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India’s food

service industry:
Growth recipe
Consumer Markets

November 2016

KPMG.com/in

© 2016 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

Forewords
FICCI
Dear readers,
offerings and new and innovative policy streamlining to stimulate the
The Indian Food and Beverage (F&B) service elements. growth of this sector.
service Industry is one of the most
vibrant industries that has seen This report titled ‘’India’s food service I am confident that the deliberations
unprecedented growth in the recent industry: Growth recipe’’ highlights of the conference and the
past and continues to expand rapidly. the overall potential of the industry recommendations of the report would
This can be attributed to the changing and captures the changing scenario provide a roadmap for the Industry to
demographics, increase in disposable in the sector. While the report would grow and achieve its true potential. I
incomes, urbanisation and growth of enlighten the readers on the latest am hopeful that the study would give
organised retail. trends and growth strategies of the us some critical insights along with
food service retail industry, in order to pertinent answers and would establish
The Gross Value Added (GVA) achieve the desired growth, it is very itself as a work pioneered for the
by hotels and restaurants has important to address the regulatory sector.
witnessed an annual increase in both bottlenecks. The ease of doing
absolute and relative terms. It grew business scenario for the food service Enjoy reading and we look forward to
from INR1,084.2 billion in FY14 to industry needs to be refurbished; the receiving your suggestions!
INR1,211.7 billion in FY15, growing its current laws mandate new businesses
contribution in country’s overall GVA to obtain about thirty permits to
from 1 per cent in FY14 to 1.1 per cent become operational. Hence the report
in FY15. The restaurant industry is deep dives into the policy reforms
expected to contribute about 2.1 per required to create an ‘ease of doing
cent to the total GDP of India by 2021. business’ ecosystem for the Food
The F&B sector has evolved over the service retail space. This report would
past decade, giving rise to exciting also analyse various aspects that need
new concepts in food and beverage

Dr. A. Didar Singh
Secretary General
FICCI

© 2016 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved

Piyush Patodia Chairman FICCI Food Service Retail Task Force © 2016 KPMG. yy Lack of quality infrastructure the most attractive investment destinations worldwide. The changing advocacies.438 crore. The on developing the food processing F&B service market is dominated by infrastructure and integrated food unorganised segment and although it parks by subsidising the capital cost. increase in income. Brands/ highlight the key issues and suggested chains of both Indian and MNC brands certain measures to counter these are still less penetrated and there based on industry feedback. All rights reserved.000 crore by 2017. efforts of all the concerned demographics. The sector is rich diversity and food is embodied a flourishing one and is needed to be The FICCI Food Service Retail Task to be one of the core part of this nurtured with right set of policies and Force is certain that the collaborative diverse landscape. . Welcome to FOODZANIA 2016!! will decline significantly over the next These initiatives will go a long way in 4-5 years. Mr. a Swiss entity. an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”). India has always been known for its than 60% of the market. it is likely to remain more promoting the ‘Make in India’ initiative. yy Shortage of skilled manpower The combined F&B service market is yy Increasing real estate cost worth INR 204. we have attempted to INR 380. The exists a large opportunity in this space government has been of late focused to create bigger restaurant chains. stakeholders would help in bringing urbanisation and growth in organised Some of the key issues maiming the further clarities for the sector and retail is driving India’s F&B sector industry include: lead to auxiliary growth of the national the nation has emerged as one of economy. growing at yy Multiple licencing system compound annual growth rate (CAGR) of 23-24% and is expected to touch In this report. Chairman’s note Dear readers.

a Swiss entity. an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”).© 2016 KPMG. All rights reserved .

a Swiss entity. All rights reserved.© 2016 KPMG. an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”). .

Drop the hyperlink from here and at all places in the paper. 30 July 2015. ease of doing business. investor and consumer sentiments the food service domain. a Swiss entity. To realise the Growth recipe’ delves deeper into the country is poised for a strong potential of growth in the food service the policy and regulatory challenges growth across the consumer sector in industry downright. etc. starting from consumption. At the event. the tracking of raw and unprocessed food inventory to ordering and KPMG in India is the Knowledge Partner delivering at consumers’ doorsteps. Owing to these reasons. A rising young population. bridging the alike. This demographics. along government authorities at various with a fast-paced trend of eating out The report tries to articulate the major levels and the industry stakeholders challenges and recommends steps and experimenting various cuisines work hand-in-hand to address and on a frequent basis. All rights reserved . technology is imperative for all stakeholders to has played a pivotal enabler role contributed to this report. academia and consumers. We acknowledge requirements of any living being. Since food is one of the basic food service business operators in the globally competitive. safe for human service value chain. increasing consumer base — expected skill gap. Food Service Rajat Wahi Partner and Head Consumer Markets KPMG in India * India ‘to overtake China’s population by 2022’ – UN. including relaxation on Foreign Direct a single touch. It is pertinent that the overview and potential opportunities. increasing disposable eye-catching prospects for foreign and report ‘India’s food service industry: incomes and growing urbanisation. amend the existing norms governing aims to present its all-encompassing the industry. at a consumer’s preferred location with industry. for FICCI’s – FoodZania. an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”). food experts from Investment (FDI) limits and passage various sectors shall come together to of Goods and Services Tax (GST) Act. collaboratively ensure its availability across various facets of the food in good quality. there is a need to of the food service industry and the near future. The Indian diaspora presents a deliberate on the areas related to food have helped uplift and strengthen the significant array of opportunities in policy. investor-friendly economic reforms. Indian investors alike. it and appreciate everyone who has country. Liberal and prepared ready-to-eat food is delivered the society — including governments. where freshly stakeholders from diverse strata of and consumer sectors. that aims to provide a stable governance at the centre have applications has pushed the boundaries a common platform to all relevant provided fresh impetus to the retail of convenience farther. KPMG in India A rapidly growing Indian economy and A new range of web tools and mobile Retail Conclave. © 2016 KPMG. customer service. An ever. has provided a to counter them that could make remove the bottlenecks faced by the the country’s food service industry plethora of growth opportunities for industry. menu trends and consumer coupled with favourable Indian to surpass China’s by 2022* — offers behaviour. food approvals and guidelines. The BBC. Simultaneously.

industry and other single-window clearance system to ease stakeholders is required to advise the central obtaining the permits and simultaneously regulatory authority towards formulating 1. The ‘Digital 30 permits to become operational. This step is category. The World Bank. (EoDB) 2017 country ranking1. the current laws acknowledged standards of food safety mandate new businesses to obtain about through stringent compliance. contributing a significant total investment. with the exceedingly contributed to the growth of increased focus on ‘Digital India’ initiative the industry. All rights reserved. the different food authorities at various levels. and ensure the The EoDB scenario for the food service uniform implementation of internationally industry is no different. 27/10/2016 © 2016 KPMG. comparison with developed economies Although the rankings are believed to of the world. collaboration among the governments there is an instant need to introduce a (national and states). chain. October 2016. the Indian food retail expected to bring more transparency and industry is positioned globally as the sixth. The pace of over 15 per cent annually. The country reforms such as expected implementation faces challenges of having unambiguous of the Goods and Service Act (GST) and and non-overlapping responsibilities among the Insolvency and Bankruptcy Code. India food through means of inspections and has shown an improvement of one point non-compliance penalties. trimming down with increasing disposable incomes have non-essential licences. However. The Food Safety and Standards Authority the government’s flagship initiative. supply gap in the country. a Swiss entity. Also. Free Press Journal. With India’ initiative can help adopt faster and the growth projections better than global. the shift from manual fast food outlets. has provided an impetus to the overall authority in India. released and helps ensure the availability of safe by the World Bank in October 2016. ‘Make in of India (FSSAI) is the apex food regulatory India’. to set up a restaurant/other related food constituting the largest retail consumption outlet anywhere in the country. single-window clearance would not only the food services industry in the country has help expedite the process. food reduce the number of approvals required expenditures hold a lot of prominence. One of the major components in the manner with well-defined and discernible EoDB rankings — ‘Starting a business’ — roles. more efficient technological means for India’s food service industry is set to keep the betterment of the industry. As the next step. GST may help improve India’s ranking in ‘Doing Business’. indicating an ailing the significant food laboratory demand– condition for new businesses. country still seeks an improvement in the This is in contrast to developed countries process of making businesses operational where authorities work in a collaborative swiftly. but would also witnessed unprecedented growth over the remove any irregularity adding up to the past few years. governments could play an instrumental role to implement the changes and follow The favourable Indian demographics coupled a structured approach. It mandates food service operators to follow the standard regulatory practices According to the Ease of Doing Business regarding sanitary and hygiene needs. which attracted substantial investments from foreign countries. responsible for framing industry by driving the food manufacturing guidelines and monitoring the functions and processing. However. There is also an urgent need for slipped by four points to 155 and remains infrastructural development to bridge a challenging issue. an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”). In fact. reforms. the state proportion to India’s economic performance. Executive summary In the progressive Indian society. Greater investors interested in future. . Further. India lags in terms of food improve next year on the back of some major quality and safety standards. in to 130 as compared with the 2016 ranking. and providing attractive across the country’s entire food value business opportunities to the investors. 2017 Doing Business rankings. Hence. dominated by restaurants and by the government. remove duplicity that exist in the system largest and has been increasing at a steady of starting a food service business. The Indian government has to online approvals is expected to ease the also taken major steps towards prioritising over-regulated terms and could equip new the industry as part of its liberal economic ventures with better knowledge of process.

