2004 2005 2006 2007 2008 2009

India
Annual Disposable 26,993,576. 30,540,508. 35,504,003. 40,722,892. 46,391,350. 50,184,613.
Income 7 8 9 5 7 5
notSet

Change columns to...

Indian foodservice continues to expand beyond largest cities

1 Dec 2010

While the very largest cities continue to drive demand, foodservice operators in India have grown ever more

aggressive in targeting smaller cities and towns, where incomes continue to grow and competition remains

muted.

The major cities, which include New Delhi, Mumbai, Bangalore, Hyderabad, Kolkata and Chennai, are estimated

to account for more than one half of consumer foodservice value sales in India. However, as the number of

foodservice outlets is expanding rapidly, albeit from a very small base in smaller cities and towns, the outlet

and value growth rates have been significantly higher in cities such as Pune, Jaipur and Chandigarh over the

later years of the review period. With more than thirty cities boasting a population of one million people or

more, the scope for expansion across India is expected to only grow over the next five years, particularly as

the Indian government steps up its investments in second-tier cities, looking to spread the benefits of growing

prosperity to every corner of the country.

Evolution in big cities, expansion elsewhere

Chained foodservice outlets on the whole remain far more concentrated in the major cities. However, well-

established brands including Baskin-Robbins, Domino's Pizza, Café Coffee Day, McDonald's and Indian Hotels

Co Restaurants are present across a wide range of cities and towns. Indian Hotels Co Restaurants, for instance,

is present in around 61 locations in India, comprising a mix of large cities, commercial hubs, and tourist areas,

such as travel resorts and historical and pilgrimage centres. That said, while Domino's Pizza outlets were

present in 55 Indian cities by early 2010, about 50% of its outlets are known to be in metro cities in India.

Several domestic brands, especially emerging ones, have a regional focus, with their outlets being

concentrated in the leading cities within their home region. For example Jumbo King, Devil's Workshop, Uncle

Sam's Pizza (by Sankalp Recreation Pvt Ltd), Natural and Havmor (by Havmor Group) are mainly present in

Vododara, Ahmedabad and Mumbai in West India. By contrast, nascent international brands such as Papa

John's and Mövenpick tend to set-up one or two outlets in each major city before expanding their business.

This allows the international brand to gauge the Indian consumers' responses to the brand and then tailor their

expansion strategies based on regional differences in terms of taste preferences and operational constraints.
With the rapid pace of shopping mall development as well as continual upgrading of popular high street areas,

the major cities in India continue to offer plenty of potential for outlet expansion. However, with the

infrastructure and purchasing power in smaller cities and towns, including Nagpur, Mysore and Jaipur,

improving at a much higher pace than in the major cities, several leading brands, including Domino's Pizza,

McDonald's and Baskin-Robbins, have focused their outlet expansion plans on developing a footprint in smaller

cities.

There are marked differences between consumer preferences in the major cities and smaller cities and towns.

With parking, traffic congestion and long working hours posing a problem in all the major cities, home delivery

is highly popular in these areas. On the other hand, consumers in smaller cities see an entertainment value

and novelty in dining-in and the proportion of sales coming from home delivery is very low in such cities. While

foodservice has become an increasingly basic part of life for more-affluent Indians in cities like Mumbai and

Bangalore, elsewhere it remains very much a luxury, and chains which understand this will likely do well—

Domino's Pizza, for instance, has shown no qualms about moving away from a delivery focus where conditions

demand—for many Indian families still, a “pizza night” is by no means a regular occurrence. Rather than

gathering around the television with a delivery pizza, for many middle-class consumers a purchase from

Domino's or similar chains is an occasion, to be enjoyed in-store, as a group, allowing for the full “restaurant

experience.”

Strong expansion forecast

This growing focus on second-tier cities will only accelerate going forward, particularly as real estate values in

cities like Mumbai and Delhi continue their dizzying ascent. What's more, continued expansion in second-tier

cities has emerged as a real priority for India's federal government--in 2007, it pledged to spend US$29.0

billion over the seven years to 2014 in order to modernise second-tier cities and turn them into economic hubs

besides existing metropolises. Thanks to government investment and incentive policies, second-tier cities

across India will gain greater importance both as engines of economic growth and as expanding consumer

markets.In the city of Nagpur (2.5 million population), for example, the government has allocated more than

US$280 million to a number of urban development projects, including renovating the local airport and

constructing an eco-friendly mass-transit system to absorb an expected surge in road traffic.

