Government should grant industry status to the sector that's growing at a CAGR of 10%
The food services market in India is projected to reach over Rs 5,52,000 crore in the next five years i.e. a growth of 63.5% from the present (in 2017) estimates of Rs 3,37,500 crore.
According to a latest FICCI-Technopak report, the sector is growing at a compounded annual growth rate (CAGR) of 10% and two mega metros viz. Mumbai and Delhi-NCR contribute to 22% of the overall food services market (11% each). This is followed by six mini metros (Pune, Ahmedabad, Bengaluru, Chennai, Hyderabad and Kolkata) comprising of 20% share in this space.
The report pointed out that high percentage of young and working population which is well travelled have double incomes and is experimental along with being tech savvy, is eating out more than their predecessors, driving the growth of the food services market. Availability of organised retail space is helping in consistent growth of Indian and International brands across different formats.
The impact of the market as a whole on the entire ecosystem – right from real estate to agriculture, kitchen equipment to supply chain and employment is significant. “However, certain challenges such as availability of quality manpower, high attrition rate, high real estate cost, fragmented supply chain, over-licensing etc act as headwind for growth of the industry,” the report said.
Sanjaya Baru, secretary general, The Federation of Indian Chambers of Commerce and Industry (FICCI), said, “India’s overall retail opportunity is substantial, and coupled with a demographic dividend (young population, rising standards of living and upwardly mobile middle class) and rising internet penetration; strong growth in retail and e-commerce is expected. The Indian government’s ambitious Make in India, Digital India, and Start up India project is indeed giving a great stimulus to the food services retail sector.”
Availability of organized retail space is helping in consistent growth of Indian and International brands across different formats. The Indian food services market is attracting significant interest from domestic as well as international private equity (PE) and venture capital (VC) funds. Large investments can be attributed to the fact that the food services market is a domestic consumption driven story with great growth potential.
Some key trends gaining traction in this space include virtual kitchens and ready-to-cook players. “Ordering-in has become an integral part of the eating experience and several logistics players are providing last mile delivery for restaurants. Thus, food services is emerging as a key contributor for the Indian economy, including employment generation, skill development, growth in the allied industries, entrepreneurship, and tourism and creating experiences for the Indian consumer,” the report said.
The report also emphasised on the fact that the government and regulators need to recognise the contribution and role of food services industry and take measures to create a positive policy framework for industry’s growth. Saloni Nangia, president, Technopak Advisors, said, “Hopefully, the various state and the central governments will provide the requisite policy and fiscal support to enable it to grow steadily and thereby make an even bigger positive impact by way of creating more employment and by way of meeting the changing consumer needs more efficiently.”
The food services sector is still to get an industry status from the government which further makes it difficult to attract the desired levels of investments. For the rapid growth of the sector, it is desirable that the government should grant industry recognition to this sector and facilitate easy availability of working capital loan to the players through policy formulation.
The food services sector in India is expected to have generated direct employment for 5.5-6 million people in the financial year 2016, which is expected to increase to 8.5-9 million by the year financial year 2021. Indirect employment has seen a growth at CAGR of four per cent from 2013-2016 and expected to grow 6% till 2021.
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