Also. and An immediate and time-bound strategy to the skill gap could further increase in the address the challenges could determine future due to developing tastes for global the progressive track of the food services cuisines. practical and updated norms significant attrition rate. Key recommendations to the food service industry for reforms Discernible roles of authorities Use of technology as a tool for compliance Uniform implementation of Codex Digital transitioning of approvals/licensing HACCP* across the country Developing in-house curriculum/collaborative Removing dispensable licences structured programmes HIGH PRIORITY LOW Development of infrastructure Greater collaboration among and human capital authorities at different levels Stringent compliance required Referring to occupational Expedition in implementing standards reforms by state governments Regulatory landscape Ease of Doing Business Addressing the skill gap *Hazard Analysis Critical Control Point (HACCP) © 2016 KPMG. More than the numbers. the in-house/structured by 2022. All rights reserved . making it globally and high costs of skilled staff due to competitive. rising foreign and culinary tourism. From kitchen to service. an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”). it is training programmes can focus more on the quality of workforce and skill that are improving the communication and language required have not been met from several skills of the employees that remain one of years required. the industry lacks skilled employees. a Swiss entity. industry in India. since several years. which remains unaddressed the biggest challenges in the industry. there is a need for businesses The employment opportunities in the food to refer to various occupational standards service industry are growing and projected to to ascertain the preparedness for different require almost double the existing workforce functions. Although the ‘Skill with discernible procedural steps for India’ initiative by the government has been implementation across the country. adequate. actively devising strategies to improve the condition.

an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”). a Swiss entity. . All rights reserved. Table of contents 01 Food service industry: Poised for growth 01 02 Ease of Doing Business (EoDB): Inexorable need to remove red tape 17 03 Regulatory landscape: Preparing to be competent globally 25 04 Human capital: Strategies to bridge the skill gap 31 05 Bottlenecks inhibiting growth path 37 06 Way forward 41 © 2016 KPMG.

an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”).© 2016 KPMG. All rights reserved . a Swiss entity.

All rights reserved. . a Swiss entity. an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”).01 e Food s Poisedr v i ce in d u s tr y: for g ro w t h © 2016 KPMG.

WSJ.5% Standard & Poor’s 8. NRAI website. India’s growth cent. All rights reserved . revised estimates.1% 1.0% witnessed an annual increase in both INR billion absolute and relative terms. It grew from INR1.5% 7. 5. stable unaffected trade ties between the government.212 Restaurant’ industry in the restaurant industry is expected to contribute about 2. growing its contribution in country’s overall GVA from 1 per cent in FY14 to 1.1 per cent over 2016. International Monetary Fund Trims India’s Growth Forecast. 02 India’s food service industry India is one of the fastest growing the world economy is expected to grow economies in the world.2 billion in FY14 to INR1.084.1 per cent in FY15*5.4% 7.K. Amitabh Kant in New Delhi. over the Fiscal agencies depict a positive outlook3. The Gross Value Added (GVA) by hotels and restaurants has 1.7 billion in FY15. India’s GDP growth to expand about 8% in next two years: S&P. as estimated by the International ratings by the ‘Big three’ credit rating Monetary Fund (IMF).7% 7. share of the ‘Hotel and 1. favourable economic European Union (EU) and the United policies and a positive sentiment. Saving and Capital Formation 2014-15.).211.8% The Indian Food and Beverage (F&B) services industry is one of the most vibrant industries to witness rapid ‘Hotels and Restaurants’ GVA* and unprecedented growth over the recent past. ups China’s estimates. According to the National Percentages represent the Restaurant Association of India (NRAI). Press Note on First Revised Estimates of National Income. 22/07/2016 © 2016 KPMG. Similarly.4 : Year 2017 (FY17) and FY18. 21/07/2016 The Economic Times.0% IMF 7. an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”). while 2015 figures are first revised estimates as 3. Food expenditures constitute a majority of population’s consumption basket and the share is expected to grow further in the coming years as organised food 2014 2015 service retail penetrates 2. Growth forecasts for India Agency/organisation FY17 FY18 Fitch Ratings 7. 18/08/2016 6. the Kingdom (U.4% 7. January 2016 reported by Central Statistical Office (CSO) ToI. assuming the changing demographics. a Swiss entity. 2014 figures are second 20/07/2016 Consumption Expenditure. The CSO-MoSPI.9% Moody’s Investors Service 7. The industry contributes significantly to the nation’s economy and has been the frontrunner in terms of attracting investments. Driven by at 3.0% 8. These projections make country’s Gross Domestic Product India the fastest growing large economy (GDP) is projected to grow at 7.084 1.4% ADB (Asian Development Bank) 7. Moody’s retains India GDP forecast. *Note: GVA figures at base prices taken.4 per globally2. Relatively. NRAI India Food Services Report (IFSR) 2016 launched by Shri 4.1 per cent to Indian GVA the total GDP of India by 20216.

Growing at an 60–65 per cent of the total retail average annual rate of 12–13 per cent. KPMG in India’s analysis 2016. 7/06/2016 9. The consumer base leading to a contribution share of total household significant market size for F&B sales. 25 pc growth potential in organized F&G market: India Food Report 8. IMAGES Retail Report – 2015. Source(s): Euromonitor research. the food consumption organised retail and about 70 per cent and demand is expected to be more of unorganised retail industry8. an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”).6 trillion by 2017. 21/01/2016 © 2016 KPMG. food constitutes the largest retail India has a substantial food-loving consumption category in India. expenditure toward food stood at Food and grocery retail constitute 43 per cent in FY15. a Swiss entity. Currently.1 trillion in in India. and in India is primarily constituted by INR61 trillion by 2020. Consumer Durables and Information Technology (CDIT). at a Compound the unorganised retail. The coming years. accessed January 2016 10. six-year period. accessories and footwear. January 2016. Similarly. including omnichannel. and other small categories. says report. jewellery.03 Current market-size and future potential Retailing has gained significant A steady increase in the consumer popularity in India and has evolved spend on food. drinks and groceries. All rights reserved. India Retailing website. The driven by an overall improving country is embracing modern retail business and consumer sentiments formats. Indian food retail market to cross Rs 35 lakh crore by 2017. According to the India emergence of lower-tier markets Food Report 2016. would maintain the internet penetration increases the segment’s dominance in the both in urban and rural regions. Retail 60-65% Food and grocery retail 35-40% Others* *Others includes apparels. Euromonitor research. IMAGES Retail Report – 2015. as and easing inflation. 2014–209. released in January as demand centres and the growth 2016 by Ministry of Statistics and of internet retailing — coupled Programme Implementation (MoSPI). accounting Annual Growth Rate (CAGR) of for more than 85 per cent of the total more than 15 per cent over the retail value7. Food and Beverage News. with the country’s favourable the Indian food retail market — sixth- demographics — has opened a largest globally — is expected to grow plethora of opportunities for retailing from a value of INR25. . health. the retail industry 2014 to INR35. market in India — 15–20 per cent of in value terms. home and furnishings. KPMG in India’s analysis 7. rapidly over the past few years. time-pieces and time- wear. beauty and fitness. than twice its current value by 202510.

0 opportunity for 5. 04 Indian food service market Factors such as growth in consumption of food in terms of frequency of eating out.3 billion.13 yy Growing at a CAGR of 7.8% 81. 18/05/2016 delivered or prefer takeaway. Online sales mode constitutes the remaining 2 per cent of the total retail sales.981.1 by offline or physical sales. the Indian food services industry is dominated 3.11 4. Approximately 81 per cent of diners prefer to eat-in.1 In terms of mode of retail.1 billion in 2016. 20/07/2016 12. will foray into London and Singapore too.7 per cent from 2013.12 Similarly. a Swiss entity.2% 19. All rights reserved .5 sales value of the industry. consumers prefer to eat 2013 2016 2018F 2021F their food when it is still hot and fresh. accessed September 2016 © 2016 KPMG. Only 33% of food services industry is organised. to reach a value of INR4. as compared with Source(s): NRAI India Food Services Report (IFSR) 2016 launched by Shri Amitabh Kant in New Delhi. The Times of India. and greater brand and value consciousness. the NRAI estimates the Indian food services market to stand at INR3. the online sales value is increasing constantly as the industry progresses toward organised retail with increasing penetration of internet in the country. increasing trend of experimenting Food service market (INR trillion) new cuisines. 21/07/2016.8 million people in 2016 and contribute INR224 billion by way of taxes to the Indian economy. are expected to create a direct employment CAGR 10% 5. accounting for almost 98 per cent of the total retail 2.0% Offline Eat-in 97. 19 per cent who either tend to get it Mumbai-based Bar Stock Exchange expands outlets to other cities. NRAI website. accessed September 2016 13. Euromonitor research. an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”). Euromonitor research. The Economic Times. accessed September 2016 11. yy The market is expected to expand at a CAGR of 10 per cent during 2016 to 21. Retail mode: Online vs offline Retail type: Eat-in vs takeaway Online Takeaway 2. However.091.0% Source(s): Euromonitor research.