None of this is to say that megacities like Delhi and Mumbai will fall by the wayside, any more than foodservice

demand has passed by cities like New York or London. Yet it seems clear that the truly meteoric growth in

demand to be found in India over the next five years will increasingly centre on second-tier cities, with many

growing into powerful regional hubs in their own right, particularly as migration from the countryside

continues. For global foodservice operators, the time to start investing in outlet presence and, above all,

distribution infrastructure is now—as the example of operators like McDonald's and Domino's Pizza has shown,

success in India is a long-term, 10 to 20-year project, with both chains investing tens of millions in

infrastructure prior to becoming consistently profitable. While obviously not a process without risk, the rewards

are significant—ten years from now, the list of the top ten largest global chains in India will include those
operators who began the process of investment and expansion today, with an eye on serving the vast cohort of

consumers found in mid-sized cities across the subcontinent.

For further insight, please contact Michael Schaefer, Consumer Foodservice Analyst:

Michael.Schaefer@Euromonitorintl.com

Consumer Foodservice - India

EXECUTIVE SUMMARY
Growth slows temporarily due to the economic downturn
Terrorist attacks in Mumbai in late 2008 and concerns about the economic slowdown resulted in a drop in

consumer confidence as well as uncertainty in the property market in the first half of 2009. This adversely

affected consumer foodservice in 2009 and footfalls dropped as consumers tried to rein in their expenditure. In

2009 growth was significantly slower than other years of the review period, although current value growth

remained in double digits. With concerns about the economy easing in the second half of the year and most of

the major brands undertaking remedial action, such as launching new menu items and attractive discounts, the

industry was on its way to recovery by the end of 2009.

Multibrand operators expand their presence

2008-2009 saw the emergence of operators managing the outlets of several domestic and multinational brands

across India. Rapid outlet and value expansion over the review period has emboldened existing domestic

foodservice operators and they increasingly launched new foodservice concepts, acquired franchising rights for

multinational brands and spun-off their existing brands in new formats. This resulted in the launch of several

new brands and formats including Chili’s Grill & Bar’s first outlet in India and Mocha’s new format - Mocha Art

House. Yum! Restaurants International Inc, Speciality Restaurants Pvt Ltd, Oriental Cuisines Pvt Ltd and Lite

Bite Foods Pvt Ltd have emerged as some of the fastest growing multibrand operators in India.

Competition intensifies between cafés and fast food outlets

With a large number of foodservice brands competing for share of pocket among college youths and young

professionals and most brands offering similar benefits, such as hygienic and affordable food and a safe and

‘cool’ place to relax with friends, cafés and fast food outlets increasingly competed head-to-head towards the

end of the review period. While cafés increasingly expanded their food menus, fast food outlets and casual

dining full-service restaurants expanded their dessert and beverage offerings in a bid to compete for the same

consumer group.

Shopping malls become unpopular as foodservice locations

Foodservice outlets in shopping malls in the major cities in India are generally perceived as upmarket and

expensive. With consumers seeking to rein in expenditure in early 2009, footfalls in shopping malls fell
drastically in the first half of the year. The high levels of vacancy due to a combination of overcapacity, high

rentals and outlet closures in some major cities further reduced footfalls and made shopping malls unattractive

locations for foodservice outlets. Some operators such as Nando’s Indage Restaurants Pvt Ltd relocated their

low-performing mall outlets elsewhere by late 2009.

Strong recovery expected as concerns about the Indian economy

ease
With most brands emerging from the economic slowdown with slight slowdowns in growth by the end of 2009,

consumer foodservice in India is expected to see a recovery with strong growth rates in 2010. With vast

potential for expansion, particularly for affordably priced quick service brands, double-digit current value

growth is forecasted for chained brands. Fledgling multinational chains such as Au Bon Pain and Häagen-Dazs,

which made their first appearance in India in 2009, and Bembos are expected to develop a presence in the

major cities in India in the short term. Meanwhile, leading brands, including Domino’s Pizza and Café Coffee

Day are expected to drive the growth in smaller cities and towns.

Consumer Foodservice - India

KEY TRENDS AND DEVELOPMENTS

City Level Trends
The major cities, which include Delhi-NCR, Mumbai, Bangalore, Hyderabad, Kolkata and Chennai, are

estimated to account for more than one half of consumer foodservice value sales in India. Due to the presence

of a large number of affluent and well travelled Indian and expatriate consumers, international and domestic

chained brands have focused on firmly establishing their presence in these cities before considering expansion

into smaller cities and towns across India. However, as the number of foodservice outlets is expanding from a

very small base in smaller cities and towns, the outlet and value growth rates have been significantly higher in

cities such as Pune, Jaipur and Chandigarh over the later years of the review period.

