Fast food chains face worthy competitor in India – a chatwala

The Quick Service Restaurants (QSRs) sector in India is likely grow in double digits to reach $4.13 billion (nearly Rs 27,475.9 crore) by 2020, said CyberMedia Research in a report dated May 12.

The fastest growing segment of the organised food service industry is slated to grow at a CAGR of 18% to reach the estimated figure in the next four years.

However, a worthy Indian competitor is giving them a run for their money—your local roadside chatwala.

According to analysts, foreign quick service restaurants (QSRs) operators are likely to face challenges in India in terms of localising their menus in addition to competition from roadside vendors on price margins.

Apalak Ghosh, Practice Head, CMR Industry Consulting Practice, said, "Foreign QSRs will continue to face challenges pertaining to localizing their menus. Coupled with that, foreign QSRs also face pressures and challenges from roadside vendors who beat them on price margins and offer quality food."

The midriff

The $50-billion (nearly Rs 3.33 lakh crore) food service industry in the country is currently dominated by the unorganized sector and while this is not likely to change in the near future, there will be a steady decline in the share of unorganized food sector over the next four to five years, noted the research firm.

The market for organised food service industry in the country presently stands at $15 billion (nearly Rs 99,791.3 crore) of the total market and is expected to grow at a CAGR of 17% to reach $33 billion (nearly Rs 2.19 lakh crore) by 2020, thus capturing 36% of the total market, the research firm said.

The QSRs market in the country currently stands at a mere $2.13 billion (nearly Rs 14,170.4 crore).

Fast food, fast problems

Internationally, the QSR market has seen a huge slowdown with companies such as Pizza Hut, Costa Coffee, Barista, KFC, and Mc Donald's downsizing their operations in recent months, reported the Economic Times earlier this month.

On the back of declining same-store sales growth, consumers scaling back spends, and increasing pressure on their profitability, quick service restaurants (QSRs) and coffee chains have shut down more than 80 stores over the past 12-18 months, the news report said.

The target consumer of QSR segment is majorly the youth. The research firm has said that increasing disposable incomes, the shift in consumer preferences to increasingly eating out, and greater hygiene consciousness are some of the factors contributing to the rise of QSRs in the Indian market.

Digital, too, is contributing to a new breed of consumers with an increasing demand for gourmet and specialized food.

Prabhu Ram, General Manager, CMR Industry Consulting Practice, said, "Technology adoption and new technology-led models will contribute to the growth of the organized food service sector."

"Already, digital has enabled the new age dabbawallahs, Swiggy, Zomato and FoodPanda to disrupt the food delivery market. For home cooks, digital is the great enabler as they seamlessly connect to their customers, right from customer acquisition to order delivery," Ram added.

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