14 as unorganised segment dominates Key drivers of growth As one of the fastest growing economies of the world. accessed January 2016 Although the organised share of the food service industry. India offers a variety of advantages for the food service industry. a Swiss entity. an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”). All rights reserved. NRAI India Food Services Report (IFSR) 2016 launched by Shri Amitabh Kant in New Delhi. it significant opportunity for branded currently constitutes one-third (33 per and chain outlets to increase their cent) of the total food services market.05 The food services industry in India can broadly be classified into four major segments: Sales split.6% Full-service restaurants and Quick Service Restaurants (QSRs) together Streets kiosks stalls account for a majority 14. Demand factors The major demand-side factors driving the industry’s growth can be classified under four major buckets: Increasing disposable Changing consumer income levels lifestyle Large share of Increasing urban young population working women population 02 03 01 04 14.3% 56.6% of 73 per cent of India’s food service industry. Cafes and Bars 12.5% *Fast-food restaurants are also referred as Quick Service Restaurants (QSR) Source(s): Euromonitor research. . NRAI website. 21/07/2016 © 2016 KPMG. There is a food services in India is growing. by segments Full-service Fast food* restaurant 16. penetration in the Indian markets.

06

1. Large share of young population

With a population of 1.3 billion, India is According to the United Nations yy Eating out is often seen as a
one of the largest consumer markets Population Fund (UNFPA), with over habit among youngsters, rather
globally. Demographically, it is also 350 million population in the age than being as an occasion-driven
one of the youngest markets with group of 10–24 years, India has the activity.19
more than 45 per cent of population world’s largest youth population
below the age of 25 years.15 globally. It accounts for 28 per cent of yy The youth population of India is
the country’s total population.17 expected to reach about 465 million
The country has the youngest median by 2021.20
age (27.6 years) currently, among yy The psychographic profiling of
the BRICS nations and major global youth reveals that a significant
economies. With an estimated share of youth population in India
median age of 29.7 years in 2030, it has a liberal mindset, encouraging
would continue to be the leader in that experimentation and greater
domain.16 consumption.18

Age distribution of population in India (Percentages depict population in that age group)
2015 2030F

Median age: 27.6 years Median age: 29.7 years

65+ 6% 8%

55-64 7% 9%

25-54 41% 43%

15-24 18% 16%

00-14 28% 24%

Females Males

15. The World Factbook, CIA, 8/10/2016 18. Psychographic Profiling of Indian Young Adult Consumers of 20. Food Service Industry, CMR India, 05/2016
16. Data Query, UNDESA, accessed 20/10/2016 Smartphone - VALS Approach, MSAES website, 16/11/2015

17. India’s Secret Weapon: India Has Largest Youth Population, The 19. QSRs In India: How Fast Food Chains Are Changing Eating Habits
Universal News Network, 27/10/2015 of Indians!, Trak website, 22/01/2015

© 2016 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved

07

2. Increasing disposable income levels

The growing Indian economy has According to the Economist yy The country’s median household
resulted in rising income levels, thus Intelligence Unit (EIU) data21: income is expected to increase from
leading to an increase in disposable INR267,100 in 2015 to INR380,300
income. The country’s household yy India’s personal disposable income is by 2020, growing at a CAGR of 7.3
income and consumer spending expected to increase from INR86.5 per cent over the five-year period
are also expected to increase over trillion in 2015 to INR142.1 trillion during 2015–20.
the next five years, driving the food by 2020, growing at a CAGR of
service industry and presenting a approximately 10.5 per cent during
lucrative opportunity to the companies 2015–20.
operating in the segment.

Personal disposable income Median household income
(INR trillion) (‘000 INR)
380

142
CAGR 10.5% CAGR 7.3%

339
126

111 310

293
99

92 280

86 267

2015 2016 2017 2018 2019 2020 2015 2016 2017 2018 2019 2020

Consumer spending and consumer confidence 134
131 131 131
130
129 128
128
126

122 123
121
121 121
120
119 119
118
16.7
115 16.2 16.1
112 15.4 15.1
15.0 15.0
14.8
14.7
14.2 14.2
14.1
13.8
13.3 13.4 13.0
12.8 13.0 13.0
11.5
15

15
12

12

13

13

14

14

16
15
14
12

13
11

11

15
12

13

14

16
3Q

4Q

2Q

3Q
2Q

3Q

2Q

3Q

2Q

3Q

2Q
4Q
4Q

4Q

4Q

1Q
1Q
1Q

1Q

1Q

Consumer spending (INR trillion) Consumer confidence (number)

Source(s): India Consumer Confidence, Trading economies website, accessed 9/09/2016; India Consumer Spending, Trading economies website, accessed 9/09/2016

21. Economy: Market opportunities, EIU research, 24/08/2016

© 2016 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

08

3. Changing consumer lifestyle

A rapidly growing young population, yy Exploring culinary experiences — driving the organised food services
rising income levels, increasing including both global and authentic retail market
use of technology in consumer Indian regional cuisines
space, urbanisation, brand and style yy The growing internet penetration
awareness, health consciousness, yy Busier lifestyles, leading to an and technological disruptions in
increased social media activity, hectic increase in on-the-go consumers — food delivery is leading to easier and
life routines, etc., have led to a shift opting for ready-to-eat food faster availability of food-on-order
in consumers’ food buying habits. yy Innovations in traditional menu yy The use of social media for sharing
The following trends are pushing the options — attracting even the culinary experiences — urging
food service industry towards a high experimental consumers consumers to try new food options
growth trajectory: and outlets, based on reviews
yy The availability of hygienic and shared.
yy Increasing preference for healthier food options, primarily
convenience to eat out

4. Although India’s urban female Workforce

Although India’s urban female between 1991 and 2011, compared yy The share of women in wage
Workforce Participation Rate (WPR) with the urban women population employment in the non-agricultural
of 15 per cent is lower, in comparison growth of 4.5 per cent during the sector, as a per cent of total
to global/other countries, the trend same period.24 non-agricultural employment, has
is steadily changing as the rate is increased from 13 per cent in 1990
increasing 5.6 per cent annually since yy Among all urban workers, women to 18 per cent in 2005.27
1991. It is growing at a faster pace as constitution increased from 13.4 per
compared with 2 per cent for rural cent in 1972–73 to 14.7 per cent in With more women spending
females and 3 per cent for urban 2011–12.25 substantial time at work, time
males.22 availability for cooking and meal
yy The total number of women in the preparation is relatively restricted.
yy According to 2011 Census carried workforce increased more than Thus, ready-to-eat food or eating out
out by the Indian government, the three-fold, from nine million in 1991 has become a preferred alternative/
number of women working and to 28 million in 2011. 26 option.
seeking work grew 14.4 per cent

25%
% of women in total workforce in India23
21%
20%
19%
18%

15%

1995 2000 2005 2010 2011 2014

22. Urban India and its Female Demographic Dividend, India Spend 26. Urban India and its Female Demographic Dividend, India Spend
website, 30/07/2015 website, 30/06/2015
23. Thomson Research, accessed October 2016 27. Share of women in wage employment in the nonagricultural
24. Women In The Workforce: India, Catalyst, 17/11/2015 sector (% of total nonagricultural employment), Worldbank,
accessed 21/10/2016
25. Women In The Workforce: India, Catalyst, 17/11/2015

© 2016 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved

Hyperlocal market in India. etc. All rights reserved. It constitutes avenues (such as airports. and new retail market in India. Thomson Research. by minimising the barriers to doing yy Hundred per cent FDI permit business in the country. led to the e-commerce and marketplace modernisation of the industry with model. Technology and emerging retail formats Emanating from rapidly evolving are driving consumers towards food technologies. yy Hundred per cent FDI permit on trade of food. Hyperlocal market in India.75 1. June 2016 29. a Swiss entity. Dedicated food segments driving the hyperlocal courts and food malls. . accessed June 2016 28.65 2015 2020F Source(s): Thomson Research. subsuming tax structure — Goods Such reforms. The onset on Business to Business (B2B) of foreign majors. an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”). hyperlocal market in India. railway about 60 per cent of the total and metro stations.) approximately INR1 billion. also attracted private and Services Tax (GST) equities and venture capitalists to invest in the food service sector. June 2016 © 2016 KPMG. highways.09 Supply factors a.65 billion in 2015. hospitals. produced and marketed in India b. Liberal reforms The country’s economic liberalisation yy Hundred per cent FDI permit on has opened the gates for many major Single Brand Retail Trading (SBRT) global food business operators.28 dimension to food service business yy Food delivery is one of the major in the country. retail formats are emerging at a fast pace. in turn. global best practices and pushed the yy Implementation of simpler industry toward organised market.29 Hyperlocal market (INR bilion) CAGR 69% 22. new and disruptive services. Application-based online yy The Indian hyperlocal market grew aggregators and development of at 41 per cent year-on-year (Y-o-Y) in third-party logistics service providers terms of revenues to reach a value have introduced a whole new of INR1. Thomson Research. valued at amusement parks.

