Rabobank has published a report looking at the recent growth in the quick service, i.e. fast food, restaurant sector in India, and forecasting growth of 30% CAGR across the industry until 2015, outpacing 10% CAGR for the overall Indian foodservice sector.
The report, published by Rabobank’s Food & Agribusiness Research and Advisory department, says that rapid change in food consumption habits in India has spurred domestic and foreign quick service restaurant (QSR) chains to implement aggressive expansion plans. The bank says this growth will accelerate and, to sustain growth while focusing on quality and profits, Indian market QSRs will have to build collaborative and dedicated supply chains from the ground up – connecting local business partners, high quality vendors, the right commissaries, and state-wide or nation-wide supply chain solution providers.
“A younger population, higher rate of urbanization, larger disposable incomes, higher protein consumption, increased participation of women in the workforce, and exposure to western lifestyles are leading to the experimentation with, and adoption of, new dietary habits and more occasions to eat out for all levels of Indian society.”
“QSRs will be a double-digit growth story in India in the medium- to long-term, as food consumption habits in India are changing fast,” commented Asitava Sen, Head of F&A Research & Advisory for Rabobank in India. “A younger population, higher rate of urbanization, larger disposable incomes, higher protein consumption, increased participation of women in the workforce, and exposure to western lifestyles are leading to the experimentation with, and adoption of, new dietary habits and more occasions to eat out for all levels of Indian society.”
“As a result, we believe the time is right for both global and Indian QSR chains and their supply chain partners to expand in India. This growth will support the development of a new generation of Indian food processors and supply chain partners. Rabobank believes that there is significant potential for commissaries to establish themselves as a link between QSRs and food producers and processors,” Sen added.
Total industry size for the Indian foodservice sector was INR 460 billion (USD 8.6 billion) in 2011, and is expected to grow at a compound annual growth rate (CAGR) of 10 percent until 2015. Out of this total, the QSR segment is worth INR 33 billion (USD 600 million) and is expected to grow at a CAGR of 30 percent over the same period. At present, according to the National Restaurant Association of India, 50 percent of Indian consumers are eating out at least once every three months, and this shift is epitomized by the growing presence of QSR concepts, among them many global QSR players.
An efficient supply chain will help provide standard product quality to customers across stores, but supply fragmentation in India is significant, creating quality issues at the ‘back-end’. Limited modern storage and transportation infrastructure add to the problem, which is even more pronounced in perishable products. As such, capital investments in the upstream and midstream processing parts of the supply chain are critical, especially since food production, processing and preparation on a large scale are just beginning in India.
Relationships between QSRs and their channel partners have worked well in categories such as cheese, poultry and frozen foods in India, and there is room for such partnerships to flourish in other key categories of commodities and processed foods.
QSR players prefer to have multiple supplier options to diversify the risk and help in price negotiations. In segments such as poultry, cheese and French fries, there are only a few processors currently, but Indian QSRs may look at either developing small players as vendor partners or even consider backward integration into the business.
Nicholas Fereday, Rabobank analyst and author of a 2011 report on the U.S. QSR industry, said, “QSRs have proven very successful in the U.S., with some of the leading brands having a greater than fifty-year pedigree. Many of the lessons learned by these companies – such as how to weather economic downturns, manage input costs, and maintain brand relevance – will be very relevant to the emerging opportunities in India.”
The Rabobank report on the outlook for the Indian QSR industry is available to media upon request.
Rabobank Group is a global financial services leader providing wholesale and retail banking, asset management, leasing, real estate services, and renewable energy project financing. Founded over a century ago, Rabobank is one of the largest banks in the world, with nearly $1 trillion in assets and operations in more than 40 countries. In North America, Rabobank is a premier bank to the food, beverage and agribusiness industry. Rabobank’s Food & Agribusiness Research and Advisory team is comprised of more than 80 analysts around the world who provide expert analysis, insight and counsel to Rabobank clients about trends, issues and developments in all sectors of agriculture. www.rabobank.com/f&a
Logos, product and company names mentioned are the property of their respective owners.