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.
2
Category
Current
Market Share
CAGR
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
3
4,395 6,240
1,320
33,200
1,640
8,415
Café QSR Frozen
Dessert/Ice
Cream
Casual Dine Fine Dine Pub, Bar,
Club and
Lounge
7,745 10,050
2,330
75,955
2,890
13,550
Café QSR Frozen
Dessert/Ice
Cream
Casual
Dine
Fine Dine Pub, Bar,
Club and
Lounge
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
Café QSR Frozen
Dessert/Ice
Cream
Club and
Lounge
2013 2018
3,775
16,785
1,560
9,035
1,010 1,085
Café QSR Frozen
Dessert/Ice
Cream
Club and
Lounge
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
4
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
5
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
6
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%
KFC
9%
Pizza Hut
8%
McDonal
d's 11%
Subway
12%
Others
40%
Break-up of Market Share for QSRs
2013
2015 E
2018 E
5,000 Cr
16,785 Cr
8,250 Cr
The chain QSR market size

KEY QUICK SERVICE RESTAURANTS IN INDIA
7
44%
23%
15%
10%
6% 2%
Cafes
Pizzas
International Fast Food (Non-Pizzas)
Ice-Creams
Indian 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
8

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
9

10
CATEGORY INGREDIENT ITEMS
CEREALS
Wheat, 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
FRUITS
Walnuts, 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 HERBS
Oregano, 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,
FRUITS
Pineapple, 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
OILS
Mustard, 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
11
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
12
Structure Description
Direct Sourcing
Most common among all channels.
The restaurant sources products directly from the processors, vendor etc
Commissaries
Commissaries directly source food products from suppliers and deliver ready to eat food to the
franchised outlet.
Buying Agency
A 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 Partners
SCPs 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
13
Cheese
Dynamix
Parag
Amul
Flanders
Poultry
Godrej Tyson
Suguna
Zorabian
Vista
Processed
Foods
Al-Kabeer
Frozen
Foods
McCain
Godrej Tyson
Bakery
Mrs Bector’s
Cremica
Exotic
Vegetables
Trikaya
Jal Agro Pvt.
Ltd.
Ketchup
Mrs Bector’s
Cremica

OPPORTUNITIES IN
LOGISTICS INDUSTRY
14

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
15
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
16

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
17

OPPORTUNITIES IN PACKAGING INDUSTRY
18

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
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CLASSIFICATION OF PACKAGING
20
Other
Caps and
closure
Labels
Secondary
Packaging
Rigid
Metal Containers
Glass bottles
Rigid plastic
Paper cartoons
Wooden racks
Flexible
Stand-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
21

Supply Side Opportunities - Food Service Market

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