Increasing travel and variety of cuisines There has been a consistent increase overall food service demand in the in Foreign Tourist Arrivals (FTAs) in nation. obviating the growth of food service industry. companies indulge in contract farming—where the desired produce is procured directly from the farmer at an already agreed price. GoI.0 7. 9/07/2016 © 2016 KPMG.33.432 million31 authentic regional cuisines and driving Foreign Tourist Arrivals (FTAs) in India (in millions) Change over previous 9. the country. Various domestic and foreign majors procure raw inputs directly from farmers. Ministry of Tourism. Government Policies for Improving Agricultural Productivity. an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”). The government also promotes the practice.03 million30 the form of global cuisines.4 6. specifically in yy The number of FTAs: 8. a Swiss entity.5% year 9 8 7 6 5 FTA 6. At the yy The number of domestic tourist same time. India Tourism Statistics at a glance 2015. Agriculture Information Website. India Tourism Statistics at a glance 2015. leading to the popularity of territories: 1. 30/08/2016 d. GoI. All rights reserved . Ministry of Tourism. by 2017. Procurement by direct farm-firm linkage (contract farming) To obtain the desired product grades and quality at reasonable prices. 10 c. accessed on 5/09/2016 34. 29/03/2016 33.0 2011 2012 2013 2014 2015 Source(s): India Tourism Statistics at a glance 2015.7 8. 30/08/2016 31.6 7.9% 10.32.2% 4. domestic tourism is also visits to all states and union increasing. and targets contract farming to contribute 4 per cent to the planned agricultural growth targets.34 30. The Organic Life. NABARD website.2% 4. GoI. 30/08/2016 32.3% 5. Ministry of Tourism.

11 Upcoming trends and the changing scenario The Indian food service industry well as domestic players have set-up has evolved significantly over the their base in the country. Technology as an enabler Technology has impacted all aspects Big data analytics and cloud of the food service industry — from computing assist restaurant owners sourcing to reservations to on. service levels opportunities in various areas of the have improved and supply chain food service industry. All rights reserved. and customer experience via cloud-based kitchens that support facilitating inventory management.5 2013 2014 2015 Source(s): Euromonitor research. a Swiss entity. Euromonitor research. accessed September 2016 Retailing. home cooks and online food customer management and order delivery.37 In the past decade.39 Online food service sales value (at current prices) 153. The online ratings.3 84. How technology will change the restaurant industry. 14/04/2015 © 2016 KPMG. The use demand delivery. for unorganised food retail industry displaying menu items. an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”). consumer experience and increase operational efficiency. for making decisions about increment during 2013 to 15. A number of foreign as have been listed below. several new Various restaurants and cafes have food tech start-ups have emerged started to use digital devices such that have helped organise the as digital kiosks and tablets. among others.36 their eating preferences. CMR India. helps improve the management such as restaurant aggregators.8x reviews. .38 Online sales form a small fraction of the total food services sales Consumers have also started to rely pie. The Indian Food Service Industry. 12/04/2016 Safety Helpline. Food Retailing. owing last two decades — new formats to the prevalence of a number of have emerged. India 39. It has led to the of big data and cloud technologies emergence of new business models. to derive value out of data.9 (INR billion) CAGR 35% 113. 12/05/2016 38. accessed January 2016 35. 12/04/2016 37. Key trends that practices have become more are changing the face of the industry efficient. however. India 36. menu items and user food services sales witnessed 1. place orders by enhancing access to small and provide feedback. The Changing Face of the Indian Food Service Industry. How technology will change the restaurant industry. to enhance restaurants and home chefs.35 management. its prominence is on technology to compare restaurant increasing at a rapid pace.

Technova Global. As on August 2015. 12 Expansion in the market share of the organised food service sector The Indian food service industry food service market in India.8 per cent from outlets in the country. of foreign restaurant brands in India domestic organised food service The organised sector has grown stood at 57.41 Following the footsteps of foreign sector in India. to approximately INR1. a Swiss entity. Nishith Desai. has competing to gain a large share in the landscape. engaging in partnerships. Hospitality Biz India. 05/07/2013. a number of domestic Owing to the large consumer base players have also set-up organised and significant growth potential. 21/08/2015 44. Taking a bite out of the Indian pie. How India eats out. the number Various international as well as the market share of organised players. Hospitality Biz India. accessed on 27/10/2016 © 2016 KPMG. It is expected to capture over in India. All rights reserved .42 These players operations in India by opening new approximately INR750 billion in 201340 are fostering the development of outlets. How India eats out. Live Mint. Live Mint. 22/06/2016 40. which operates over 3. 2016. 05/07/2013 43. an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”). International fast food joints expand in India. FnB News.43 unorganised sector. is experiencing players to launch their operations in a gradual shift with the expansion in India. which is dominated by the attracted a large number of foreign organised food service sector. 41. 22/06/2016 11/02/2015 42. Indian QSR industry to touch $2 billion by 2016-17. the food service retail outlets and are INR 5. India Food Services Report 2013.460 players are looking to expand their at a CAGR of 10.020 billion in organised food service retail market employing more manpower..0 trillion Source(s): India Food Services Report 2013. which would help fast track the 41 per cent of the Indian food service growth of organised food service market by 2021.44 players. etc.

incentives. necessary to outperform the competition. 08/01/2014 declining. Since the youth. which trended in few cities for several weeks.45 Food services players are increasingly Social media is a cost-effective trying to leverage these platforms approach and provides the advantage to increase their interaction with Case example46 For instance. offerings. owing to the increasing taste for Western cuisines. . launching breakfast menus. share feedback. product information with increased disposable incomes. They have also opened several 100 per cent vegetarian Thai cuisines. etc. Technopak. a. The Hindustan Times. with them. brands to effectively market act as effective ways to receive It has become an avenue for them themselves. While the foreign players are trying to adapt to local tastes. Many Indian food retails have cent of its offerings to suit the Indian taste. Localisation in offerings About 29 per cent of the total Indian population over the age of 15 years are vegetarians. in their restaurants to attract the vegetarian customer base. Various Indian food consumer feedback. The winning burger was made available in the brand’s outlets for a week. Evolution of the Indian food menu Changing lifestyles. Indian Food Services Trends. expansion in tourism (both inward and outward) and increased focus on health have compelled Indian and foreign players to introduce innovations in their food menus. and the brand was able to increase footfall by nearly 8 to 10 per cent. CNBC. India Retailing. campaigns on social media to lure social media has become one of the customers to their outlets and most important medium to connect increase their footfall. a Swiss entity. 14/02/2016 02/04/2015 47. an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”). A growing taste for US fast food in India. All rights reserved.. helping the brand to express their views and opinions. to gain acceptance of Indian customers. various Indian restaurants are incorporating international cuisines in their menu. and promotions.13 The use of social media to stimulate customer connect Social media has become an integral of instant reach for food services consumers. India’s fast-food industry is becoming a major market. and the social media to communicate actions. primarily due to increased exposure to international Case example48 food via travel and international food For instance. 04/11/2014 48. French. Social Media: The double-edged sword. among others. Survey finds 7 of 10 Indians non-vegetarians but numbers are 49. one of the leading QSR brands in India. one of the leading QSR MNC chains has tweaked about 70 per chains49. service operators are making use of to change strategies or take corrective compare and evaluate choices. Another leading brand launched a photo contest where customers were asked to take a photo in an auto rickshaw placed in its restaurants and upload it on social platforms. Several food service constitute a large part of the customer brands have introduced innovative base for the food service brands. positioning outlets as destinations of family outings. offers. and was promoted through a Hashtag. which are not served anywhere included Italian. 08/06/2016 © 2016 KPMG. invited food bloggers and tweeples to create their own burgers in its outlets. if and when required. 46. Chinese and outside the country. The winners of the contest got a free meal.47 Multinational food service players are focussing on local taste and are increasingly engaging in ‘Indianising’ their menu options. 45. CNBC. as these platforms also part of the young population’s lifestyle.