The preparations for the Commonwealth Games, which will be held in Delhi in October 2010, have fuelled the

upgrade of the premises and menus of a large number of foodservice outlets, as directed by the Delhi

government. The Delhi government is working with the Confederation of Indian Industry (CII) to provide

hygienic and authentic meal options to visitors during the games.

Chained foodservice outlets are more concentrated in the major cities. However, well-established brands

including Baskin-Robbins, Domino’s Pizza, Café Coffee Day, McDonald’s and Indian Hotels Co Restaurants are

present across a wide range of cities and towns. Indian Hotels Co Restaurants are present in around 61

locations in India, comprising a mix of large cities, commercial hubs, and tourist areas, such as travel resorts

and historical and pilgrimage centres. While Domino’s Pizza outlets were present in 55 Indian cities by early

2010, about 50% of its outlets are known to be in metro cities in India.

Several domestic brands, especially emerging ones, have a regional focus, with their outlets being

concentrated in the leading cities within their home region. For example Jumbo King, Devil’s Workshop, Uncle
Sam’s Pizza (by Sankalp Recreation Pvt Ltd), Natural and Havmor (by Havmor Group) are mainly present in

Vododara, Ahmedabad and Mumbai in West India.

Nascent international brands such as Papa John’s and Mövenpick tend to set-up one or two outlets in each

major city before expanding their business. This allows the international brand to gauge the Indian consumers’

responses to the brand and then tailor their expansion strategies based on regional differences in terms of

taste preferences and operational constraints.

On the other hand, most of the rapidly expanding independent players (such as the Middle Eastern fast food

brand Falafels in Mumbai) and domestic fledgling chains (such as Berco's Chinese full-service restaurant (FSR)

in Delhi-NCR) usually seek to establish their presence with a large number of outlets concentrated in one major

city before trying to expand into other major cities.

Most operators of multinational brands have set-up their base in either Delhi-NCR or Mumbai with a focus on

expanding in either North India or West and South India respectively. Increasingly, Bangalore is also attracting

multinational brands due to the concentration of the IT industry in the city which attracts a large number of

expatriates and well travelled Indian consumers. Au Bon Pain and Chili’s Grill & Bar opened their first outlets in

India in Bangalore in 2009.

With the rapid pace of shopping mall development as well as continual upgrading of popular high street areas,

the major cities in India continue to offer plenty of potential for outlet expansion. However, with the

infrastructure and purchasing power in smaller cities and towns, including Nagpur, Mysore and Jaipur,

improving at a much higher pace than in the major cities, several leading brands, including Domino’s Pizza,

McDonald’s and Baskin-Robbins, have focused their outlet expansion plans on developing a footprint in smaller

cities.

The upgrade of airports in major cities such as Hyderabad and the development of metro rail transport systems

in Delhi and Mumbai have provided a new avenue for the expansion of outlets in travel locations in 2008 and

2009.

There are marked differences between consumer preferences in the major cities and smaller cities and towns.

With parking, traffic congestion and long working hours posing a problem in all the major cities, home delivery

is highly popular in these areas. On the other hand, consumers in smaller cities see an entertainment value

and novelty in dining-in and the proportion of sales coming from home delivery is very low in such cities.

Consumers in the major cities tend to be more open to trying unfamiliar cuisines due to their greater exposure

to international media and brands. With food and overhead prices and purchasing power generally being higher

in the major cities, brands such as Little Italy and Barbeque Nation, which have a higher spend per transaction

compared to quick service brands such as Pizza Hut and McDonald’s, tend to develop menus with lower prices

for their outlets in smaller cities and towns.

Growth of chained brands slows

The economic uncertainty of early 2009 resulted in a slowdown in value sales growth in the consumer

foodservice industry in India. The global economic recession caused a loss of consumer confidence in India in
the first half of the year, alongside tighter credit requirements and uncertainty in property prices. The effect of

the slowdown was more pronounced among chained brands as several chained players underwent a period of

rationalisation in terms of outlet expansion and witnessed outlet closures or renovations.

Current Impact

The growth in outlets, transactions and value sales in chained consumer foodservice reached robust double-

digit levels during the review period. However, in 2009 growth levels slowed sharply. With the exception of a

handful of brands such as KFC, Mainland China and Baskin-Robbins, the growth in outlets slowed in 2009.

