India’s Food Retail market is worth RS 25,12,962 crore (2014) and holds a 65 per cent share in the country’s total retail market pie. The Food Retail market has grown at an average 16 per cent p.a. from 2010 to 2014. With the same pace of growth, it will be worth RS 61,11,461 crore by 2020. Out of this, Food and Grocery (F&G) retail is worth RS 23,03,496 crore and Foodservice (FS) market is valued at RS 2,09,466 crore. The average rate of growth during the past four years in F&G has been 15 per cent p.a. and 22 per cent p.a. in FS. The respective growth rates are estimated to take these retail markets to RS 54,20,789 crore and RS 6,90,672 crore by 2020.
Revealing the findings mentioned above by IMAGES Research done for the India Food Report 2016 – which covers in-depth analyses and perspectives on the Food Retail market in India from leading industry experts and think tanks – Chief Convenor of India food Forum, Amitabh Taneja, said that food is the largest retail consumption category in India, accounting for 33 per cent of overall consumption expenditure.
Giving more details about the findings of the Report, Taneja revealed that more than half of the total household sector spending on food is expected to come from rural India in the coming decade. “There is huge demand from small towns and the rural markets. So, I expect the next phase of revolution (in terms of growth) in the food sector to come from rural areas and tier-II & III cities. If the economy has to grow 8-10 per cent, then there is no way that it can happen without investing in the Food sector and making value additions, which will lead to higher incomes and better living standards and will, in turn, generate more and more demand.”
India’s food processing industry was about RS 2,47,680 crore ($41.28 billion) in 2013 and is expected to grow at a rate of 11 per cent to touch RS 4,08,040 crore ($68 billion) by 2018. The food processing industry forms an important segment of the Indian economy in terms of contribution to GDP, employment and investment. The industry contributes as much as 9-10 per cent of GDP in agriculture and manufacturing sector, according to the Ministry of Food Processing Industries (GOI). The Confederation of Indian Industries (CII) estimates that food processing sector can attract an investment worth $33 billion in a span of 10 years. The sector has a potential for generating employment to the tune of 9 million people.
The India Food Report 2016 takes a close look at the currents, undercurrents and trends in the country’s Food & Grocery (F&G) and Foodservice (FS) markets to map out their future course and trajectory and its implications for all stakeholders. Both these sectors are evolving and maturing, offering lots of opportunities for business and growth. Data from the chapters in the Report show that over the next six years the food market is expected to register an average growth rate of 5.3 per cent per annum. The pace of growth is expected to be slightly higher at 5.7 per cent per annum between 2020-21 and 2025-26. Both urban and rural growths are likely to be considerably higher during the next decade as compared to the decade ending 2014-15.
What is fuelling the growth of these two sectors and what are the opportunities for investment? While the chapters in the book offer a detailed perspective and analysis of food business segments – food retail, food processing, food logistics & support, food services, supply chain and technology – the market dynamics shaping India’s F&G retail and food-service business have revved up considerably in recent years.
Going forward, Food Retail is expected to reach RS 61,00,000 crore by 2020. The sector will have much more to offer to both domestic and international investors, in all aspects of growth and business. Within the food basket, there will be sub-categories that will emerge strong, health-based foods that will see increasing demand, new flavours from across the world will become popular, and new concepts, formats, themes will get introduced in Food & Grocery and Food Service markets.
New players, both in F&G Retail and Food Service, are emerging on the horizon with each one promising faster and better services and quicker delivery. New and innovative retail formats are being introduced. Our lifestyles are evolving, which is influencing our consumption and eating habits. These changes are bringing about the development of new and hybrid formats of organised food retailing. At the same time, the growth of online business presents fresh new opportunities for both F&G and FS players and in a way that they would be able to add value to the supply chain.
Looking into the future, the Indian F&G market will be unique in its own way and will be a medley of extremes. The unorganised, organised and online players will co-exist in the Indian retail ecosystem and will expand the market for each other, as all have unique strengths and the sector is large enough to accommodate all participants.
It is expected that unique partnership models will emerge as the retail market matures and this partnership will further push the sector growth. Early signs of this are already visible as e-grocers aggregate orders and pass them on to brick and mortar grocery stores nearest to the consumer, for local delivery. To a large extent this co-existence will be driven by the consumer who will not shun one channel for the other and will seamlessly switch between channels. The consumer approach to channel selection will thus be “inclusive” and not “exclusive”.
The shopper is moving seamlessly between the physical and digital world, and the mobile is fast becoming the central processing unit of her life! She is buying more and more food online – grocery buying on the internet has grown by 14 per cent over the past two years. Over all, F&G e-tailing is the fastest growing category in India.
In India, the online market stands at about at 1 per cent of the total retailing market but considering that the country’s tech-savvy, young generation has made India the third-largest country in terms of internet users, the growth in electronic commerce may happen more rapidly than expected. The e-tailing sector is booming on the growing internet user base, which was projected to cross around 400 million users by 2020. E -tailing in India has the potential to reach US $20-30 billion by 2020.
A major contributor for the growth of e-tailing is the Indian urban population; Mumbai, Delhi and Kolkata ranked among the top three cities in India respectively with the maximum number of internet users. The shopping style of Indian customers is changing fast and it is expected that in the next 10 years, around 30–40 per cent of the total retail in top 75 cities of our country will be done through online.
In the Foodservice industry too, the increasing income and exposure to new avenues to express consumption is bringing in sweeping changes. More than 65 per cent of the Indian population is aged less than 30 years and exposed to international brands. Increase in literacy, high disposable income, exposure to media, greater availability and penetration of a variety of consumer goods into the interiors of the country have also resulted in creating lifestyle and aspiration levels on a par with other fast-moving metropolitan cities.
So apart from the metros and mini-metros such as Delhi-NCR, Mumbai, Hyderabad, Chennai, Kolkata and Bangalore, major food service brands are also looking to spread out to a number of tier-II and tier-III cities, like Lucknow, Jaipur and Ahmedabad, on account of the growth in infrastructure and business opportunities there. More than 50 international chains of restaurants have entered the country and have made Rsoads into even tier– II and tier– III towns. This has helped the existing domestic players to consolidate and thousands of new ventures to flourish.
With increased competition and high cost of operations in the metros and tier I cities, a number of tier II and III cities may offer better growth prospects for players across sectors, driven by factors such as favourable demographics, infrastructure growth and higher disposable income driven by both strong economic growth. Many segments of the Foodservice industry have already adopted this strategy to keep growing and build on the available opportunities.
The QSR sector has thus managed to grow even during the economic slowdown. As economic growth returns, Cafés & QSRs in the organised segment will continue to grow at a CAGR of ~11 per cent and ~14 per cent respectively. In the organised market, the chained segment is expected to grow at a healthy rate as compared to the licensed standalone segment. In the chained market, the QSR and the CDR constitute ~75 per cent of the total organised food service market followed by cafés (12 per cent). Café and QSR’s are projected to grow at a CAGR of 15 per cent and 18 per cent respectively in the chained segment.
The higher growth in the chained segment for the next six years will be driven by the increasing presence of international brands, strengthening of back-end infrastructure, acceptation of new cuisines and formats, changing lifestyles and aspirations and emergence of entrepreneurial ventures in these segments.
The future will belong to the players who will put in place better customer-friendly models and faster modes of delivering service. All of these will help to grow and expand the market, build consumer confidence and brand loyalty.