The health conscious segment caters to about 5 million people in top-six Indian cities — Delhi. vegan diet. amplifying the taste of Indian food.51 c. All rights reserved . and has reached a market size of INR125 billion in 2016. accessed June 52. Fusion food Another new trend witnessed in India is the emergence of fusion food. such as extensive use of international gourmet ingredients such as truffle oil. Technopak.50 Fusion food is also becoming popular with international tourists visiting India as they can better relate to the taste of foreign ingredients.52 Moving in sync with the changing customer preferences. Bengaluru. multigrain breads. an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”). What’s pushing the growth of ‘Healthy’ food segment. are gaining popularity in premium restaurants. In addition. in traditional Indian dishes. and blue cheese. accessed October 2016 © 2016 KPMG. 25/05/2016 51. City of 53. This segment is growing at a rate of 10–15 per cent annually. 04/11/2014 Jaipur. Pune. food services operators are incorporating a number of health food options in their menus as direct offerings or as ingredients. a Swiss entity. Hyderabad and Chennai. Mumbai. Increasing Craze of Fusion Food in the City of Pink Hue.53 50. and gluten-free diets. Franchise 2014 India. Customers are shifting toward Lacto vegetarian diet. such as breakfast cereals. porridge. 14 b. Indian Food Services Trends. Indian Accent. low carb diet. foie gras. hotels and restaurants experiment with food by serving traditional dishes in creative. green tea and caffeine-free tea/coffee. Healthy food The increasing awareness about health and its connection with food is driving customers to move towards healthy eating options. Various standalone restaurants are also emerging that serve health foods as their core offerings. Demystifying fusion Indian food. modern and contemporary manner to please their customers. salads. Health foods. food service retailers are engaging in experiments. organic soups. In a bid to offer customers unique offerings.

produced and yy New retail formats and marketed in India yy Increased spending power supported with favourable avenues are emerging at a yy About 100 per cent FDI permit consumer lifestyle and fast pace .15 Opportunities galore The growing Indian economy coupled with a rapidly evolving consumer demand offers a plethora of opportunities in the food service industry. on Single Brand Retail Trading preferences (SBRT) food courts at airports. railway and metro stations. food processing. yy About 100 per cent FDI permit on B2B e-commerce and etc. . a Swiss entity. growth in third- party logistics services yy Substantial untapped tier-II yy Identification of food processing and tier-III regions as a priority sector for development . Key opportunities Government Industry © 2016 KPMG. All rights reserved. food parks. Liberal economic policies Indian consumer Technology yy One of the fastest growing major yy Evolving technology leading economies globally to innovations across the food yy Nation is among countries with yy About 100 per cent FDI permit the largest population of youth service value chain. on trade of food. as yy Special focus on infrastructure the presence of unorganised development for rail. an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”). highways. water sector is prevalent currently and air transport. road. marketplace model yy Implementation of simpler subsuming tax structure — GST Consumers Unorganised Infrastructure development yy Opportunities for branded food business operators. etc.increased focus on cold storage.food-tech start-ups.

16 © 2016 KPMG. an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”). a Swiss entity. All rights reserved .

. a Swiss entity. an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”). All rights reserved.17 o i n g B u s i n es s Ea se o f D n e e d B ) : I n e x o ra b l e (Eo D ta p e to re m o v e re d © 2016 KPMG.

Ease & Unease. However. 7/09/2015 © 2016 KPMG.55 taxes. including the application Business (EoDB) rankings released by of GST (Goods and Services Tax) the World Bank. 27/10/2016 55. across the country the flow of goods the operators are not pushing the and reduce logistics costs owing to government for tax cuts. the cost of raw material. a Swiss entity. Hence. setting up the restaurant come down. other emerging economies in the world. All rights reserved . Hospitality Biz India. the overall scenario and Insolvency and Bankruptcy of doing business in India is relatively Code. could However. with the provision of 54. such as food items. Also. which are likely to improve the less favourable as compared with environment. The World Bank. it is unlikely to deter 2017 Ease of Doing Business rankings investor sentiments as there have of BRICS countries:54 been various significant decisions Category Brazil Russia India China South Africa Starting a business Dealing with construction permits Getting electricity Registering property Getting credit Protecting minority investors Paying taxes Trading across borders Enforcing contracts Resolving insolvency Overall Favourable Moderate Relatively less favourable With GST likely to get implemented availing benefit of input tax credit. 18 State of EoDB in the food service industry According to 2017 Ease of Doing been taken. Moreover. as the implementation business remains one of the biggest of GST is expected to streamline challenges for the industry. in FY17. an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”). however. tax code. Free Press Journal. GST may help improve India’s ranking in ‘Doing Business’. the removal of varying state level need simplification in new avenues. 2017 Doing Business rankings. October 2016. the restaurant owners are the operating margins of restaurant required to comply with a simplified owners are expected to improve.

0% India: 10. . especially India average and other major regions. a Swiss entity. All rights reserved. industry is likely to be driven by the with India likely to outpace the global Asia-Pacific region. Food- navigator Asia. NRAI. 21/07/2016 © 2016 KPMG.2% Asia Pacific: 8.19 What is keeping investors interested? The growth in the global restaurant demographics and economic growth.0% Global: 6. NRAI India Food Services Report (IFSR) 2016 launched by Shri Amitabh Kant in New Delhi. 16/02/2016. an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”). due to evolving consumer Food services industry annualised growth rate projections (2016–20F) Western Europe: 3.9% North America: 5. and China.3% Sources: China’s massive foodservice industry drives global disposable growth.

Avendus. 2014-63.55. 2016-67. Avendus. for which figures were with reported deal volume exceeding beyond a few locations. All rights reserved . as the organised in the restaurant space. This shift INR43 billion. 57. Restaurant deals slide in January-August after peaking last year. Converted USD into INR taking average exchange rates: (2011-49. Restaurant Industry Report. 2012. Note: Deal volume pertains to looking to expand their operations those deals. 7/09/2016 56. 18/08/2015 VCCircle. accessed on 28/10/2016 58. accessed October 2016. 20 The Indian food and services industry restaurant industry for the next few has witnessed significant tractions in years.12. market is expected to increase by a rate faster than industry’s growth. the Indian players are been realised as of August 2016. 7/09/2016 60. accessed October 2016 59. 56. 2013-60. The Economic Times. an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”). 2015-66.59 The industry could undergo terms of deals taking place. PEs find restaurant chains too hot to resist.57.46.60 *2016: as of August 2016 on their investments in the Indian Deals in Indian Restaurant industry Sources: Restaurant Industry Report.58 PE investors could reported toward organised market could spur potentially realise 30 per cent returns higher deal activity in the space. Restaurant deals slide in January-August after peaking last year. VCCircle.14) © 2016 KPMG. more than 80 deals have Moreover. Avendus. Since 2011. a Swiss entity. Restaurant Industry Report.93.91. especially structural changes.76.

20/04/2016 © 2016 KPMG.21 How supportive is India’s regulatory landscape for setting-up of food service business? The number of permissions are usually dependent on service offerings of a restaurant and state-level requirements.No License/ certificate Purpose Issuing authority FSSAI (Food Safety and Standards 1 Food license Primary requirement to register the business Authority of India) Municipal Corporation or Health 2 Health trade licence Mandatory to be obtained in the state(s) of operation(s) Department of State 3 Eating house licence Required to have a proper eating place Police department (city/state) No Objection Certificate (NOC) required for security in case 4 Fire security certificate Fire department (city) of fire 5 Liquor/bar licence Required if liquor served at the food outlet Excise Commissioner (city) 6 Approval/re-approval Mandatory to apply for Liquor licence Department of Tourism (state) Required for food outlets in multi-storey buildings to Labour Commissioner (Electrical 7 Lift clearance ensure compliance with safety norms for lift (elevator) Inspector) operations License for playing music/ Necessary for playing recorded music and/ or videos in the Phonographic Performance Limited 8 video outlet to comply with the Copyright Act. NDTV website. The Hindustan About Various Licences. a Swiss entity. and Goods and Services Tax (GST) became an Act on 8 September 2016 after getting the President’s approval. President gives his nod. as it was introduced in the Lok Sabha in 2014.62. GST Bill becomes Act. Government revives talks to revamp Factories Act. Thinking of Opening a Restaurant? Here’s What You Should Know 63. 20/04/2016. 9/09/2016 61. Sources: Thinking of Opening a Restaurant? Here’s What You Should Know About Various Licences. NDTV website. All rights reserved. an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”). 2009 Registration under 14 Required if the number of employees exceeds 10 Department of Labour Factories Act* State Tax and Value Added Required for registration under the applicable tax 15 Department of Commercial Taxes Tax (VAT)* authorities *Note: A few alterations are expected in the procedures and guidelines in the Factories (Amendment) Bill. GST Bill becomes Act. The Hindustan Times. 1957 or Indian Performing Right Society 9 Environmental clearance NOC required to ensure compliance with pollution norms Pollution board (state) Mandatory insurances required for assets and products liability: • Public liability 10 Insurances Recognised insurance company • Product liability • Fire policy • Building and asset 11 Signage licence Required for public display of signs Regional/local civic bodies Shop and establishment Registration necessary to safeguard employee rights and Concerned State authorities (as 12 registration working conditions applicable) Approvals for weighing and Approvals required to comply with the Legal Metrology 13 Weights and Measures department measuring instruments Act. The Hindu.63 Sr. While the number of licences/NOCs can go more than 30 to set-up a restaurant. . The Hindu. President gives his nod. some major licences/permissions that are required include:61. 30/12/2015 Times. 9/09/2016 62. Government revives talks to revamp Factories Act. 30/12/2015.