KFC, Mainland China and Baskin-Robbins stepped-up their outlet expansion rate in 2009, increasing their

market penetration at a time when most other brands were lying low. Domino’s Pizza continued on its pre-

2009 outlet expansion trajectory in preparation for an IPO (Initial Public Offer) in early 2010. However, most of

the other fast growing brands in2009 were relatively new, particularly in street stall/kiosks, which require low

investments for outlet expansion.

While most brands continued to add new outlets, especially in smaller cities and towns, several domestic and

multinational brands, including Coffee Day Xpress, McDonald’s, and US Pizza, witnessed a large number of

outlet closures. With transaction value and volume growth slowing or dropping for several brands, operators

tried to rationalise costs by shutting down low-performing and cost-ineffective outlets. For example, Costa

Coffee closed several high-rental outlets in 2009 as they were hurting the company’s bottom line.

While a large proportion of brands, including McDonald’s, have decided to wait-out the uncertainty in property

prices, others such as US Pizza took the opportunity to reconfigure their expansion plans and experiment with

menu innovation and brand renovation instead of focusing on outlet expansion.

Outlook

Chained consumer foodservice is expected to bounce back to record largely robust double-digit growth

transaction volume and value and outlet terms in 2010, as the effects of the economic uncertainty were

wearing off in early 2010. Several emerging independent brands recorded strong performance towards the end

of the review period, and they are expected to emerge as high growth chained brands over the forecast period.

Future Impact

As the effect of the economic slowdown was short lived in India, foodservice operators are expected get back

on the outlet expansion track from 2010 onwards. Growth in chained brands is expected to continue to outpace

that of independent brands as the former are growing from a very small base in India. Nonetheless,

independent outlets are expected to continue to dominate the consumer foodservice landscape over the

forecast period.

Chained consumer foodservice growth is expected to be robust from 2010 onwards as multinational brands

such as McDonald’s and KFC, as well as domestic brands such as Nirula’s and Jumbo King, move ahead with

outlet expansion plans. Value sales growth is expected to be driven by brands’ efforts to expand the average

bill size through menu expansion. The entry of multinational brands such as Starbucks, which were not present

in India over the review period, is also expected to inject buoyancy into the industry over the forecast period.
Brands such Au Bon Pain, Chili’s Grill & Bar and Bembos, which were still fledgling chains in 2009, are expected

to enjoy rapid expansion in the forecast period. Growth is also expected to be driven by the expansion of small

city-based chains, such as Mast Kalandar and Casa Piccola from Bangalore, into neighbouring cities.

Menu innovation increases profitability in tough economic

conditions
With the economic slowdown in early 2009 resulting in consumers cutting back on their expenditure in terms of

eating-out, manufacturers focused on strategies to attract more consumers to their outlets. Menu innovation

was a common strategy, particularly for chained brands which slowed down their outlet expansion in 2009.

New menu items generated interest and drove-up bill sizes for several brands in 2009.

Current Impact

Several operators added new menu items to generate interest in their brands in 2009. Some of the new menu

items launched in 2009 also allowed café brands to compete more successfully against fast food brands, and

vice versa, for the attention of young consumers. KFC and Domino’s Pizza added several new and indulgent

desserts, beverages, main and side dishes to their menus in 2009, widely promoting them through mass-

media advertisements, drawing consumers to their brands to try out the new items.

McDonald’s and Domino’s Pizza also widely promoted their low-priced menu items as a key strategy to drive-up

transaction volumes. McDonald’s and Baskin-Robbins encouraged consumers to trade-up to more expensive

items, McDonald’s by bringing down the prices of their meals to reduce the price gap between meals and single

snack items and Baskin-Robbins by launching a ‘Value scoop’ - a more expensive and larger serving size which

consumers perceived as offering more value for money than the single scoop.

Other brands, including US Pizza, Pizza Hut and Mocha, rolled-out completely revised menus in several of their

outlets: Pizza Hut extended its menu to include a large variety of new pastas, sides, desserts and beverages;

US Pizza launched several new items to cater specifically to health conscious and religious consumers; and

Mocha introduced a sophisticated menu, which includes raw food items and alcoholic drinks.

These strategies allowed several chained brands to record positive growth in transaction volume and value

terms despite the economic slowdown in 2009.

Outlook

Menu innovation is expected to remain a key strategy for growth in the forecast period, particularly for

multinational brands which need to continuously adapt their menus to the tastes of Indian consumers.

However, with the pressure of the economic slowdown easing in late 2009 and with several brands having

undertaken large changes to their menus in 2009, companies are expected to focus more on expanding their

outlet count in the early part of the forecast period rather than on radical menu innovation.

