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Tier 2 and 3 Cities New Destination for Fast Food: Assocham

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The annual spending of middle-class households on fast food restaurants in India’s Tier 2 and 3 cities has increased from Rs 2,500 to Rs 5,200 (a growth of 108% on fast food in the last two years), according to a study by the ().

India’s market has remained largely affected by the economic slowdown, and touched the $50 billion-mark from $35 billion last year, according to report titled ‘Indian fast food market new destination: Tier-II and III cities’.

“The factors propelling this buoyancy include the changing economic and demographic profiles of consumers in India, who are exposed to international brands and aware of the global trends. Considering a large portion of customers are youth, this remains a key growth driver too,” stated , Secretary General, Assocham. According to the report, over 65% of the population is under 30 and exposed to international brands.

The annual average spending of each middle-class household in India’s Tier-I cities has increased by over 35% to Rs 6,800 on fast food restaurants in the last two years. But middle-class families in Tier-2 and 3 cities are spending much higher in fast food restaurants in Tier-I cities, and the expenditure on fast food restaurants has increased from Rs 2,500 to Rs 5,200 (a 108% increase) in the last two years. Indians are eating out almost eight times a month. This is less than the number of visits to restaurants by people in the US (14), Brazil (11), Thailand (10) and China (9). There is a steep rise in QSR spending pattern in Tier- 2 and 3 cities, due to increase in nuclear families, working women, growth in income, changing lifestyles, and more importantly, greater accessibility to QSR outlets.

According to Rawat, The Indian fast food market is now spreading its wings to the smaller towns and cities. There is room for growth in the untapped Tier-2 and 3 cities, in fact, the future of the Indian fast food industry lies in these cities. “With increased competition and cost of operations in the metros and Tier-I cities, a number of Tier- 2and 3 cities may offer better growth prospects for players across sectors, driven by factors such as favourable demographics, infrastructure growth, and higher disposable incomes driven by both strong economic growth and government support through various employment schemes,” said the report.