Data Smart.64 The identification of licences that could be The suggested approach for the combined into a single licence — for instance. various business without troubles. licences into sub-sets based on the requirement to fulfil a particular governing need. 30/01/2016 65. state governments are contemplating about there is a need to bring transparency scrapping non-essential approvals needed Degree of regulation Degree of regulation by reducing the number of approvals Low from the Police department. a Swiss entity. as it leads to a lot under the single-window clearance of duplication as well as loss of time. approvals from regional civic bodies can be tier structure by classifying the Medium combined to save time. Case Study: Chicago Licensing and Permitting Reform.65 point/ministry. 64. All rights reserved . Ease to start hotel. 19/03/2015 © 2016 KPMG. Maharashtra state reduces 5 permissions. The Times of India. Hence. 22 Single window clearance: Reducing the number of permissions required The current bureaucratic process Removing the outdated licences that are hinders restaurants to start their no longer required. These can help the governments High identify the gaps and constantly keep a check on the policies to eliminate any unnecessary approvals and equipping new restaurants with better knowledge for swift operations. government is to build a three. system by removing the duplication of licensing at central and regional levels. This would abridge the process of eradicating redundancy keeping the regulatory Including only major licences and facilitation aspects and customer protection at in the process of applying through single utmost priority. For instance. an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”).

an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”). the total investment required to set-up a new restaurant. Authorities propose single window approval system for realty projects. 25/04/2014 © 2016 KPMG. All rights reserved.23 Accelerating the growth of industry through single window clearance The outset of single-window clearance is expected to enhance effectiveness and productivity of resources. With the introduction of single-window clearance. Ease of doing business: Food and beverages bitten by over regulation.66. 10/11/2015 67. The Economic Times. restaurant owners. . helping improve transparency in business by reducing corruption and unlawful business activities. The Times of India.67 Moving fast-track Monetary inducements With no single ministry responsible for issuing licences/approvals The establishment of single-window clearance system is likely to restaurants. return on investments. making it cheaper for businesses to start and achieve better encouraging new minds to serve customers. thus the process time is expected to reduce by two–three times. Hence. a Swiss entity. This can make it more comprehensive. the documentations have to travel to several to rationalise the existing methods and bring the cost down for departments for getting all the mandatory licences and NOCs. efficient and computerised approach. the process of obtaining licences takes about 120–150 It can help the industry remove any irregularity that adds up to days. 66.

involvement of various ministries — favourable to businesses with an Since many of the regulations are tourism. agriculture. 20/09/2016 © 2016 KPMG. rather than approvals is lengthy and over. state-based. a Swiss entity. an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”). All rights reserved . 24 Bridging the gap — steps needed68 An immediate execution plan to ensure a proper implementation plan Therefore. each state should commerce — that delays the progress. each state should ensure a proper fulfilling operational elements. Since many of requirements can better focus procedure to apply for requisite the regulations are state-based. regulated. 68. The legal application status. finance and improved implementation plan. concerned ministries are required to rationalise and simplify the process by formulating guidelines favourable to businesses with an improved implementation plan. all the documentation. finance a rapid update to the applicants on and commerce — that delays requirement(s) for any additional the progress. Therefore. Since the services sector. Action plan Reduction in licenses Digital transition States to play an instrumental role The authorities need to apply a The system of acquiring licence An immediate execution plan to structured approach in trimming and approvals is still manual in create a single-window clearance down the number of licences various departments and there system can transmute the and approvals required to set-up is no real-time tracker of the progress in the country’s food a restaurant business. Maharashtra government to create single window clearance for hospitality industry. all the concerned ministries create a single-window clearance to put things into action. Mid-Day website. This could also help provide — tourism. on targeting frauds. One of the major and less time consuming for challenges for the sector is the businesses to get into a working involvement of various ministries mode. issuing licences online implementation plan to put things would make the process easier into action. agriculture. One of the are required to rationalise and simplify system can transmute the progress major challenges for the sector is the the process by formulating guidelines in the country’s food services sector.

a Swiss entity.25 r y l a n d sc a p e : R e g u l ato g t rP eparin global yo b e com p ete n t © 2016 KPMG. All rights reserved. . an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”).

FSSAI. major regulatory provisions of FSSA entail guidelines for the following71: The Food Safety and Standards Authority of India (FSSAI) is the yy Packaging and labelling — for apex food regulatory authority in labelling of food products India. 26 Current regulatory scenario in India A country’s food policy affects the departments.73 Once all the mandatory registrations and clearances are obtained from the respective authorities. An Overview of Food Policy in India. is implementation of FSSAI comes the world’s largest welfare scheme under the purview of the Ministry to guarantee food grains to 67 per of Health and Family Welfare. etc. proper food safety measures. The administration and Food Security Act (2013). Guidelines materials and food food business operators. country.) keeping requirements as laid out by FSSAI. for such yy Location and surrounding of food products. Notification. concerning advertising by food and ensures availability of safe food business operators for human consumption. June 2010 Mondaq website. –– Food packaging storage. Established yy Licensing and registration. cent of the population at economical Government of India (GoI)70. Food Safety and Standards Authority of India (FSSAI). 13/06/2013 © 2016 KPMG. The current National standards. including act is to harmonise India’s food production. and thus ascertain the availability of safe food –– Procurement and storage of raw require special attention by the for human consumption. FSSAI.). The purpose of this entire food value chain. ventilation. yy Layout and design of the yy Food testing facilities establishment 69. a Swiss entity. and other standards are followed and yy Food operations and control Dairy and meat products are reviewed periodically. temperature. 10/2015 72. India. 73. FSSAI. ice. The rates69. and under the Food Safety and Standards health and sanitary permits — Act (FSSA). yy Signage and customer notices — distribution. an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”). personnel facilities. humidity. The training manual for food safety regulators who are involved accessed October 2016 in implementing Food Safety and Standards Act 2006 across the 71. All rights reserved . including: a. 2006. distribution regulations with the international and purchase. across provisions various ministries and government Operating a food service business72. so as to be deemed fit for establishment –– Food distribution/service human consumption. 1/08/2011 70. it consolidates for registration and operational and overrides all other major food- related laws prevalent earlier. yy Auditing. lighting. sales and imports of food. so as to perishable in nature. storage. processing. etc.) yy Visitors/customers. Inspection of the premises and yy Facilities used (water. documentation and record to confirm to the sanitary and hygienic containers. Maintaining sanitary and hygienic requirements Food business operators are required yy Equipment used (utensils. yy Personal hygiene and behaviour facilities is carried to help ensure waste disposal. processing. FSSAI are laid for setting up infrastructure lays distinct guidelines in terms of –– Food preparation/processing — maintaining ambient conditions and operations across the following time and temperature control areas: (lighting. India: Laws Governing The Food Industry In India – Revisited. the food business operators are required to follow the standard regulatory practices of operating a food service business. World Wide Journals. etc. packaging and more. steam. It regulates and monitors the manufacturing.

27 b. canteens. as listed by FSSAI. Specific practices for food serving establishments In addition to the above.74 The FSSAI officials. India: Laws Governing The Food Industry In India – Revisited. cooking and chilling of food products. generally food safety regulators. Non-compliant matters are reported and punitive measures are taken in the absence of any corrective measures. In general. if complaints of violations against a food business operator are received. c. to help ensure that the standardisation of contents in such products across the country is achieved. snack bars. Compliance to regulatory mechanism Adherence to the regulatory mechanism is ensured through levy of penalties in case of non-compliance. food business operators engaged in catering/food services are required to follow additional practices. The training manual for food safety regulators who are involved in implementing Food Safety and Standards Act 2006 across the country. All rights reserved. Supplementary guidelines for preparation of vegetarian and non-vegetarian products.75 74. Inspections are also carried in cases. and special requirements for high-risk food items are listed. a Swiss entity. including milk and oil. FSSAI. Such establishments include eating houses. non-compliance with the provisions of FSSA could attract penalties to the tune of INR200. food service at religious places and neighbourhood tiffin services. for making adequate information available across the food chain. June 2010 © 2016 KPMG. Mondaq website. . restaurant and hotels. Providing product information for consumer awareness It is required to label all the packaged food products providing requisite information as per FSSA. stock rotation and storage. the operator is punishable with penalties extending to INR500.000 and imprisonment for up to six months. 13/06/2013 75. Ingredient-level limits are specified for some special products. as applicable. are empowered to carry out inspections to warrant adherence to the food regulations. In case a food business operator is functioning without the requisite licences. transportation and handling of food.000. an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”).

Percentage of population with access to potable water iii.7.The performance indexing is a dynamic quantitative and qualitative benchmarking model.0% 3.0 Canada 9.2% 2.5 France 13. production process. EIU website. Portugal top-ranked with a quality and safety score of 89.5 China 28.0 0 10 20 30 40 50 60 70 80 90 100 2016 FQS score Source: Global Food Security Index (EIU). 28 Regulatory landscape vis-à-vis developed countries A majority of the developed accepted principles to find.4% UK 8. an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”). accessed 27 October 2016 Note*: Food Quality and Safety (FQS) is one of the three major parameters of the Global Food Safety Index (GFSI) released annually by The Economist Intelligence Unit (EIU).7% 0. accessed October 2016 © 2016 KPMG. All rights reserved .7% 3. a Swiss entity.0 1.0 0.5% Brazil 25.5 GDP per capita (INR million) Australia 10. The scoring and ranking on food quality and safety is done based on a composite indicator measuring the enabling environment for food safety with the following sub-indicators: i. Global Food Security Index (EIU). Global food quality and safety (FQS) performance* 4.5 4. with a score of 46.5 India 30. The national recommended by the Codex agencies work in collaboration with Alimentarius Commission — the regional and local authorities.7 in 2016. Presence of a formal grocery sector India ranks 80th position in the global food quality and safety index. EIU website.76 76. chemical Analysis Critical Control Point and biological) throughout the food (HACCP) approach to food safety. to compare and analyse 113 countries globally.1% 1. rectify and countries have adopted the Hazard prevent hazards (physical. stringent compliance measures to It is a systematic and preventive determine adherence to the regulatory approach laying seven universally norms.0 Bubble-size represents average household expenditure on food (in %) US 6. with United Nations (UN) international discernible responsibilities and standards organisation for food safety.6% 2. Agency to ensure the safety and health of food ii.