Future Impact

Overall, menu innovation is expected to continue at a steady pace over the forecast period as brands launch

new items to maintain the interest of consumers. However, most companies are expected to focus on
popularising the new menu items that were launched during 2009 in the short term instead of undertaking

extensive menu innovation.

Players such as McDonald’s are expected to focus on persuading consumers to choose meal instead of low-

priced snack options. McDonald’s is also expected to roll-out the breakfast menu that it developed and tested

in 2008 to more outlets to increase its dayparts and expand transaction volume and value sales. Meanwhile,

Domino’s Pizza and Pizza Hut are expected to focus on popularising their new pasta menus while regularly

launching new pizza crust and pasta styles to pique consumer interest.

Menu extensions and limited edition launches are expected to become a key differentiator for brands in the

forecast period, particularly as categories such as specialist coffee shops, chicken fast food and Asian fast food

become increasingly crowded with a large number of chained brands.

Multibrand foodservice operators on the rise

2008-2009 saw the emergence of several operators managing outlets of several domestic and multinational

brands across India. The learning curve for franchising and brand building has been very steep for Indian

foodservice operators as the industry has witnessed very rapid chained outlet expansion since the beginning of

the review period. Towards the end of the review period, with the increased availability of experienced

foodservice brand managers and raw material suppliers across India, domestic foodservice operators

increasingly launched new foodservice concepts, acquired franchising rights for multinational brands and spun-

off their existing brands in new formats.

Current Impact

Multibrand operators continued to gain prominence in 2009 through capacity expansion and new concept

launches and by bringing more multinational brands to India. This fuelled new concept launches, brand

revamps and chained outlet expansion in 2009.

Some operators sought to segment their existing concepts into various formats by launching subbrands that

cater to consumer groups with different purchasing power and tastes. In 2008 and 2009 café players

Impresario Entertainment & Hospitality Pvt Ltd and Barista Coffee Co Ltd launched lounge-styled outlets under

the Mocha Mojo and Barista Crème subbrands respectively. Some of their existing cafés were converted into

these new formats, which cater to a more mature clientele and they served alcoholic drinks as well as a main

course with a health & wellness slant. The Mocha brand was present in the major cities under various

subbrands including Mocha coffees & conversations, Mocha Bar, Mocha Mojo and Mocha Art House by early

2010.

Foodservice operators’ increasing confidence in managing several brands simultaneously resulted in the entry

of several new brands in 2009. While JIP Fashion & Restaurant Pvt Ltd, the master franchisee for Papa John’s,

added Chili’s Grill & Bar to its portfolio in 2009, Lite Bite Foods Pvt Ltd added another multinational brand to its

existing portfolio of more than 10 domestic and multinational brands by launching Guatemalan chicken fast

food brand Pollo Campero in January 2010. United Restaurants Ltd, of US Pizza fame, leveraged its expertise in

affordable and hygienic pizzas by launching a pizza street stalls concept called Nuva in January 2010.
Existing multibrand operators also stepped up their activities in 2009. While Yum! Restaurants International

launched Taco Bell’s first outlet in India in March 2010, Global Franchise Architects (India) laid the groundwork

for raising funds for future expansion through private equity investment. This company also engaged a master

franchisee in order to expand the footprint of its Pizza Corner and Coffee World brands in East India in 2009.

India Hospitality Corp, which had taken over the multibrand foodservice operator Mars Restaurants Pvt Ltd in

mid-2007, further expanded its presence in consumer foodservice by acquiring the franchise for Pizza Hut’s

outlets in Central India in November 2009.

In 2009, companies from other industries, including the personal care player CavinKare Pvt Ltd and textiles

conglomerate Vardhman Group, also tried to build a presence in consumer foodservice. While CavinKare

experimented with two new Asian FSR concepts in 2009, as it determined a growth strategy in consumer

foodservice, Vardhman Group initiated plans to launch a chain of Asian fast food outlets in the forecast period.

Outlook

The expansion of multibrand foodservice operators is expected to continue in the forecast period. Several

leading single foodservice brand operators are expected to expand their portfolios with the launch of new

brands or spin-offs. With Indian consumers showing a high affinity to eating-out and trying new cuisines, as

long as prices are affordable, operators are expected to be emboldened by their success with existing brands

and launch more innovative brands and formats over the forecast period. International companies looking to

build a presence for their brands in India are also expected to prefer well-established companies for joint

venture or brand licensing deals due to the their proven track record and industry know-how.

