Key trends impacting foodservice industry in India

The unorganized segment, which are eateries not licensed by FSSAI like dhabas, street stalls, roadside vendors, food carts, etc., accounts for a 66 percent share in the food services market and is projected to fall to 57 percent in 2022 as many unorganized businesses continue to move towards the organized sector.

According to report published in indiaretailing.com the organized market (chain and organized standalone outlets) was estimated at Rs 1,15,000 crore in 2017 and is projected to grow at a CAGR of 16 percent, to reach Rs 2,37,000 crore by 2022, gaining a share of 40 percent from 31 percent in 2017.

Larger focus on value meals: For the Indian food services market, value for money will continue to be the order of the day as Indians are eating out and calling in much more at an average of nine to ten times per month. Indians no longer need a reason or a occasion to eat out. Indians, irrespective of their economic class, are going to eat out – simply because they want to experiment, love food and prefer to socialize and unwind over food, or that’s how they want to spend their free time. Indian consumers, though willing to spend more and more on experiential eating, are known to be quite cost-conscious and are looking at value for money concepts, or for cost efficient functions when calling in. When thinking about consumer spending, affordability is something that the industry needs to keep in mind and offer consumers the opportunity to treat themselves without being significantly out of pocket.

The youth shall drive the food service industry towards explosive growth due to their sheer numbers and consumption habits. The country’s burgeoning population of Millennials and Gen Z’ers (approx. 830 million) are leading the charge in shaping the food service trends.

The Millennial effect: Millennials (people between the ages 18 and 35) now make up the majority of dining-out customers and they have been making their presence felt with the rise of casual/ fine dining restaurants, cafes, pubs, bars, clubs, lounges, and international fast food joints, which have to come up to cater to the Millennials’ changing food habits. So, it is critical to understand how the Indian Millennials think and behave so as to understand their spending patterns and stay current with their evolving dining and flavor preferences.

Generation Z: Generation Z, otherwise known as Centennials or post Millennials, is the generation born year 2000 onwards and is in the age group of 15-18. Gen Z, with early exposure to digital technology, is already a force in food consumption and starting to drive a lot of trends as they are the ones calling the shots in households in terms of food decisions – dining out or calling in. Decoding the behaviour of the tech-savvy and on-the-move Gen Z, and studying the changing preferences of these young future consumers will tip off the food operators on what they can expect from the generation that will help determine the future of foodservice; and how best they can capture them. Food tech will play an important role going ahead since it’s influencing all aspects of restaurant business in India – be it to find out which restaurants to go to, or for table reservations, feedback or calling through the apps – cloud kitchens like Inner Chef or FreshMenu – there are many options that have come up which didn’t exist earlier.

Use of technology: Technology has really transformed the food services industry in the past five years with the advent of a whole range of food tech concepts for food exploration, discovery, reservations, delivery, feedback, and internet restaurants, among others. Earlier, food enthusiasts had to wait for annual food guides, eating-out directories of restaurants or other publications on opinions and vital information on where to dine out. But with food discovery or restaurant search players like Zomato, EasyDiner and Dineout, expert reviews and opinions are made available in just a few clicks. Of late, providing the service of table reservations to their clients has become an integral part of a restaurant’s operation.

One major difference technology has brought in is that the consumer’s reviews, ratings and feedbacks are available online and visible. It has also made the market very competitive and transparent. So, performance is important and it should be consumer centric and geared to provide a quality experience. With the advent of cloud technology facilitating online ordering, cloud kitchens have grown in numbers as they make it easier to manage high rentals and poor margins. And being not real estate intensive, they will continue to grow provided they understand consumers’ needs and deliver differentiated or curated experiences in terms of delivery, packaging, or by way of offering healthy and nutritious food. Technology is also not limited to the front-end only – the biggest benefit has been to the kitchen, with better and efficient equipment coming in. There is a lot of innovation happening in the last mile delivery front.

Ordering to grow rapidly, with a focus on convenience: The demand for takeaways and home delivery services have swelled over the years across all formats. This is due to the convenience that mobile app-based food ordering offers, both in terms of the ordering process – which can be done end-to-end using just a smartphone – and the comfort of doing the whole process sitting at home with little or no effort.

The growing demand for takeaways and home delivery services can be attributed to the ease of communication along with the penetration and access of the internet and smartphones, increasing all-round efficiency of the delivery business in India in terms of the order taking process, the packaging, the delivery time, coverage, value offers, and the growth of online channels. Ordering in has changed dramatically in the past five years with platforms like Foodpanda – which pioneered the food ordering industry – Zomato and Swiggy, etc, that have made it convenient to order food from the neighborhood restaurants. Dining in and food delivery, which accounts for 18-22 percent of the market now, has the potential to reach 35-40 percent in the next few years, presenting a big business opportunity for restaurants – provided they extend the comfortable experience of a restaurant to delivery, packaging or any tech interface they may have with the consumer. Tiffins, homestyle meals and subscription service will also show encouraging growth.

Consumers want healthy foods: People are becoming more health conscious with healthy eating increasingly on the consumer’s agenda. Cloud kitchens that have come in are also focusing on healthy food options. Restaurants that are transparent about their ingredients and product claims and serve healthy and nutritious food will find themselves in the good books of consumers and enjoy regular patronage. Indian cuisines still rule the roost despite the wide variety of international cuisines available. Indian cuisines have the largest market share at 60 percent and will continue to grow. For Indian companies specializing in Indian food, this is the right time to take it to the world. The ecosystem internationally is ready. If we create the right format, franchise it internationally, there is a potential for creating an Indian QSR that we can take overseas according to indiaretailing.com

With food becoming omnipresent, it has become very important for the operator to be able to differentiate for the consumer to create an impression as there are enough choices available to the consumer now. The speed of change that is happening in terms of the consumption market is really high with some industries growing at a dramatic pace. One needs to understand the speed of change that is happening in some businesses and see what the game changers are doing, how the market is going to evolve, how it could influence the future and thus act accordingly.