S.29 Table highlighting regulatory practices followed in major developed economies Table highlighting regulatory practices followed in major developed economies Major concerned Country Regulatory practice authorities/agencies • Food safety regulations in the U. Inspection. a Swiss entity. The four major themes on which the law is based on include: i. food inspection. food and drugs. packaging and labelling. state and local level • The FDA and USDA are the major federal agencies. exist at the federal.-passed FDA Food Safety Modernization Act (FSMA) in January 2011 to adopt a proactive approach by shifting the focus from ‘reaction after contamination’ to ‘prevention of contamination’. while state and local regulations govern intra-state trade • Agencies across levels (federal. to be available for the health department and public to read — based on which. compliance and response iii. which formulates rules and policies for different segments related to food health — including agricultural produce. feeds and fertilisers. for which the latter is responsible • There is minimum overlap among agencies’ work as the federal regulations govern international and interstate trade. state and local) are interrelated and interdependent and thus. necessitates the food business operator to help ensure sale of safe food for human consumption • The CFIA is a regulator-cum-agency. purposes • The regional/local food inspection agencies are responsible to ensure that food business operators upload their recent inspection reports. © 2016 KPMG. poultry and a few egg products. state agencies assist through laboratory testing. etc. plant breeding. the establishments are either passed. Import safety iv.. Enhanced partnership • The Food and Drugs Act of Canada 1985. . reporting.S. health of animals. leading Agriculture (USDA) investigations and set ground-level safety standards for establishments • The U. but meat. etc. an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”). • The CFIA Act empowers the CFIA to administrate and enforce regulations Canadian Food Inspection Canada pertaining to food inspection Agency (CFIA) • The agency collaborates with provincial governments. enforcement. closed or conditionally passed. Local agencies have the frontline responsibility of reporting. All rights reserved. Prevention ii. inspection. inspections and Department of training. municipalities and regional health authorities for implementation. work hand-in-hand in a collaborative manner to • Food and Drug help ensure adherence to the regulations Administration (FDA) • While the federal agencies are responsible for framing regulations for the USA • United States country. The former frames guidelines for all food products.

European Commission. General Food Law. the food regulation system is overlooked by the Legislative and Ministerial Council Governance Forum on Food Regulation (Australia and New Zealand Food Regulation Ministerial Council). US FDA. respectively • Further. introduced in 2002 by the EC. Restaurant and Food Service Inspection in Canada. accessed October 2016. European Commission. stakeholders consultation is conducted periodically. Everything You Need to Know about Starting a Food Business. states and territories and New Zealand • The system. Government of Canada. accessed April 2015. and other improvements. accessed October 2016 © 2016 KPMG. How to Start a Food Business. The Forum is in turn supported by the Food Regulation Standing Committee (FRSC) and the Implementation Sub- Committee (ISC). The Food Regulation System. All rights reserved . January 2016. established through Food Regulations Agreement and a treaty between both the countries. to ensure extensive coverage through policy and standards. accessed October 2016. the national food safety authorities provide for enforcements of (respective member the standards and look after compliance country) • The EC legislation requires food business operators to mandatorily run verification programs per the international standards • Compliance is also ensured by the EC. The safe food system. accessed October 2016. liberates the states and territories to have their respective laws to implement and enforce the food standards as laid by FSANZ — a joint food standards setting body • Food Standards Australia New Zealand (FSANZ) • Local governments are responsible for monitoring and enforcing the food standards Australia/ New • Australia and New Zealand Zealand Food Regulation • Overall. accessed October 2016. Government of Canada. an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”). through on-the-spot inspections by the Food and Veterinary Office (FVO) based in Ireland • Australia and New Zealand have a cooperative bi-national food regulation system involving the Australian government. Australian Institute of Food Safety. 30 • Member countries of the EU follow the General Food Law Regulation. setting up EFSA as an independent agency for technical advice and support • It lays down broad principles and procedures to be followed across all stages • European Commission of food production and distribution (EC) • The member countries’ national food safety authorities provide strategic • European Food Safety advice to the EFSA for formulating harmonised policies and rules for food European Union Authority (EFSA) safety (EU)-member countries • National food safety • While EFSA helps in advising and supporting member nations to follow the authority/agency EC guidelines. accessed October 2016. a Swiss entity. Food safety controls in the European Union. through advising and enforcements. Department of Health – Australian Government. DineSafe Durham. as an integral part of the food regulation system • Proof of implementing food safety programme has to be submitted by the food business operator to the local authority Sources: Food Safety Policy and Regulations in the United States. EUFIC. 15/03/2016. FSANZ.

an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”). All rights reserved. a Swiss entity. .g a p © 2016 KPMG.31 c a p i ta l : Human to bridge Strate g i e s the s k i l .

but also trained and new employment opportunities. 2017–22). 20 July 2016. Human Resource and Skill requirements in the Retail sector 80. controlling costs to reduce wastage.6 million 2017F: 2016: 5. the requirement in the food service need for talent is evolving. 32 Current and future employment gap in the industry The success of a food service venture communication skills to deliver best- is significantly dependent on the in-class services. Government of India and KPMG identification of skill gaps in tourism industry.0% 2017–22F CAGR: 8. IJMSS. professionals who possess effective Projected workforce requirements in the food service industry77. January 2015 © 2016 KPMG. Provides Jobs to 16 Million People.1% Break down of workforce by functions in hotels and restaurants79: Function % of employees Food service 20 Chefs 15–20 Housekeeping 15–20 Front office 8 Management 8 Others 20–25 Total 100 Major skill-based challenges faced by the industry : yy Food service: Ineffective communication skills of the staff and average understanding of service offerings yy Chefs: Unawareness of global cuisines. With the growth skill sets of its workforce. Krishisanskriti. time management and maintaining cleanliness yy Management: Lack of skill in handling people.1 million million 2017F: 7. Delhi-NCR is the No. All rights reserved . 79. a Swiss entity. Now.78 2013: 4.8 7. Over. inadequate arrangement of food items and scheduling. inefficient problem- solving/complaint-handling skills 77. indicating a strong potential chefs in-house. A study on role of tourism in Indian economy with reference to (2013–17.1 million 2017F: 2022F: 7. NRAI website November 2014 78.5million million 2013–16 CAGR: 8. less impactful in marketing and communications. an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”). Owing to of restaurant culture. the workforce constantly changing lifestyles.1 10. An Explorative View on Human Resource Management with Regulated. 1 Market in India’s Over-Taxed. Largely Unorganised Food Services Sector That Focus on Tourism & Hospitality Industry of India. the industry is expected to almost double need is not limited to having best by 2022.

an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”). For gourmet travellers. According to the International Culinary Tourism Association.83 Note: Converted USD to INR at an exchange rate of 1USD=66.81 Also. The food tourism market in India is estimated to be INR133.000 of the overall expense they incur while touring India. NSDC. 12/10/2016 18/07/2016. The rising costs of skilled staff due to high attrition: For the Quick Service Restaurants (QSR) and fast food segments. International Journal of Science Technology & Management. and Hospitality sector.000 per trip.3 million in 2025 from 8 million in 2015.. while it is approximately 60 per cent for the relatively more skilled workforce. Tourism & Hospitality Industry in India. Human resource and skill requirements in the 82. they have to constantly bear retention costs by paying competitive salaries to avoid any shortage of staff. Mediterranean. Rise in demand for expat chefs as standalone restaurants look 84. All rights reserved. . the demand for international cuisines could increase further. compelling the leading restaurants and five-star hotel chains to hire expat chefs to present the authentic taste of global cuisines. In the high-end food service 15. The Economic Times.3 market. Food Tourism: An effective marketing tool for Indian tourism industry. How to Start a Restaurant Business In India. February 2015 © 2016 KPMG. people in the country are now exploring different Foreign Tourist Arrivals (FTA) in India (million) cuisines such as Italian. Muvsi website. an international traveller spends about INR80.82 2015 2025F The increase in foreign tourist arrivals in India is indirectly related to the culinary market growth. 84 81. Lebanese. the attrition rate hovers between 90 per cent and 100 per cent for semi-skilled workers. Japanese. Thai.e. Hence. Tourism. Developing taste for global cuisines: Unlike in the past.0 within the existing local workforce.7% dishes. INR40. which is likely to reach 15. the food-related spend can cross over 50 per cent i. in the absence of required skills from 8. with more than one-third — 36 per cent or over INR28. April 2015 Foundation.6 billion and is growing with the trend of food and drink festivals organised at various places in the country. a Swiss entity. etc. with the number of foreign tourists increasing every year.000 — of the travel expenses constitute food- related spend. customers are willing to pay a premium price for authentic global 2015–25F (CAGR) 6. October 2016 83. to raise the bar. Such high rates inhibit businesses to hire or retain cheap staff.33 What could broaden the employment gap? 1.79INR 2. India Brand Equity Travel.

