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Business News/ News / India/  Indians still hungry for fast food: Report

Indians still hungry for fast food: Report

India’s QSR market is expected to clock a compound annual growth rate of 23% between now to fiscal year 2025
  • Covid has, in fact, become an enabler boosting preference for QSR, the report said
  • Indians still hungry for fast food: ReportPremium
    Indians still hungry for fast food: Report

    New Delhi: India’s quick-service restaurant (QSR) market is expected to clock a compound annual growth rate of 23% between now to fiscal year 2025 as large food services chains such as McDonald’s, Burger King, Domino’s, among others deepen their reach in India’s smaller cities, and benefit from a younger demographic, a report by Edelweiss Securities released Monday said.

    Covid has, in fact, become an enabler boosting preference for QSR, the report said, especially as consumers shifted to familiar brands. The pandemic-induced lockdown also wiped-out significant supply from the market benefiting larger players.

    It pegged the QSR chain market to be the highest growing sub-segment in the food services market over the next five years. "Over FY20-25, the QSR chain market is estimated to be the highest growing sub-segment--23% CAGR—of not just the chain market, but also the entire foodservice market," the report said.

    Fast-food chains are still less than 5% of India’s food services market—the global average rests at 20%.

    India’s food services market was estimated at 4,236 billion in FY20, Edelweiss said in its research note citing data from Technopak. As of FY20—organised QSRs had a market size of Rs348 billion. Future growth in the segment will be driven by chains in QSR market, which accounted for 54% of the total QSR sub-segment in FY20 and are estimated to reach 64% of the QSR sales by FY25, it said.

    Covid dealt a body blow to the food services industry on account of the lockdown in the country.

    However, large players were quick to remedy the impact on business by scaling their existing delivery capabilities.

    “QSRs took a heavy knock from covid-19, especially the store/non-delivery focused players. Fortunately, these chains had the infrastructure and process for delivery services in place long before the spread of the pandemic, which enabled them to adapt swiftly to government regulations," the report said.

    Edelweiss estimates that while the entire food services market plunged 82% year-on-year in the first half of FY21, the contraction that organized QSR chains such as Domino’s, Burger King, McDonald’s (West & South) reported was restricted to 45%; by September recovery was already at 85% of pre-covid levels.

    Fast food chain Burger King reported a blockbuster IPO last year; meanwhile Jubilant Foodworks, that operates the Domino's pizza franchise in India recently revised its potential store opening target in India from the earlier 2,000 to 3,000. The management, however, did not give a definite timeline for opening these stores. Domino's, that opened stores in India in the 90s, has over 1,300 outlets in India. The promoters of HT Media Ltd, which publishes Mint, and Jubilant FoodWorks are closely related. There are, however, no promoter cross-holdings

    The report said that the large QSR chains are set to gain a bigger share of the food services market on the back of a young population, value pricing, increased penetration in tier two and three cities, aided by improved supply chains and customisation in operating models and store sizes.

    The more recent popularity of online food ordering and food delivery platforms have enabled QSRs reach more consumers.

    However, the report also flagged concerns over challenges that restaurant chains could face. "Despite its popularity, success and return structures remain divergent. Most QSRs, except Dominos, are still tweaking their business models even as they keep expanding. QSR brands will also need to work towards favorable store economics and continue to localize their menu," the report said.

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    Published: 22 Feb 2021, 06:07 PM IST
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