite the unorganised sector retaining over 40% market share, the organised segment is rapidly expanding, fuelled by urbanisation, rising disposable incomes, and deeper digital penetration. E-commerce and modern retail formats have enhanced accessibility, while a clear premiumisation trend is taking shape as consumers increasingly favour branded, hygienic, and convenient products. Notably, Tier-2 and Tier-3 cities are emerging as powerful growth drivers, with Tier-3 markets recording a 59% surge in grocery and supermarket spending, signalling a shift from “emerging” consumption centres to mainstream engines of volume growth. For instance, in cities like Vadodara, Nashik, and Mysore, quick commerce is solving the chronic availability gap.
Historically, consumers in these towns had the purchasing power but lacked access to niche products. Now, platforms delivering in 10-15 minutes are bringing gourmet cheeses, imported Korean noodles, almond milk, and exotic sauces directly to their doorsteps.
India’s RTC and RTE Revolution
The Indian market for convenience foods is undergoing a seismic shift, with the Ready-to-Cook (RTC) segment valued at approximately US$640.3 million in 2025 and projected to grow at a CAGR of 8% through 2029. More impressively, the Ready-to-Eat (RTE) category is forecast to expand at a rapid CAGR of 16.4% over the next decade, driven almost entirely by new adopters in non-metro regions. A defining statistic for this boom is the "Volume Doubling" phenomenon seen in 2024, where the RTC segment witnessed a staggering 58% volume growth, significantly outperforming the broader packaged food industry's 8% growth. In cities like Indore and Coimbatore, the highest adoption is not in full meals, but in "culinary aids" like Idli/Dosa Batters and Ginger-Garlic Pastes.
These products allow homemakers to save time on laborious prep while still performing the final act of cooking, bridging the gap between convenience and tradition. Despite the boom, reports indicate that 85% of the addressable market (approximately 70-80 million households) is still untapped, primarily because many consumers in smaller towns are waiting for products that match their specific regional taste profiles (e.g., spicy Chettinad mixes vs. generic North Indian curries). Brands are increasingly using Retort Technology and High-Pressure Processing to offer preservative-free, shelf-stable curries and rice mixes, directly addressing the "freshness" concerns of small-town consumers.
Furthermore, the canned food market in India, often overshadowed by the frozen sector, is quietly carving out a substantial niche. The market is projected to reach US$10.8 Billion by 2033, while the overall growth rate appears steady at a CAGR of 1.7%, specific sub-segments like "Canned Ready Meals" and "Canned Vegetables" are witnessing faster adoption in non-metro regions.
A key driver for this is the post-pandemic shift towards "emergency preparedness" and "shelf-stability," where households in Tier-2 cities are increasingly stocking up on canned ingredients (like corn, mushrooms, and fruit pulps) as pantry essentials rather than just luxury items. In Tier-2 and Tier-3 cities, the adoption of canned food is driven by the "Off-Season Availability" factor.
Consumers in towns like Nagpur and Visakhapatnam are turning to canned fruits (especially pineapples and cherries) and vegetables (sweet corn, mushrooms) to bypass seasonal price fluctuations and availability issues of fresh produce. Furthermore, the "Canned Curries" segment is gaining traction among the student populations in education hubs like Kota and Pune, where the convenience of a "pop-and-heat" meal offers a reliable alternative to hostel food.
Frozen Foods on Rise
The Indian frozen foods market was valued at Rs 216.59 billion in 2025 and is expected to expand significantly to Rs 643.64 billion by 2034, registering a robust compound annual growth rate of 12.86% between 2026 and 2034. This explosive growth is underpinned by a parallel boom in the Cold Chain Logistics sector, which is projected to reach US$12.19 Billion by 2030. In Tier-2 and Tier-3 cities, the frozen food boom is being driven by the "Café at Home" phenomenon. Young consumers in towns like Ludhiana, Surat, and Bhubaneswar are increasingly purchasing frozen French fries, burger patties, pizza pockets, and momos to replicate the dining-out experience at home.
Improved electricity reliability in these regions has given local kirana store owners the confidence to invest in deep freezers, turning frozen food stock from a risky liability into a high-margin asset. The dominance of "Individual Quick Freezing" (IQF) technology, which now commands a 42% market share, has been a game-changer for smaller households. IQF ensures that small items like green peas, corn, or diced vegetables freeze individually rather than in a solid block. This allows cost-conscious families in smaller towns to use exactly the portion they need and store the rest without wastage.
Healthy Snacking & Diet Diversification
The healthy snacks market in India is expected to reach a projected revenue of US$8,183.3 million by 2033. A compound annual growth rate of 8.1% is expected of India healthy snacks market from 2026 to 2033. A striking sign of this change is spending on discretionary grocery items in Tier-3 cities, showing that consumers beyond the metros are increasingly prioritising health and choice over just cost. The "Millet Revival" is a central theme in non-metro adoption.
Leveraging the momentum from the "International Year of Millets," brands are flooding the market with millet-based cookies, roasted puffs, and multigrain chips that resonate with traditional dietary habits. In cities like Varanasi and Madurai, consumers are actively replacing fried namkeen with roasted Fox Nuts (Makhana), viewing them as a return to "grandma's wisdom" packaged in a modern format.
There is also a distinct "Label Reading" movement, where buyers in smaller towns are rejecting products with palm oil and specifically seeking "Baked, Not Fried" certifications. To meet this demand for "guilt-free" crunch, manufacturers are adopting "Vacuum Frying" technology. This process allows fruit and vegetable chips (such as okra, jackfruit, or sweet potato) to be fried at lower temperatures, retaining their natural colour, nutrients, and fibre, while absorbing significantly less oil than traditional deep-frying methods. This technology is critical in converting health-conscious but taste-driven consumers who refuse to compromise on flavour.
Avenues for Growth
Despite this rapid growth, the market is far from saturation. Research points to 70–80 million households who have the income to buy packaged food but are waiting for products that match their regional taste preferences, revealing a clear desirability gap. The future lies in hyper-localisation, with the next wave of growth favouring products that combine the shelf-stable convenience of modern packaging with the authentic, preservative-free flavours of regional cuisine. To bridge this gap, companies will need to invest in regional taste research, develop flexible product portfolios, and leverage digital platforms to test and scale offerings quickly.
Collaborations with local producers, adoption of smaller batch production, and the use of innovative packaging technologies that preserve freshness can help brands deliver authentic flavours at scale. As digital penetration deepens and cold chain networks expand, Tier-2 and Tier-3 consumers are set to move from passive buyers to primary protagonists, shaping not just demand but the very trajectory of India’s food revolution. Brands that understand these evolving preferences and act proactively will be best positioned to capture this untapped potential.
(Dr Sahni is assistant professor and Devank and Divyansh are dairy technology students at College of Dairy and Food Technology, Agriculture University, Jodhpur. They can be contacted at ftech.sahni@gmail.com)
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