Indian Fast Food Market Analysis

With the rapidly growing middle class population and changing lifestyle, India is blessed with one
of the fastest growing fast food markets in the world. The Indian fast food market is growing at an
annual rate of 25-30%. Almost all the world’s big fast food brands have succeeded in making their
presence felt in the country and most of them are posting appreciable growth.

Consequently, all the popular fast food chains have chalked out massive plans for expanding
their business and presence throughout the country. Foreign fast food chains are aggressively
increasing their presence in the country. For instance, Domino’s has planned to open 60-65
outlets every year for the next three years (2010-2012) while Yum Brands Inc is also preparing for
massive expansion across the country with plans to open 1000 fast food outlets by 2015.

According to our new research report “Indian Fast Food Market Analysis”, although the market
has witnessed robust growth over the past couple of years, it remains largely under penetrated
and concentrated in metropolitan cities. However, there is a large room for growth in untapped
tier-II and tier-III cities. Therefore, the future of the Indian fast food industry lies in tier-II and tier-III
cities. Owing to this, major fast food retailers are on the way to market their brands by using
different marketing strategies such as campaigns and putting up billboards in tier 2 and tier 3
cities.

Food Industry Last Updated: July 2010

According to a report published by market research firm RNCOS in April 2010, titled ‘Indian Food
and Drinks Market: Emerging Opportunities’ the Indian food and beverages market is expanding
rapidly and is projected to grow at a compound annual growth rate (CAGR) of about 7.5 per cent
during 2009-13 and would touch US$ 330 billion by 2013.

Exports

Exports of agricultural products from India are expected to cross around US$ 22 billion mark by
2014 and account for 5 per cent of the world’s agriculture exports, according to the Agricultural
and Processed Food Products Export Development Authority (APEDA).

Exports of floriculture, fresh fruits and vegetables, processed fruits and vegetables, animal
products, other processed foods and cereals rose to US$ 7891.8 million in 2008-09 from US$
7877.07 million in 2007-08, according to DGCIS annual data published by APEDA.

Moreover, India exported schedule products, floriculture and seeds, fruits and vegetables,
processed fruits and vegetables, livestock products, other processed foods and cereals worth
US$ 6.53 billion between April-February 2009-2010, according to APEDA.

Spices

India exported 502,750 million tonnes (MT) of spices valued at US$ 1.25 billion in 2009-10,
according to the estimates by Spices Board of India.

Moreover, India enjoys a 48 per cent in volume and 44 per cent in value share in the world spice
trade, as per the Spices Board of India.
Food Processing

In order to further grow the food processing industry, the Ministry of Food Processing Industries
(MOFPI) has formulated a Vision 2015 action plan under which specific targets have been set.
This includes trebling the size of the food processing industry, raising the level of processing of
perishables from 6 per cent to 20 per cent, increasing value addition from 20 per cent to 35 per
cent, and enhancing India’s share in global food trade from 1.5 per cent to 3 per cent.

According to Mr Subodh Kant Sahai, Union Minister for Food Processing Industries, the Central
Government is envisaging an investment of US$ 21.9 billion in the food processing industry over
the next five years, a major chunk of which it plans to attract from the private sector and financial
institutions.

Moreover, the food processing sector has grown from 6 per cent a year ago to 14.9 per cent in
2010, according to Mr Sahai. The Minister further said that at present the country was processing
10 per cent of the total food produce and aimed to enhance it to 20 per cent by 2015. Exports are
also targetted to increase from 1.5 per cent to 3 per cent.

Furthermore according to Mr Sahai, foreign direct investment (FDI) in food processing is likely to
rise 27 per cent to US$ 264.6 million in 2010-11. "This year, FDI is expected to cross Rs 1,000
crore and touch Rs 1,200 crore," Sahai said on the sidelines of the second national conference of
the National Meat and Poultry Processing Board (NMPPB) in New Delhi in May 2010.

The cumulative FDI received by the food processing industry from April 2000-March 2010 stood
at US$ 1,042.62 million, according to data released by the Department of Industrial Policy and
Promotion.

Major investments

Some of the major investments in the industry are:

• Iffco is looking at entering the dairy business by setting up a new venture by the year end
at an investment of US$ 224.9 million.
• Capital Foods and Kishore Biyani-led Pantaloon Retail plan to float a Special Purpose
Vehicle (SPV) that would invest US$ 60 million in setting up two mega food-parks in
Maharashtra and Karnataka.
• India's largest sugar refiner Shree Renuka Sugars will acquire 50.34 per cent stake in the
Brazil's Equipav AA for US$ 248.4 million.
• McDonald’s India plans to invest US$ 2.15 million annually, adding 30 restaurants per
year in the western and southern region in the next three-four years.
• Amul is planning to add 15,000 more retail outlets to its existing 70,000 outlets by the end
of 2010.

Government Initiatives

• The Centre has announced a series of new initiatives which include a separate policy at
the state level, thrust on contract farming and making the sector tax-free.
• The government plans to open 30 mega food parks by the end of the 11th Five Year Plan
(2007-2012).
• In the Union Budget of 2010-11, the government has announced setting up of five more
mega food park projects in addition to the ten already being set up. Moreover, external
 commercial borrowing will be made available for cold storage or cold room facility
including for farm level pre cooling, for preservation or storage of agriculture and allied
produce, marine products and meat.

As per information published on MOFPI

• Income Tax rebate is allowed, 100 per cent of profits for 5 years and 25 per cent of profits
for the next 5 years, for new industries to process, preserve and package fruits and
vegetables.
• Excise duty on ready to eat packaged foods and instant food mixes has been brought
down to 8 per cent from 16 per cent.
• Excise duty on aerated drinks has been reduced to 16 per cent from 24 per cent.

Looking ahead

According to an industry body and E&Y study on the Indian food industry called 'Flavours of
Incredible India – Opportunities in the Food Industry', published in October 2009, investment
opportunities in the Indian food industry are set to shoot up by a huge 42.5 per cent to US$ 181
billion in 2015 and to US$ 318 billion by 2020.

Exchange rate used: 1 USD = 46.33 INR (as on June 2010)