September 17, 2013

Mumbai

Organised fast food in the fast lane

At a time when the economy is experiencing a slowdown and many sectors are struggling to grow, one sector
that has bucked the trend and grown rapidly is organised fast food outlets (quick service restaurants or QSR).
CRISIL Research, Indias largest independent and integrated research house, estimates that the QSR market
will double to around Rs 70 billion in 2015-16 from Rs 34 billion in 2012-13, driven largely by new store
additions. However, during this period, same-store-sales growth is expected to decline considerably due to
intensifying competition in tier I cities, coupled with the economic slowdown.
Over the next 3 years, new store additions will increase by 16-18 per cent annually, propelled by the rapid
expansion of global players into tier II and tier III cities. Currently, tier II and tier III cities account for just about
25 per cent of total stores; in the next 3 years, however, nearly 40-45 per cent of store additions will take place
in these cities.
In tier I cities, we expect the annual QSR spend per middle class household to surge by over 1.5 times
to around Rs 6,000 by 2015-16 from about Rs 3,700 in 2012-13. In tier II cities, currently the QSR spend
is around Rs 1,500, which is less than half that in tier I cities. However, growth is expected to be much
higher in tier II cities, at about 2.5 times to Rs 3,700 by 2015-16. This quantum jump in QSR spend in
urban areas will be propelled by the increase in nuclear families and working women, steady growth in
incomes, changing lifestyle and eating patterns and, importantly, greater accessibility of QSR outlets.
said Prasad Koparkar, Senior Director, Industry & Customised Research.
Global brands currently have an aggregate market share of 63 per cent of the domestic QSR market and will
continue to grow on the back of expansion into smaller cities. These players have been successful in adapting
their menu and products to local tastes. Indian players who serve domestic cuisine too will grow, but not as fast
as global players.
In value terms, pizzas, burgers and sandwiches still account for 83 per cent of the domestic QSR
market. Players have found it relatively difficult to adapt Indian food into an assembly line production
model. On the other hand, foreign cuisine can be served quickly, and is more amenable to the cold
storage format and a centralised kitchen. McDonalds and Dominos Pizza have shown over the years
that the Indian consumer is comfortable with western fast food, said Ajay Dsouza, Director, Industry
Research.
To compete effectively with their global peers, Indian players such as Jumbo King, Kaati Zone and Faasos
have already moved to a centralised kitchen model. Investing in centralised cooking and supply chain facilities
is critical to success in the QSR space as it ensures quality and consistency across outlets, and helps players
reap the benefits of bulk procurement. Some Indian players are also serving global cuisine laced with Indian
spices to satisfy the local taste.

Contd..

September 17, 2013

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Media Contacts

Analytical Contacts

Priyadarshini Roy
Communications and Brand Management
CRISIL Limited
Tel: +91-22- 3342 1812
Mobile: +91- 9819742778
E-mail: priyadarshini.roy@crisil.com

Prasad Koparkar
Senior Director, Industry and Customised Research
CRISIL Research
Tel: +91-22- 3342 3137
E-mail: prasad.koparkar@crisil.com

Jyoti Parmar
Communications and Brand Management
CRISIL Limited
Tel: +91-22- 3342 1835

Ajay Dsouza
Director, Industry Research
CRISIL Research
Tel: +91-22- 3342 3567
E-mail: ajay.dsouza@crisil.com

E-mail: jyoti.parmar@crisil.com

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CRISIL Research is India's largest independent and integrated research house. We provide insights, opinions, and analysis
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