Supply Side Opportunities - Food Service Market

FOOD SERVICE

MARKET

OPPORTUNITIES IN THE SUPPLY SIDE

Food Service Market – Opportunities in the Supply Side 1

THE FOOD SERVICE MARKET

According to a Franchise India report, the Indian food services industry is estimated

to be nearly worth USD 41.3 billion and is growing at a healthy compound annual

growth rate (CAGR) of 11%. The Organized Food Service Industry is worth $13.79 bn

(approx. 33% of total Indian Food Service Industry) and growing at 17%.

The F&B food service sector in India comprises two distinct market segments:

a) Organised – Chain and licensed standalone players across quick service restaurants, full service casual and fine dining

restaurants, hotels, bars and lounges, cafes and frozen desert formats

b) Unorganised – Dhabas (Roadside restaurants serving as truck stops and serving Indian cuisine), street stalls, halwai (sweet

shops), road side vendors, food carts, etc.


CategoryCurrent

Market ShareCAGR

Expected Market

Share by 2017

Organized 30% 12-14% 45%

Unorganized 70% 8-10% 55%

Source: India Food Service Report Extracts, HospitalityBiz India

THE FOOD SERVICE MARKET


4,395 6,2401,320

33,200

1,6408,415

Café QSR FrozenDessert/Ice

Cream

Casual Dine Fine Dine Pub, Bar,Club andLounge

7,745 10,0502,330

75,955

2,89013,550


Cream

CasualDine

Fine Dine Pub, Bar,Club andLounge

2013 2018

8% 11%2%

60%

3%15% 7% 9% 2%

68%

3%12%

Size of the Licensed Standalone Food Service Market (INR Cr)

Size of the Chain Food Service Market (INR Cr)

1,520

5,500

775

3,950

500 540


Cream


2013 2018

3,775

16,785

1,560

9,035

1,010 1,085


Cream


12%

43%

6%

31%

4% 4%11%

50%

5%

27%

3% 3%

Source: Technopak Report – The Rise Of The Quick Bite

FINE DINING• A Fine Dine restaurant is either a specialty or a multi-cuisine restaurant with a strong focus on quality

ingredients, presentation and immaculate service

• The chain segment is predominantly limited to “starred” hotels and exclusive standalone

entrepreneurial ventures

• With over 90% of Fine Dine outlets, Metros and mini metros dominate this market as consumers in

these cities have high disposable incomes with increased spending powerThe chain Fine Dine market

in India has ~50players with ~150-200 outlets spread across major cities

• Food contributes ~66% of total sales followed by beverages at 30%

• Dinner hours(7:00 PM – 12 midnight) contribute nearly 70% to sales while lunch hours contribute

~29% to total Fine Dine sales


2013

2015 E

2018 E

Major New Entrants

Premium Michelin-star restaurants such as Hakkasan and Yauatcha

Domestic players such as Italia, Kylin, Olive Bar & Kitchen, Masala Library

500 Cr

1,010 Cr

756 Cr

The chain Fine Dine market size

CASUAL DINING• Casual Dining revolves around specific cuisines or themes focusing on elaborate menus, quality of food and

increased focus on presentation

• Casual Dine market is led by domestic players, which are largely region-specific

• A few international players present in the space which have a pan-India presence

• Currently, there are~1700-1800 Casual Dine outlets spread across India In the affordable and premium

segment

• In the Casual Dine segment, food dominates the SKU and sales mix at 77% - 81% followed by beverages

and deserts that are mostly side orders

• Most of the sales (60%) are through dine-in although delivery services contribute a healthy 30% to sales

• The main meal times of lunch (1:00 PM – 4:00 PM) and dinner (7:00 PM – 10:00 PM) contribute to ~85% of

the total sales at Casual Dine outlets


2013

2015 E

2018 E

Key Players

International players like pizza Hut,Papa john’s, pizza express, Flavors of Italy, Café Zone

Domestic players Rajdhani, Moti Mahal, Indigo Deli, Smoke House Deli, Amici café

3,950 Cr

9,035 Cr

5,673 Cr

QUICK SERVICE• A fast food restaurant, also known as a quick service restaurant (QSR) within the industry, is a specific

type of restaurant characterized both by its fast food cuisine and by minimal table service

