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India’s FoodService Industry: Opportunities and Trends

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At a panel discussion at India Food Forum 2017, foodservice industry stalwarts came together to discuss some of the burning issues faced by the industry today: changing diner preferences; changes in India‘s foodservice industry vis-a-vis what’s happening in the rest of the world; changes in regulatory and legal environment; impact of digitalisation on foodservice industry; and new formats of food outlets.

FoodService Industry - Opportunities and Trends
The country’s economic dynamics are playing out in force and the imprints are visible all over: the ever-evolving consumer demands, rapid urbanization, favourable demographics, increased disposable income, more women in workspace and changing lifestyles and food habits

India today is one of the fastest growing economies in the world. It is expected to register a GDP growth of 7.5 per cent this fiscal and is on its way to becoming a US $3.8 trillion dollar economy by 2021. The country’s economic dynamics are playing out in force and the imprints are visible all over: the ever-evolving consumer demands, rapid urbanization, favourable demographics, increased disposable income, more women in workspace and changing lifestyles and food habits. All of these economic factors have ushered in a scenario where the foodservice industry is changing every quarter and there are ripples of disruptive changes coursing through the market. But what is heartening is the positive upside to these changes with the market outlook presenting significant opportunities for industry players.

Food Service: Key Highlights

• CAGR growth forecast of 19 per cent for the foodservice sector in the organized segment for the next five years.
• The foodservice sector is estimated to be valued at Rs 500,000 crore in 2021. The organised segment is set to grow from the current 30 per cent share to 41 per cent.
• The per capita spend of Rs 6,500 per year on foodservice is significantly lower compared to China where per capita spend is seven times higher.
• All the data points to a big technological revolution in the offing. With 2 per cent of the foodservice market on apps, the industry already begets one million daily phone orders, 30 million online orders, 200 million active Internet users. The share of smartphone users is expected to be 39 per cent of cell phone subscribers by 2019.

The numbers are fairly impressive and speak for themselves. And what they clearly point to is a sector with plenty of opportunities waiting to be tapped. “The foodservice sector has witnessed an unprecedented growth and considering the significant contribution it makes to the economy, it is expected to contribute 2.1 per cent of the total GDP of India in 2021. The sector will bring in a lot of investments, opportunities and challenges,” said President, , .

Changing Landscape and Emerging Trends

The foodservice sector is witnessing growth due to an increasing preference to eat outside, growing participation of women in the workforce and double income families – all creating new opportunities for the industry.

Food evolution is happening thanks to innovations in the traditional menus and experimental consumers.

Indian food will continue to dominate and grow strong and be complemented by the rise of Indian ethnic and regional cuisines. Foreign players are adapting themselves to suit the local palate while Indian restaurants are introducing Thai, Mexican and Italian cuisines.

Health and hygiene conscious consumers with wellness on the mind are moving towards healthy eating options. Foodservice operators are meeting customer preferences by adding healthy food options to their menu, ranging from lactose-free, vegan, low carbohydrates, gluten-free and diabetic meals, etc. Some restaurants have also started serving health food or organic food as their core offerings.

Internet penetration and access to smartphones contribute to a new breed of consumers with an increasing demand for gourmet and specialized foods.

Technological disruptions in the market are taking place with web-based ordering, and it is set to revolutionize home delivery with the faster availability of food on order. Home delivery and online ordering are together moving the needle on consumer convenience.

Food trucks, drive-through and takeaway joints are being set up for consumers on the go. Food aggregators and food courts are consolidating all format types under one roof.

This changing landscape, in tandem with upcoming trends and the growth trajectory that India is experiencing, is fast-tracking the growth of the foodservice sector.

Key Growth Challenges

Availability of skilled manpower: Finding and retaining quality manpower is an issue and the industry is beset with attrition rates.

Technological disruptions: With rising digital influence on consumer decision making, companies need to adopt technology to enhance consumer experience and improve operational efficiency.

Rising inflation/ changes in raw material prices: “If we can fix the back-end through technological interventions, then we can reduce wastages, inputs and overhead costs. We can then price our products better on the menu,” said Director, Commercials, , .

Regulatory and legal framework: Foodservice operators are expected to conform to the hygienic and sanitary requirements as laid out by FSSAI.

The Way Forward

While the foodservice industry evolves and progresses, technology can be a great enabler to take the growth story forward. Since the sector is largely unorganised, the adoption of technology has been sporadic. With consumer preferences expected to drive innovation, technology can be used for generating a customer feedback system, GPS-aided delivery, digital menus, mobile payment solutions and mobile applications for taking orders. Already, digital kiosks and menus are visible, leveraging the cost-effective medium of social media platforms to reach, interact, communicate and promote offers.

We are in an experiential phase and while we follow and adapt Western standards, it will be a while before we know what works for us in terms of sustainability. Ambiguity in food regulations and licensing procedures are a concern and while there is a lack of regulatory standards for organic foods and a need to streamline it.

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