Quick service restaurants buck slowdown in smaller towns

Changing demography, increased appetite to try out international food, exposure to global media and cuisine has shot up the annual spending of each Indian middle class household on quick service restaurants (QSR) in smaller towns by 108 per cent. This is revealed in a study by industry body Assocham.

Despite the QSR sector remaining affected by the economic slowdown, it has increased to $50 billion from $35 billion last year, according to the study titled “Indian fast food market new destination: Tier-II & III cities”.

“The factors propelling this buoyancy include the changing economic and demographic profiles of consumers in India and also exposed to international brands and are far more aware of global trends. Considering a large portion of customers are youth, this remains a key growth driver too,” said D S Rawat, Secretary General ASSOCHAM while releasing the paper.

The annual average spending of each middle class household in India’s tier-I cities have increased by more 35 per cent to Rs 6,800 on fast food restaurants in the last two years. On the other hand, middle- class families in tier-II and III cities are spending much higher in fast food restaurants in tier-I cities and have increased from Rs 2,500 to Rs 5,200 (108%) on fast food restaurants in the last two years, reveals the ASSOCHAM findings.

As per the findings, Indians are eating out more often now, as many as 8 times a month less than US (14 times), Brazil (11 times),  Thailand (10 times), China (9 times) etc, reveals the ASSOCHAM findings.

There is a steep rise in quick service restaurant  (QSR) spending pattern in tier-II and III cities which is propelled by the increase in nuclear families and working women, steady growth in incomes, changing lifestyle and eating patterns and, importantly, greater accessibility of quick service restaurant outlets”, highlights the paper.

Rawat further said, after capturing the tier-I cities, Indian fast food market are now spreading their wings in tier-II and tier-III cities. However, there is large room for growth in untapped tier-II and tier-III cities and the future of the Indian fast food industry lies in tier-II and tier-III cities.

He also said, “more than 65 per cent of the population is aged less than 30 years and are exposed to international brands. Considering a large portion of customers are youth, this remains a key growth driver too. It is one of the sector that has managed to grow even during the economic slowdown”, adds the paper.

With increased competition and 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 and government support through various employment schemes, adds the paper.

“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 all resulted in creating lifestyle and aspiration levels on a par with other fast-moving metropolitan cities”, highlights the paper.

The growth in nuclear families, particularly in urban India, exposure to global media and Western cuisine and an increasing number of women joining the workforce have had an impact on eating out trends.

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