• Largely present in metros and mini metros due to high consumption, heightened consumer awareness

and exposure

• Now expanding into smaller cities with smaller formats

• The concept of QSR has gained increased prominence in India characterized by entry of Indian and

international brands into the space encouraging affordable eating


Foreign Brands

$0.39 bn

Indian Brands

$0.23 bn

Domino's$0.08 bn

KFC $0.04 bn

Pizza Hut

$0.03 bnMcDonald

's $0.04 bn

Subway$0.05 bn

Others$0.16 bn

Foreign Brands

63%

Indian Brands

37%Domino's

20%

KFC9%

Pizza Hut8%

McDonald's 11%

Subway12%

Others40%

Break-up of Market Share for QSRs

2013

2015 E

2018 E5,000 Cr

16,785 Cr

8,250 Cr

The chain QSR market size

KEY QUICK SERVICE RESTAURANTS IN INDIA


44%

23%

15%

10%

6% 2%

CafesPizzasInternational Fast Food (Non-Pizzas)Ice-CreamsIndian Fast Food (Key players)Confectionaries

2,939

1515

1001

645

419

132

0 500 1,000 1,500 2,000 2,500 3,000 3,500

Cafes

Pizza Chains

International Fast Foods (Non-Pizzas)

Ice-Creams

Indian Fast Foods

Confectionaries

Outlets of Key Players (Nos. )

FOOD INGREDIENTS MARKET IN INDIA


INTRODUCTION

In addition to the increasing number of restaurants in India, more and more international brands are foraying into India, As a result, there has been an increasing demand in the Food Service Industry for domestic, international and exotic ingredients

The increasing appetite of the Indian consumer has created an urgent need for competent supply partners for satisfying the ingredient needs of the quick service restaurants, casual dining restaurants, Fine dining restaurants, cafes, lounges and many more. However, there are not many such partners, present on the supply side who can offer:

1. Competitive and Uniform Price

2. Uniform Quality

3. Uniform Quantity

4. Back-end Integration

5. Hygiene Standards

This has led to a gap in the supply side of ingredients for such restaurants which presents a huge opportunity with great potential



CATEGORY INGREDIENT ITEMS

CEREALSWheat, Rice, Brown Rice, Barley, Oats, Pulses, Maize, Ragi, Semolina, Couscous, Millet, Gramflour, Riceflour, Wheatflour,

Soyaflour, Cornstarch, Quinoa etc

DAIRY Milk, UHT Processed Milk, Cheese, Mayonnaise, Cottage Cheese, Milk Powder, Yoghurt, Butter, Ghee (Clarified Butter)

BEVERAGE-BASED

COMPLEMENTARY TO

DAIRY

Coffee Beans, Tea, Green Tea, Fruit and Non-fruit syrups and Pulp, Nectars, Honey, Chocolate (Cocoa Beans), Vanilla,

NUTS AND DRY

FRUITSWalnuts, Figs, Dates, Cashew, Peanuts, Raisins, Chestnut, Pistachio, Hazelnut, Almond, Apricot, Coconut

SPICES AND

CONDIMENTS

Nutmeg, Clove, Salt, Black Pepper, Dry Red Chillies, Rock Salt, Mustard, Turmeric, Cinnamon, Rye, Garlic, Cardamom,

Parsley, Asafoetida, Fenugreek seeds, Cumin, Poppy, Kokam, Ginger, Green peppercorn, Fennel, Cassia, Pomegranate,

Saffron, Star Anise, Aniseed, Marjoram, Tamarind, Dried mango

FRESH HERBSOregano, Basil, Bay Leaves, Coriander, Parsley, Mint leaves, Rosemary, Celery, Thyme, Lemongrass, Lemon leaves,

Cilantro, Curry leaves, Sage, Chives, Marjoram, Wheat grass, Rhubarb, Leek leaves, Makroot

VEGETABLES

Potatoes, Tomatoes, Chillies, Onions, Sweet corn, Baby corn, Leeks, Jalapenos, Paprika, Olives, Mushroom

(Oyster/Button), Lettuce, Capsicum, Bell Pepper, Spinach , Carrots, Beet, Radish, Artichokes, Beans, Cabbage, Brussels,

