The Indian food and beverage market, estimated to be over Rs 2 lakh crore in size, may nearly double to touch Rs 3.80 lakh crore by 2017, according to a FICCI-Grant Thornton report.
The report titled “Unlocking the potential in the food and beverage services sector” highlighted the overall potential of the industry and identified key challenges. It also focussed on how to improve ‘ease of doing business’ in this sector and make it more attractive for both Indian and foreign investors.
Changing demographics, increase in income, urbanisation and growth in organised retail is driving India’s food and beverage sector, the report said. The F&B service industry is one of India’s most vibrant industries with over 25% yearly growth.
Amongst the various segments, casual dining and quick service restaurants constitute more than 77 per cent of the overall market. The report however notes that restaurant brands and chains of both Indian and MNCs still have low penetrated and there exists a large opportunity to create bigger restaurant chains.
According to Grant Thornton India Partner Vinamra Shastri, the government has been of late focused on developing the food processing infrastructure through the promotion of cold chains and integrated food parks by subsidising the capital cost.
“This will ensure the right infrastructure availability to set up processing units to provide quality inputs to the restaurant sector and also provide a big boost to the availability of processed foods within the country. These initiatives will go a long way in promoting the ‘Make in India’ initiative,” he added.
However, the pace of growth will be determined by the manner in which key issues – lack of quality infrastructure, shortage of skilled manpower, increasing real estate cost, large number of licenses required and the time to obtain them and Tax incidence – are addressed.
“High real estate costs limits the speed of our roll-out – with high working capital requirements and upfront deposits, the high rentals not only hamper our overall margin, but also limits the scalability. Sharing of real estate costs between developer and restaurant owner through a revenue share mechanism would help in lowering rentals and providing a kicker to the restaurant industryand multiple licensing among others,” Dhuv Aggarwal, co-founder and Director, Crazy Noodles was quoted as saying in the report.
Multiple taxes like VAT, excise, and service tax, besides different state taxes, are the huge burden to the Indian restaurant industry. The taxes add up to 17.5-25 per cent of the bill value.