Did you know that in some parts of Singapore and Thailand apartments do not even include a basic cooking facility? So ubiquitous are affordable eating outlets that consumers use the space meant for kitchenette for other purposes.

While such a situation may be still be a far cry in India, when it comes eating out, Indians too seem to be marching ahead with gusto.

Take a moment and think about what tickles your palate. Chinese, Lebanese, Italian, Mediterranean, South Indian or African?

Research reports seem to indicate that Indian consumers seem to be patronising Italian cuisine the most, gulping down pizzas and pastas. Chinese comes next. This, reports say, is largely fuelled by young consumers aged 14-45 years.

It’s not surprising that the higher frequency of eating out has also evolved the market for the food services sector. The Indian food service market has come a long way from the early Nineties when it was dominated by unorganised players and few brands.

The revolution began in 1996 with McDonald’s, Pizza Hut, Domino’s Pizza, Subway and Yo!China, among others, setting up shop in the country. Since then, the food services market has been continuously growing.

Let’s look at the size of the Indian food industry. A report by National Restaurant Association of India (NRAI) and Technopak reveals that the size of the food services market in India is estimated at $48 billion in 2013. This is projected to grow at a CAGR of 11 per cent over the next five years to reach $78 billion by 2018.This market is largely unorganised. Chains account for as much as five per cent of the total market.

“The good news is that the food services industry is set to grow for many years to come, given the rising disposable incomes, a greater population of younger people, the growth of consumers in smaller towns and the widening exposure to new cultures and cuisines besides an increased propensity of eating outside the home,” says Atul Singh, President, CEO, Coca-Cola (Indian and South West) and President, NRAI.

Interestingly, the QSR (quick service restaurant) and casual dining formats together account for 74 per cent of the chain market while cafes make up 12 per cent. Cafes make for an impulsive option to hang out while fine dining places are reserved for families.

Destination Menus

Quick service restaurants are a mainstay of the Indian food service market, and are growing fast. Fine dining is gaining prominence too. Both multi-cuisine and single-cuisine establishments have shown tremendous growth.

Organised market players such as McDonald’s, Sagar Ratna and Café Coffee Day are looking to increase their market share in the QSR category by capitalising on untapped locations such as highways and airports or by creating new destinations with customised menu offerings.

McDonald’s recently introduced a breakfast menu to capture the growing market for outdoor eating.

Vikram Bakshi, Managing Director, Northern and Eastern Region, McDonald’s India, said, “When it comes to breakfast, it is still a blue ocean out there. Globally, it is a popular concept but in India it is still to catch on.”

“Consumers are eating out nearly six to seven times a month as per our research, as lifestyles are changing. There is a huge opportunity for us as we are targeting people on the move,” Bakshi added. McDonald’s has about 300 stores across India in formats including drive-throughs, full menu restaurants and kiosks.

According to the NRAI report, the chain restaurant space is marked by the presence of almost 100 brands with more than 3,000 outlets spread across various cities.

Dine-in contributes the highest, 67 per cent, to the total QSR sales and is followed by takeaway orders which account for 19 per cent of the sale. Home delivery is also picking up with most chains offering this service to consumers within a defined catchment. On-the-go meals too seem to have picked up with about 34 per cent of the total consumers flocking to them during office hours.

Around 80 per cent of the consumers order in food at least twice a month, reflecting the need for this convenience especially in larger cities where distance is a prime issue.

Ajay Kaul, CEO, Jubilant FoodWorks Ltd, which is a master franchisee of brands such as Domino’s Pizza and Dunkin Donuts, says, “You have to create a lot of stimuli for consumers, whether through online and SMS. We have been enticing consumers and will continue to put money in branding campaigns.”

Hindrances to growth

The key issues that continue to pose a challenge include high real estate costs, rising food costs, shortage of quality manpower, fragmented supply chain and over-licensing.

McDonald’s Bakshi said the lack of infrastructure and high commodity prices were hitting margins. “We undertook a price hike last year. We may look at a price hike later this year. Also, infrastructure bottlenecks such as electricity supply and water are issues we face.”

Saloni Nangia, President, Technopak, notes that this is the phase of consolidation for the food sector. The need of the hour is to establish an end-to-end supply chain, making use of modern structures such as logistics parks, integrated cold chain and last mile connectivity. She says the entry of brands such as Starbucks Coffee and Dunkin Donuts is pushing the demand for retail space.

The NRAI report reveals that despite the food services market accounting for only 19 per cent of the total organised market in India, it holds an estimated 30 million sq. ft. of real estate space. The rise in the space allocated to food services outlets in food courts and standalone spaces in malls reflect the growing confidence of real estate developers.