Red Cabbage, Asparagus, Broccoli, Eggplant (Brinjal), Leeks, Zucchini, Peas,

FRUITSPineapple, Apple, Custard apple, Litchi, Melons, family of Berries, Peach, Lemon, Avocado, Dragon Fruit, Passion fruit,

Mango, Banana, Citrus family, Guava, Papaya, Makroot, Rambutan,

POULTRY AND MEAT

AND SEA FOOD

Chicken, Turkey, Duck, Goat meat (Mutton), Lamb, Pork, Prawns, Fresh water and Sea fishes, Crabs, Sharks, Squids,

Clams, Oyster, Eggs

OILSMustard, Soya bean, Sunflower, Rice Bran, Vegetable, Olive, Coconut, Almond, Groundnut, Corn, Sesame, Chilli, Flaxseed,

Wheat Germ, Meat Fat, Cod Liver (Fish)

Source: D’essence Analysis

SUPPLY CHAIN OF FEW INGREDIENT CATEGORIES


Dairy

• There is significant demand for Mozzarella cheese from pizza chains and for cheese slices in burger chains in India. Demand is

growing by 25% for these variants

• The need for high quality milk has necessitated dairy players to set up their own milk sourcing infrastructure (e.g. Schreiber Dynamix

and Parag Milk are servicing McDonald’s and Domino’s)

• Schreiber Dynamix and Parag have set up cheese processing plants to cater to this demand. Both are servicing the QSR chains from

their plants in Maharashtra state

Cold

chain

• McDonald’s and RK Foodland worked together to put a cold chain in place to support the QSR operations

• RK Foodland handles the delivery from distribution centres to all 271 McDonald’s outlets in India

• Other cold chain players , such as Snowman, are also supporting QSR players in India

Poultry

• Poultry has always been processed for wet markets. Therefore, the requirement for good quality chicken and specific chicken parts for

QSRs will impact processing operations

• Some key poultry players have invested in poultry processing facilities to supply high quality chicken to QSRs. There has been more

focus on integration at the back-end in recent years, to provide quality products to QSRs (e.g. Godrej Tyson and Suguna for KFC and

McDonald’s)

Frozen

foods

• McCain Foods began working on French fries in India in the late 1900s, initially importing the product to start operations

• Significant research was done in multiple states in India to develop potato seeds for oblong potatoes

• McCain Foods is now the largest frozen potato player in India, supplying to major QSRs

Source: Rabobank Report

COMMON SUPPLY CHAIN STRUCTURES


Structure Description

Direct SourcingMost common among all channels.

The restaurant sources products directly from the processors, vendor etc

CommissariesCommissaries directly source food products from suppliers and deliver ready to eat food to the

franchised outlet.

Buying AgencyA Buying Agency is an independent franchise-owned purchasing cooperative. It negotiates with

suppliers on behalf of all its franchised outlets and aggregates demand

Supply Chain PartnersSCPs deals with suppliers for fresh products, such as chicken and vegetables, and delivers

ready to eat food products to restaurants

Source: Rabobank Report

SOME KEY SUPPLIERS


Cheese

Dynamix

Parag

Amul

Flanders

Poultry

Godrej Tyson

Suguna

Zorabian

Vista Processed

Foods

Al-Kabeer

Frozen Foods

McCain

Godrej Tyson

Bakery

Mrs Bector’sCremica

Exotic Vegetables

Trikaya

Jal Agro Pvt.Ltd.

Ketchup

Mrs Bector’s Cremica

OPPORTUNITIES IN

LOGISTICS INDUSTRY


INDIAN LOGISTICS SECTOR• Market size of Indian logistics sector is estimated to be in between USD 90- 125 Bn

• The logistics industry contributes around 13 % to GDP of India

• Logistics sector growing at a rate of 15% with sub-sector growing at even 30-40% per annum

• The industry employs over 45 million people


Logistics Industry Division

Modes Services Infrastructure

Coastal Shipping

Rail Fright

Road Fright

3 PL 4 PL

Cold Chains

CFS/ICD

Ware Housing

OPPORTUNITIES IN LOGISTICS SECTOR

Warehousing :• Warehousing expenditure is around 20-25% of the total logistics cost

