The market is dominated by global players
Fast food is one of the world’s fastest growing food types. India is seeing rapid growth in the fast food and restaurant industries. It now accounts for roughly half of all restaurant revenues in the developed countries and continues to expand. The trend is radically changing the way people eat in India.
Based on rising disposable income, changing consumer behaviour and favourable demographics, India is witnessing a tremendous growth in its fast food and restaurant industries. Additional reasons include exposure to western cuisine, the rising number of nuclear families and growth in the number of employed women, which are also having a significant impact on the eating out trends and growth of the fast food industry in the country.
For a nation that is particular about its food and significantly fond of home cooked and fresh food, this trend is showing the globalisation of India and increase of new markets not witnessed in India before. With increasing number of people eating out the industry offers major opportunities to the players to capture a larger consumer base. As a result of the trend, all the international food players like Pizza Hut, Dominos, McDonalds and KFC are investing huge amount of money to grab a share of this highly lucrative market.
Pizza Hut for example, is one of the flagship brands of Yum! Brands, Inc., which also has KFC, Taco Bell, A&W and Long John Silver’s under its umbrella. Pizza Hut has 143 stores across 34 cities in India.
A report by Research on India has found that traditionally, the Indian consumers have been eating at roadside eateries, dhabas and stalls which still occupy a major share of the unorganised sector, where fast food has been eaten traditionally. However, with the changes in the economy of the country and injection of modern employment from the West, the non-home food market has now changed.
The market is highly competitive with a large number of Indian and foreign players seeking business in this upward trend.
The market is dominated by global players, specially in the organised fast food segment. Growing trend of consumption of multi cuisines and increasing brand awareness has led to the increase of global players. Organised modern formats like malls and supermarkets have also become a favourite destination for the outlets. Larger companies are teaming up with small franchisors and mall owners to promote their brand.
The growing segment comprises of formats like fast food chains, cafes and fine dining restaurants. Two sub segments of the fast food market are the Pizzas and Burgers. These have now developed into part of the nation’s eating habits. Their share is continuously growing with the key global brands such as Dominos, McDonalds and KFC making their marks quickly. The chains have had no problems accommodating different menus for the Indian consumer. For example, McDonalds will not sell beef burgers but instead lamb and chicken burgers and have a larger selection of vegetarian food compared to the West.
Changing behaviours of the Indian consumer have no doubt contributed to the success. Some of the brand outlets first started only in major cities such as Delhi and Mumbai. Now, they are continuously expanding to cities like Pune, Surat, Ahmedabad, Rajkot, Nasik, Aurangabad, Kolhapur, Chandigarh, Jammu, Chennai, Bhubhaneswar, Goa and Bangalore, to meet major demand.
The challenges for the new style of Indian restaurants and fast food joints are food price fluctuations, cumbersome licensing laws, high cost of real estate and lack of skilled manpower.
Another area experiencing growth is the ‘Ready To Eat’ (RTE) market in India for food. RTE can be defined as food products that constitute complete meals; require minimal processing, if any, typically requiring re-heating to desired temperature or addition of water. They are often termed as ‘Convenience Food’ since they are positioned as ‘value for money’ products that solve the issue of time-constrains faced by consumers due to the pressures of urban life. RTEs are categorised into two product categories Shelf stable packaged food and Frozen packaged food.
When RTE foods were introduced first in India the concept failed at that time and has only recently exploded. Changing consumer habits, preferences and perceptions has driven the market. A strong correlation exists between the growth of RTE foods and organised retail formats such as supermarkets and hypermarkets. Companies such as Taj Foods, Sangeeta Foods (Raja Foods), Rajbhog Foods Private Limited are all part of the Indian RTE industry.
These trends show that the modernisation of India is well on its way. These changes in the eating habits Indians are more than likely referring to middle class and upward earning society of India. The prospect of seeing fast food such as burgers and pizzas being the staple diet for lower classes will not likely be the case, as it is perhaps is in Western societies, due to the contrast in affordability.