Future Impact

The rise of multibrand foodservice operators is expected to boost chained outlet expansion and drive concept

innovation over the forecast period. While Global Franchise Architects (India) is expected to expand its

presence outside of South India by issuing regional franchising licenses, Yum! Restaurants International is

targeting outlet expansion for KFC and Taco Bell, so that these two brands account for 40% and 10% of its

outlets, respectively, in India by 2015, while Pizza Hut accounts for the remaining 50%.

The several small regional domestic chains (less than 30 outlets) which have been mushrooming across India

towards the end of the review period are also expected to be ripe acquisition targets. Some foodservice

operators are expected to expand their footprint by taking over such brands and either rebranding them or

injecting funds to facilitate their expansion into other regions. Speciality Restaurants Pvt Ltd of Mainland China

fame is expected to acquire a South Indian FSR chain in the first half of the review period. The company plans

to dilute its equity by up to 30% to raise money for its expansion plans and it is also expected to launch an IPO

over the forecast period. Jollibee Foods Corp is expected to actively try to establish a footprint in India over the

forecast period and it is known to be on the lookout for acquisitions in the country.

With an injection of funds from its IPO in early 2010, Jubilant Foodworks Ltd (formerly Domino’s Pizza India

Ltd) is expected to seek another international brand to build-up from scratch in India and it is expected to

enter into talks for a tie-up with Starbucks in the early part of the forecast period.
Cross-category competition intensifies
A large number of foodservice brands are competing for the share of pocket of college youths and young

professionals and most brands offer similar benefits such as hygienic and affordable food and a safe and ‘cool’

place to relax with friends. Thus, cafés, fast food outlets, casual dining FSR and food courts increasingly

competed head-to-head towards the end of the review period. The effect of this trend was more pronounced in

the major cities due to the high penetration of chained players and the presence of a large number of

foodservice outlets in close proximity to popular locations such as high streets and areas close to colleges and

IT campuses.

Current Impact

Due to the economic slowdown in 2009, many young consumers cut down on their visits to cafés, fast food

outlets and casual dining FSR. Hence, foodservice operators undertook menu and outlet innovations to

differentiate themselves from other brands and cast a wider net for consumers in 2009.

Cafés such as Mocha and Café Coffee Day continued to expand their food menus to attract consumers looking

for a substantial meal and who tend to choose bakery products fast food or other fast food types over cafés.

Some cafés also expanded their emphasis on healthier and more sophisticated menu items to attract more

mature and affluent consumers. Both kiosk and café brands increasingly positioned themselves as alternatives

to fast food outlets towards the end of the review period.

Both KFC and McDonald’s sought to expand their share of the ‘café crowd’ by expanding their menus in 2009.

While KFC launched Krushers, beverages which clearly compete with the iced coffee and chocolate drinks

served by cafés, McDonald’s launched Chicken McNuggets in large portions (20pcs with three dips for

Rs225.00) to attract groups of friends who might otherwise spend time over coffee and cakes in cafés.

Meanwhile, Pizza Hut revamped its communications strategy to portray its outlets as the ideal location to

celebrate any big or small occasion in late 2009.

Cafés also faced increasing competition from ice cream and bakery products fast food as outlets such as

Häagen-Dazs, Hot Breads, and Mövenpick, which serve hot and cold coffee and chocolate beverages in addition

to cakes and ice cream. They also offer a similar youthful and inviting in-store ambience. Hence, café, fast food

and casual dining FSR menus saw an increasing emphasis on indulgent beverages and desserts. In 2009,

Barista Coffee Co Ltd introduced Barista Lavazza Ice Creams in some of its outlets while Café Coffee Day

introduced its ‘Layers’ menu comprising thick milk shakes.

Outlook

Cross-category competition is expected to intensify over the forecast period. While a large proportion of

chained brands in India were new brands or recent entrants in India as of 2009, many consumers viewed them

as a novelty and experiencing a new or different concept was very much part of their appeal. However, over

the forecast period many more fast food and café brands are expected become relatively mature brands which

young consumers would have grown up with. Moreover, eating-out is expected to lose its novelty for affluent

consumers in the major cities. The number of brands providing hygienic and affordable quick meals is also
expected to increase, especially in the smaller cities. This will force fast food, café and casual dining FSR

outlets to increasingly compete head-to-head with each other.

Future Impact

From the consumers’ point of view casual dining FSR, fast food outlets, cafés and food court stalls all provide

young people such as school and college students the opportunity to spend time together in a casual, ‘cool’ and

safe environment, at approximately the same cost in terms of meal prices. As the competition for the share of

pocket of this consumer group intensifies, brands are expected to pursue consumer segmentation based on the

age, sophistication and purchasing power of consumers to specifically target other consumers groups as well as

undertake menu and outlet innovation to increase their appeal to young people.