• 80-85% of warehouses are traditional with sizes less than 10,000 square feet

• Most of them are not leak proof , equipped with security systems, racking facilities

• Majority of operators are small to mid-sized entrepreneurs with limited capacity

• Main players are government agencies like central and state warehousing corporations

• The existing warehouses are of poor quality and are present in limited numbers

Cold Chain Storage :• Estimated that the industry will grow over USD 9 Bn by 2015

• About 40% of fruits and vegetables grown in India gets wasted, so the sector needs to grow at much faster rate to meet the needs

• The total number of cold storages in India are around 5400 with capacity of 24 million metric tons of these 60% of facilities are meant for storage of potatoes

• With the poor electricity condition in the country the cost of operating such facilities is very high

• So it provides an immense opportunity to organized players who can setup the infrastructure and are able to provide the service through out the nation

• Some key providers – Snowman, R K Foodland Ltd, Fresh and Healthy Enterprise Ltd


OPPORTUNITIES IN LOGISTICS SECTOR

Transportation• In India 61% of the cargo is moved by road, 30% by rail and the rest by airway, pipeline and

inland waterways

• The challenges associated with transporting cargos by railways are like the important rail networks are oversaturated, rail fright tariffs are high, transit time are long and uncertain, terminal quality is poor, less flexibility in carrying different types of product.

• Road transport is preferred over rail but it faces challenges like poor road quality with inadequate network coverage , high level of fragmentation along with majority of unorganized players in trucking industry, multiple check points

• The temperature control logistics (TCL) market in India recorded revenue about USD 3.83 Bn in 2013 , which comprises of few organized players with capacity of 400-450 frozen trucks and large number of unorganized service providers

• The current strength of frozen trucks is not sufficient to sustain the increasing bandwidth of the Indian food service market thus creating a huge opportunity in the sector

• Though it will take time to develop the required infrastructure for transportation, it presents a huge opportunities in the sector as majority of manufacturer seeking the option of outsourcing of their entire logistics instead of handling it in-house as timely retrieval and

delivery of material is being considered as a strategic tool for customer retention


OPPORTUNITIES IN PACKAGING INDUSTRY


PACKAGING INDUSTRY OVERVIEW

• Indian Packaging Industry is valued at around USD 19 Bn in 2014 and it is expected to

grow at a healthy rate of 12% per annum

• The food and beverage occupy the largest share of about 85% in packaging industry

• The large and growing middle class, increasing working population along with increase in

number of working women, high rate of urbanization, increase in penetration of modern

retail, rural marketing pushing demands for sachets are some of the growth drivers for

organized retailing in the country are fueling growth in the packaging industry along with

increasing export which requires superior packaging standards for the international

market

• Packaging is a necessary factor to preserve the quality and lengthening the shelf life of

products ranging from milk and biscuits to processed foods, to create attractiveness and

brand image

• Packaging is a sectoral activity to boost consumption and economic growth


CLASSIFICATION OF PACKAGING


OtherCaps and

closure

Labels

Secondary

Packaging

Rigid Metal Containers

Glass bottles

Rigid plastic

Paper cartoons

Wooden racks

FlexibleStand-up

pouches

Milk pouches and

bags

Laminated tubes

Squeezable

bottles

Medicine bottles

Foam packaging

Food containers

Products Packed

Other

Rigid

Packaging

Flexible

Packaging

Packaging by Product

Consumer

Packaging

Bulk

Packaging

Packaging by End-use

OPPORTUNITY IN INDIAN PACKAGING INDUSTRY

• Sustainability

Green plastic is newly introduced concept in Indian market , reusable and recyclable

packaging present a huge opportunity as many food manufacturer introducing such kinds

of packaging

• Light Weighing

The demand of thin walled containers which are lightweight and appropriate for

refrigeration is on the rise as processed food such as instant noodle, spreadable cheese,

ice-cream are increasingly consumed

• Shift in demand from rigid(metal/glass) to flexible(paper/plastic) packaging as consumer

preferring smaller consumer pack than bulk purchase with focus on higher level of

processing and quality

• Only 600-700 packaging machine manufacturer out of which 95% are in small and medium

sectors and located all over the country , so there is huge gap in demand and supply of

food packaging professionals


Supply Side Opportunities - Food Service Market

Business

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