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Startup 2013-05-28

Food Services Impact on Ancillary Industries

How is the growth of the food services market in India providing a boost to the entire ecosystem?

By Deputy Features Editor
Food Services Impact on Ancillary Industries

The various auxiliary businesses have had a large impact on real estate, commercial kitchen equipment, and the employment market.

Real Estate: The real estate sector is growing at a rate of about 20% per annum with many domestic and international players eyeing potential real estate locations, for manufacturing, retailing, corporate offices, etc. This surge of new entrants has increased the demand for real estate. Forays by international brands, like Starbucks Coffee and Dunkin’ Donuts, into the Indian market is also pushing the demand of retail spaces.

Key malls in India – Presence of food services outlets

Mall City Total GLA (sqft.) No. of outlets No. of F& B outlets % of F&B outlets to total
R City Mall Mumbai 6,57,000 140          49 35%
Ambience Mall Delhi NCR 8,73,000 165 47 28%
The Great India Place Delhi NCR 8,50,000 190 50 26%
Mantri Square Mall Bangalore 9,19,516 202 46 23%
Select Citywalk Delhi NCR 5,12,000 159 35 22%
Inorbit Mall Mumbai 5,45,000 149 33 22%
High Street Phoenix Mumbai 6,50,000 165 35 21%
Inorbit Mall Hyderabad 5,76,000 158 25 16%
South City Mall Kolkata 6,10,000 150 21 14%
Inorbit Mall Pune 5,47,000 125 12 10%

The demand for real estate, in tandem with the expansion by major food services brands, will boost the real estate sector in India. Additionally, the relaxation of FDI norms will further fuel real estate demand, with the entry of players like IKEA and Walmart ramping up competition for prominent locations.

Commercial Kitchen Equipment Industry:  The rising number of restaurants, a consequence of the changing culinary preferences in India, is a harbinger of business for the manufacturers of commercial kitchen equipments – commercial fryers, charbroilers, ovens, cooking ranges, microwaves, toasters and food warming equipment, etc. The average equipment cost involved in setting up food services business range from INR 1 lac (USD 1925) to a few crore depending on the format type, product range, brand, etc. With over 10,000 chain outlets across various formats, the estimated demand for equipment is worth INR 4,475 crore (USUD 860 million). This is likely to surge, at an anticipated CAGR of 21%. Some of the brands with a prominent market presence are as mentioned:

Player Product offerings
Alto-Shaam Convection ovens, rotisseries
Bake off Italian Bakery products
Beech Stone earth ovens
Carrier Refrigeration
Caplain Machines Bakery, Confectionery and pizzeria equipment
Cleverland Steam cooking equipment
Cooper-Atkins Food safety, temperature measurement and environmental solutions
Dean Commercial deep fryers
DIHR Ware washing specialists
Halal Food processor
Hatco Food warmers
Ice-o-Matic Ice makers
La Cimbali Coffee machine
Vita-Mix Blenders

Alcoholic Beverage Industry: The growth in the food industry has also brought a radical shift to beverage-based concepts as retail opportunities. The recent emergence of cafes, juice bars, and tea lounges has accelerated the Indian beverage industry’s growth. The innovations that the beverage industry has undergone is not limited to alcoholic beverages, they have also propagated a shift in preference, at the product level.

Food processing Industry:  The major players in the market, viz. Mc Donald’s, KFC, Domino’s Pizza and Pizza Hut, have made a threefold impact on the market, along economic, ethnic and cultural lines. They have changed the way of doing business in India by adopting the outsourcing model of production, and supply chain management, while maintaining focus on branding and marketing of products.

Mc Donald’s Case Study

Mc Donald’s has successfully built its food processing capacities by partnering with food processors, like Vista Foods, Mc Cain, Venky’s, and Mrs. Bector’s. On the contrary, these outsourcing partners have gained financially, by generating economies of scale, and also socially, by enlarging their business operations. They have also invested in their supply chain and logistic that ensured the at-the-doorstep supply of raw materials to various Mc Donald’s outlets.

The kind of tie-up was mutually rewarding as on one hand it helped Mc Donald’s generate quality products in quantity and also maintain an efficient supply chain throughout the year without any pressure of production. On the other hand, it helped partners improve on their plant, technology and production capacities by adding new lines of operations and also ensured annual demand.

 

(SOURCE: INDIAN FOOD SERVICES REPORT 2013, NRAI)

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