While café brands such as Café Coffee Day and Mocha matured over the review period and had to undergo

format and menu innovation to compete effectively, it is fast food outlets that are expected to face more

competition from street stalls/kiosks, casual dining FSR and cafés in the forecast period. Both kiosk and café

brands are expected to position themselves as alternatives to fast food outlets. 100% takeaway outlets, food

court stalls and kiosk brands are expected to focus on hygiene, convenience, street food and localised menu

offerings to attract youngsters.

On the other hand, café brands which have introduced more upscale subbrands, such as Barista and Mocha,

are expected to focus on targeting older consumers with deeper pockets. In addition to the superior in-store

ambience of cafés, their emphasis on healthy food will allow them to be more successful than fast food outlets

in attracting a more mature and wealthier clientele. Fast food outlets are expected to focus more on quick

service and cheap meals and snacks, home delivery and servicing high-volume locations to differentiate

themselves from casual dining FSR and cafés.

Street stalls/kiosks becomes a highly attractive format

Street stalls/kiosks have always been highly popular among Indian consumers due to their low prices,

convenient locations and emphasis on local snacks and finger foods. However, this format, which is mainly

comprised of unhygienic independent roadside outlets, was avoided by health conscious and affluent

consumers. Towards the end of the review period, wealthier foodservice operators increasingly recognised that

the format represents an untapped opportunity for spreading awareness of their existing brands, developing

new concepts and deriving high transaction volumes. Unlike fast food or full-service restaurants, the

investment required for setting-up stalls/kiosks is very low.

Several new chained fast food and full-service restaurants extended their brands by adding street stalls and

kiosks in 2009. With more hygienic street stalls/kiosks cropping up in the major cities, the format also became

more attractive to affluent consumers towards the end of the review period.

Current Impact

Several fast growing new brands emerged in street stalls/kiosks towards the end of the review period,

including the South Indian kiosk brand, BurgerMan, which went from five outlets in 2007 to 50 outlets in 2009.

These emerging street stall/kiosk brands focused on convenient, high volume locations (eg near colleges or
railway stations) and popular snacks such as burgers, rolls, pizzas, sandwiches and snow cones prepared in a

hygienic manner were their mainstay. In 2009, United Pizza Restaurants Pvt Ltd tried to benefit from the rising

popularity of relatively upmarket street stalls by launching a new concept - Nuva, a mobile street stall focused

on healthy and affordable pizzas.

Food court stalls in shopping malls were key locations for the launch of new brands such as Paranthe Wali Gali

0 Km. Paranthe Wali Gali 0 Km was a new stall which served Paranthe (stuffed Indian flatbreads) - a popular

food item served by roadside stalls and economy full-service restaurants in Delhi. Brands such as Paranthe

Wali Gali 0 Km and Street Foods of India (eight outlets in 2009) leveraged Indian consumers’ demand for

hygienic street food. Manufacturers were able to benefit from the consumers’ willingness to pay more for street

food items in upmarket locations by opening such outlets in shopping malls in 2009. Brands such as Barista

and Coffee Day Xpress also witnessed rapid expansion in captive locations towards the end of the review

period; through kiosks located on the premises of IT companies, hospitals and colleges.

With the credit crunch and uncertain property market dampening expansion plans for emerging players in

2009, emerging fast food brands such as Kaati Zone launched kiosk-styled outlets to increase their footprint at

low investment costs. East West Ethnic Foods Pvt Ltd operated seven kiosks, three 100% home

delivery/takeaway outlets and five Kaati Zone Asian fast food outlets. Kaati Zone is a brand focused on Indian

wraps and rolls in South India, as of December 2009. Similarly, Devil’s Workshop, a brand launched by Rasna

International in 2008 focused on doughnuts and other baked snacks, had 40 street stalls/kiosks in addition to

40 standalone specialist bakery retail outlets across West India in 2009. Devil’s Workshop benefited from its

strategy of targeting cinemas as locations for new kiosks as it was able to leverage the large network of

chained multiplexes across Ahmedabad, Gujarat.

Outlook

Street stalls/kiosks is expected to remain an attractive format for both consumers and foodservice operators

over the forecast period. The expansion in the number of shopping malls across urban areas will provide a

strong opportunity for both independent and chained foodservice operators to launch stalls in upmarket

locations. As food court stalls and street kiosks will continue to have lower operational costs compared to fast

food and full-service restaurants, they will remain a good way of strengthening brand awareness and deriving

volume sales with low capital investment.

