I have always felt that the Indian F & B industry is one of the most vibrant industries that has seen remarkable growth in the recent past and continues to expand rapidly. This can be attributed to the changing demographics, taste preferences, increase in disposable incomes, rising urbanisation, and growth of organised retail.
Of India’s 1.3 billion population, it is the nation’s rapidly growing middle class that presents the F&B industry with the greatest opportunities. Each year, India’s middle class adds approximately 20 million people to its ranks. Increasing purchasing power, the rise in double-income, no-kid’s households, and consumers moving away from a saving mindset towards living a better-quality life are all driving consumption and consumer aspiration.
Last weekend I visited a store near to my home and I was surprized to see many international brands like Del Monte, Ceres (in Juices), Borges, Barilla (in Pasta and noodles), Quaker, Kellogg’s (in breakfast Cereals), Tim Tam, Oreo (in Biscuits) and much more. While observing these brands I concluded that Indian shopper’s taste buds is evolving and looking for international brands from around the world across food categories.
F & B Sector
The food and beverages industry accounts for ~3% of India’s GDP and is the single largest employer in the country, with more than 7.3 million workforces. The market share held by modern retail formats (such as convenience stores, supermarkets, and hypermarkets) versus traditional outlets (including market stalls) is expected to double from 2% currently to 4% by 2020, based on developments in 2017–18.
The simplification of India’s tax system took a step forward with the 2017 introduction of the Goods and Services Tax (GST), replacing various indirect taxes. The Indian Government has also reduced the time and cost to import by implementing the electronic sealing of containers, upgrading port infrastructure, and permitting the electronic submission of supporting documents with digital signatures in 2018–19. These reforms helped India jump to 63rd place out of 190 countries (from 77 the previous year) in The World Bank’s Doing Business 2020 report. In addition, the Food Safety and Standards Authority of India (FSSAI) has streamlined and simplified the process for imports.
The number of food categories imported into India is rapidly increasing. The size of the imported food category has more than tripled in the last 10 years from US$1.7 billion in 2009 to US$5.3 billion in 2018. This is despite a strong domestic food processing sector and high import tariffs of 30% to 50%.
Globally Aware Customers
This growth can be attributed to the rapid increase in exposure of Indian consumers to international food concepts, brands, and cuisines. Between 2012 and 2018, the number of Indians travelling internationally increased from 15 million to 25.85 million (estimated to be 27.92 million in 2019). The growing diaspora is also making a difference to F&B tastes.
The primary dynamics affecting India’s F&B sector include:
E-commerce Opens up Opportunities.
The growth opportunities in India’s F&B sector have attracted interest from major Indian corporations that have diversified into retail with long-term plans for this vertical. Companies such as Tata, Reliance, Spencer’s and Bharti have been investing in India’s booming F&B retail sector. Along with these retailers, several international brands such as Metro and Wal-Mart have entered the market. New retail trade formats such as supermarkets and hypermarkets are also stepping up to fulfil the needs of consumers. Significantly, it is e-commerce that is driving the biggest change in Indians’ F&B retail market experience.
E-commerce has given Indians in Tier 2 and Tier 3 cities the ability to purchase products they could not otherwise buy in India. E-commerce has helped leapfrog bricks-and-mortar retail, created entrepreneurs across India and generated commerce and employment.
The Role of Media
For the last two decades, India’s food industry has undergone a sea change. People in India now like to experiment with different tastes and flavours but often add some kind of ‘Indianisation’ to suit regional palates.
Burgers, pasta, pizza and many other international cuisines have made their mark around the country and are often ‘regionalised’ with local flavours. Twenty-four-hour fast-food outlets are open across India and are exploding in popularity. For example, India is Domino Pizza’s second largest market outside the US, operating 1,200 stores in 271 cities (as of 2018).
In my opinion, while India represents a huge opportunity, international entrants must be mindful of the unique challenges this market presents. By taking the time to understand the Indian consumer and adapting their value proposition accordingly, international food producers can establish their products as an integral part of the modern Indian diet. F & B industry is headed for a transformation with digitisation at its core. Services will grow to become more personalised and customer-centric, creative service offerings will be launched, health and safety will be standardised, operations will become less labour intensive. All these changes will elevate customer experience and set new standards for the industry in the post-COVID era.