F&B Imports To See Quantum Growth

EH&C Staff - Mumbai

A study conducted recently highlighted India's booming tourism sector and its rapidly growing Western-style fast food joints that offers unlimited opportunities for foreign food and beverage exporters, as Indian food imports are likely to grow by six to seven per cent over the next few years.

Eyeing the over 250 million-strong middle class, a US department study says the prospects for investment in Indian markets could be gauged from the fact that total Hotel, Restaurant and Institutional (HRI) service sector sales of food and beverage amounted to US$ eight billion during the 2003-04 period.

An upswing in the Indian hotel industry since 2003 following turnaround of the global tourism industry, positive impact of the 'Incredible India' tourism promotion campaign and the world's increasing interest in India's rapidly growing economy are some of the main reasons cited for growth.

Though Indian consumers, on an average, spend only 2.5 per cent of their food expenditure in hotels and restaurants, the HRI service sector is expected to grow by six to seven per cent over the next few years.

The study also showed that 'Though new, unorganised and untapped so far, the HRI service sector in India has vast potential for growth as there are approximately 55,000 registered restaurants in the organised sector and in the range of 1,00,000 to 5,00,000 in the unorganised sector, comprising innumerable roadside eateries and tea/snack shops.'

The institutional food service sector consists of food service facilities for railways, government and corporate offices, education institutions, hospitals, prisons, armed services, and airlines. The Indian middle-class, which some estimate is 250 million-strong and growing at approximately 30-40 million a year, is the main driver of the economy, the study pointed out.

The economy of the country is widely anticipated to double by 2010 (Merrill Lynch 2004) to become the world's third largest by 2050 (Goldman Sachs).

According to the study, hotels managed to get a minuscule five per cent of total sales of Indian food service sector while restaurants and institutional caterers together cornered 52 and 43 per cent respectively.

In recent years, the Indian hospitality industry has benefited from a steadily growing economy and a booming tourism sector. Foreign tourist arrivals into the country in 2004 crossed 3.36 million, a growth of 24 per cent over the previous year.

This growth is expected to remain strong over the next few years, the study said, adding that the Indian hotel industry was gearing up to cater to the food needs of the international visitors.

A rapidly growing Indian economy (six per cent annually over the last decade) has increased incomes of the consuming class. By 2007, approximately 22 per cent of households (44 million) are expected to have an average annual income of US$ 3,150 (US$ 17,300 on purchasing power parity basis) compared to less than seven per cent in 1995, the study pointed out.

An expanding young population, more women in the workforce and increasing urbanisation support HRI food sales, the study said, noting that close to 30 per cent of the population live in urban areas. This share was likely to grow to 40 per cent by 2025.

Sixty-five million people are expected to enter the 20-34 year age group from 2001 to 2010 in India and the number of dual income households has been expanding rapidly in urban areas, the study observed.

The eating-out culture is evolving fast in India, as more consumers seek variety in their food choices. Urban Indians are aware of international cuisines and an increasing number are willing to try new foods.

About 4.5 per cent of urban consumers eat outside their home at least once a week, and about 12 per cent eat out once a month, it said quoting a survey.

There has been double-digit growth in the Western-style fast-food outlets and coffee shops, both multinational chains like McDonald's, Pizza Hut, Dominos etc and Indian chains Nirula's, Pizza Corner, Barista, Cafe Coffee Day.

It is believed that the multinational and domestic multi-unit restaurant segment will drive the future expansion of the Indian restaurant industry.

Most Indians still prefer Indian food, as regional cuisines offer many choices, it said, adding 'vegetarianism' was still a widely popular culinary tradition in India. However, the younger urban population is increasingly shifting to Western-style fast food items, the study observed.