As consumer purchasing power and health consciousness rise, the popularity of old-fashioned street

stalls/kiosks, which are not associated with any brand and operate on informal terms without cash counters or

established standards of hygiene, is expected to decline in the forecast period. Such outlets are also expected

to see increasing closures and/or refurbishments due to more stringent enforcement of zoning, outlet

registration and hygiene standards in more affluent areas of the major cities. The rapid addition of modern

outlets with higher standards of branding and hygiene and higher quality food is expected to counter the effect

of the closures of old-fashioned outlets in the forecast period.

Future Impact
Street stalls/kiosks is expected to receive a facelift over the forecast period as new stalls will be trendy and

modern while many existing stalls will be forced to close, or refurbish and/or relocate in order to avoid closure.

Small formats such as 100% home delivery/takeaway and street stalls/kiosks are expected to help players to

expand into new towns and cities. While street stalls/kiosks mainly served local or traditional food items in the

review period, foodservice players are expected to make more international food items, such as salads, soups

and noodles, available through this format in the forecast period.

Shopping mall, airport and cinema locations are expected to be highly attractive for foodservice operators

looking to set-up kiosks with upmarket offerings, due to the ability of such locations to attract high footfalls

from affluent consumers. Spend per transaction is expected to be much higher in these locations compared to

standalone locations where chained brands will have to compete with the extremely low prices of independent

outlets.

Chained street stall/kiosk brands such as Gogola which serve items that are made-to-order on the premises

are expected to see rapid outlet expansion and move into new cities in the early part of the forecast period.

However, brands such as Devil’s Workshop which rely on massive central kitchens for their food supply are

expected to face considerable teething problems when trying to expand outside their home cities.

Leading Chained Consumer Foodservice Brands by Number of Units 2009

Global Brand Owner outlets

Amalgamated Bean Coffee Trading Co

Café Coffee Day 816.0
Ltd

Baskin-Robbins Various franchisees 380.0

Domino's Pizza Jubilant Foodworks Ltd 296.0
Coffee Day Xpress Various franchisees 279.0
McDonald's Various franchisees 179.0
Barista Coffee Co Barista Coffee Co Ltd 175.0
 Leading Chained Consumer Foodservice Brands by Number of Units 2009

Global Brand Owner outlets

Pizza Hut Various franchisees 159.0

Indian Hotels Co
Indian Hotels Co Ltd 157.0
Restaurants

Subway Various franchisees 155.0

Amalgamated Bean Coffee
Coffee Day Xpress 150.0
Trading Co Ltd
KFC Various franchisees 73.0
Java Green Java Green Pvt Ltd 70.0
Smokin' Joe's Various franchisees 70.0
Swirl's Various franchisees 70.0
Nirula's Nirulas Corner House Ltd 65.0
Pizza Corner Various franchisees 62.0
Natural Various franchisees 54.0
US Pizza Various franchisees 51.0
BurgerMan Various franchisees 50.0
Costa Coffee Devyani Food Industries Pvt Ltd 43.0
Jumbo King Various franchisees 43.0
Devil's Workshop Various franchisees 40.0
Dosa Plaza Various franchisees 39.0
Kamat Rangappa Kamat Group of Hotels Ltd 37.0
Sarvana Bhavan Hotel Saravana Bhavan 29.0
Sagar Ratna Various franchisees 29.0
Little Italy Various franchisees 28.0
Marrybrown Various franchisees 28.0
Qwiky's Various franchisees 27.0
Mainland China Speciality Restaurants Pvt Ltd 25.0
Others Others 3,473.0
Total Total 7,152.

Table 3 Consumer Foodservice by Independent Vs Chained Outlets: Units/Outlets 2009

outlets Independent Chained Total

Cafés/Bars 69,325.0 2,421.0 71,746.0

 Table 3 Consumer Foodservice by Independent Vs Chained Outlets: Units/Outlets 2009

outlets Independent Chained Total

Full-Service Restaurants 601,710.0 1,497.0 603,207.0
Fast Food 64,643.0 1,444.0 66,087.0
100% Home Delivery/Takeaway 125.0 130.0 255.0
Self-Service Cafeterias - - -
Street Stalls/Kiosks 1,005,048.0 1,660.0 1,006,708.0
Pizza Consumer Foodservice - 742.0 742.0
Consumer Foodservice 1,740,851.0 7,152.0 1,748,003.0