food kitchen steward server Kitchen Level 2 helper Cleaner – Level 1 Dishwasher roadside eatery Source: Subsector-wise Occupational Map. take-aways. develops a skill plan for the tourism and hospitality industry in India. over-the-counter (OTC). F&B Level 7 Sous chef technologist cashier controller Quality Procurement Night Level 6 Station chef control Captain manager auditor manager Kitchen Inventory Street food Level 5 stewarding Bar Tender. front desk Quality Commis chef. there is a need to determine that all competencies for different roles are duly met and ascertain the training needs at every level eliminating any skill gap in the system. fine dining and casual dining. Level 3 Home delivery boy cook. Development of occupational standards: The National Skill Development Corporation (NSDC). café and bistros. All rights reserved . Within its ambit. QSR Coordinator in-charge vendor supervisor F&B steward. catering and road-side eateries (generally unorganised). Subsector-wise Occupational Map. it covers in-hotel restaurants. Tourism & Hospitality Skill Council. order taker – cuisine cook executive home delivery Tandoor Trainee chef. an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”). 34 Government initiatives to reduce the skill gap in hospitality industry 1. a Swiss entity. executive chef Food Owner-cum. counter sale Multi- Level 4 Storekeeper control pastry chef executive. accessed October 2016 © 2016 KPMG. funded by Tourism and Hospitality Skill Council (THSC). 85. accessed October 2016 With the majority of food service businesses in India are unorganised. Tourism & Hospitality Skill Council. QSRs. officer. The council has laid down several occupational standards for below-mentioned departments and levels to determine that the industry has right talent for respective roles:85 Material Food production/ Level Quality control Customer service Roadside eatery Stock taking management kitchen Restaurant Level 8 manager.

the government allocated INR17 billion toward the establishment of 1.35 2. a Swiss entity. 29/02/2016 © 2016 KPMG. Major recent announcements expected to address skill gap challenges in the industry: b. In the Union Budget 2016–17. In June 2016. accessed October 2016 87.0 to skill over 10 million people over four years (2016–20). and announced an investment of INR120 billion to support the initiative. an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”). All rights reserved.87 86. . For the hospitality industry. The scheme offers skill-based training for 577 job roles through 31 councils. Press Information Bureau. and food and beverage service — steward.86 b. Ministry of Finance (Government of India). THSC is offering training for four job roles related to housekeeping. room attendant. Sarkariyojna website. Pradhan Mantri Kaushal Vikas Yojana (PMKVY) Courses List & Job Roles. the government of India also launched the Pradhan Mantri Kaushal Vikas Yojana 2.500 multi-skill training institutes in the country. customer service.

29/02/2016 © 2016 KPMG. an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”). opportunities related to secondment or Most of the restaurants already The management development research could be explored have on-the-job training programmes could focus more for leaders to integrate each programmes in place. the However. a Swiss entity.89 restaurants/government bodies are not only required to comprehend As majority of the workforce in the training needs of the employees. policies in place. the and achieve better output. wherein new on improving customer-handling division’s tactics in achieving staff is introduced to the quality skills and teaching skills to impart overall business goals by standards by observing crew knowledge. devising a structured framework on improving soft skills of employees across functions. To enable driven schemes should focus more this. Leaders Managers The core curriculum could focus more on learning leading Entry-level or practices and implementing real semi-skilled business models in the entire The expectation is to equip value chain. would help drive innovations. managers to manage an entire restaurant shift. implementing the leading trainers. the curriculum could restaurants could strengthen focus more on improving other their training centres’ capability capabilities around communication or collaborate with various and management to deliver service universities or colleges to value to customers. Ministry of Finance (Government of India). including international cuisines. accessed October 2016 89.. rather than facilitate this. Sarkariyojna website. Press Information Bureau.88. in- their preparedness and adeptness for house programmes and government handling diverse functions. the training institutes. For kitchens. To accomplish this. just food experience. To support this. 36 Strategies and initiatives to bridge the skill gap Need for in-house curriculum/collaborative structured programmes with a focus on communication Since majority of the staff in the could help businesses close any gap industry joins at an entry-level. but industry is required to perform entry- also concoct a plan to determine level tasks. Pradhan Mantri Kaushal Vikas Yojana (PMKVY) Courses List & Job Roles.e. training on modern menus i. All rights reserved . 88.

an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”).37 e c ks i n h i b i t i n g n Bottle th gro w t h p a © 2016 KPMG. All rights reserved. . a Swiss entity.

How Percentage Rent Works in a Commercial Real Estate Lease. such as operating the past few years. High Real Estate Cost Drive Food Chains To Smaller Towns. there is margin contractions and subsequently cloud kitchens. however. Silicon India. longer profitable. The Economic Times. seven of the top-10 minimise their operational costs. Pizza Today. 38 High real estate cost The Indian food service industry has The industry is plagued with Restaurant owners are undertaking observed a high growth trajectory in increasing rentals. 12/03/2016 93.5% 17. 18/10/2016 Business. 96.94. This could allow for a reduced impact on rent on outlet revenues at the outset. in a bid to the restaurateurs. Revenue for Restaurants. an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”). moving to smaller towns. accessed November 2016 92.91. primarily based on the restaurants’ revenues. ‘cloud kitchen’. The Economic Times. 06/08/2014 © 2016 KPMG.5% Source(s): Restaurants are operating in an increasingly tough environment. The Foreign 'curry' challenge in India. This could determine rental payments to remain in-sync with the earning ability of the outlets.96 90.95 yy Pro-rating rent agreement: Paying a low rent for the first year of the lease. The Economic Times. Franchise India. The balance.90 Percentage share of rented restaurants’ total earnings Rent Rent 7. 30/08/2014. which result in various measures. 21/08/2016. Rentals eat away For instance.5% Other Other earnings earnings 92.5% 82. 18/10/2016 The Economic Times. 18/08/2016 Property metrics. All rights reserved . Why restaurant chains are shutting down outlets and shifting to 95. KPMG in India’s Analysis Note: The pie charts represent indicative values What restaurant operators can potentially consider? yy Negotiate a variable lease: Establishing a base rent with the landlord while adding a method of incremental increases in rent over a period of time.92. kitchen sharing and a shortage of quality real estate for lead to the closing of restaurants. in comparison with 2012 have shut down as they were no the global peers. Pizza Industry Expert Big Dave Ostrander talk prime cost percentage. Kitchen sharing a great idea for chefs who want to minimise cost. 21/08/2013. 16/01/2014 91. Why restaurant chains are shutting down outlets and shifting to 94. and subsequently increasing it over a period of time. a Swiss entity. Negotiating a Restaurant Lease. The Percentage of Rent Vs. Small ‘cloud kitchen’.93 a substantial part of a restaurant restaurants opened in Mumbai since owner’s earnings.

FSSAI introduced a slew of packaged food items and handling measures to protect end consumers’ of these items. as it could ask the for restaurant operators to serve manufacturers to increase the packaged food and beverages. ascertain whether the manufacturing such as packaging materials (design. GUIDELINES FOR FOOD SAFETY. convey their needs directly to the they could also form industry- manufacturers. there is and adherence to guidelines issued a dearth of internal audit mechanisms by the government authorities and across the industry to keep a check bodies for these supplied materials. or those having and beverages. industry on board to redress 98. accessed November 103. and allowing minimal lapses in quality. All rights reserved. July 2009 study. . 23/10/2016 feedback. Centre brings regulators. The food service quality check on food items provided industry lacks a mechanism to track by vendors often becomes a cost- the quality.101 number. the restaurants effects on health. an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”). food business. FSSAI.).102 What restaurant operators can potentially consider? • The restaurant owners could food items In order to determine transform their vendors and the higher levels of consistency. a Swiss entity. storage. on the quality of food being served in For instance. 22/08/2016 99. Franchise India. thereby they could directly connect with establishing quality standards and manufacturers of packaged food performing periodic checks. • It also launched a mobile app • It launched a portal in October 2016 through which the consumers to solicit customers’ feedback for can register complaints about the packaged food items. more transparency in packaged storage and packaging integrity. as they could • In alliance with the government. authenticity of information intensive exercise. the which could facilitate customers to guidelines laid stress on aspects. for small in India also serve packaged food restaurant owners. displaying abroad. the Ministry • It also issued guidelines to conduct of Consumer Affairs is planning to the audit of food establishments introduce a niche marking system.97 Also. Govt. 23/05/2016 101.39 Legal metrology In addition to indigenous items of in bakery products can have adverse respective cuisines.99 visibility and readability of details given on the items.103 wide standards. FSSAI licence number and Besides these measures undertaken nutritional information provided. the use of harmful restaurants. batch restaurants across the country.98 by FSSAI. Live Mint. In a first. to vendors. thus reducing one level of ensure consistency in products is quality check required pertaining procured. encapsulating quality of packaged food served in factors. KPMG in India analysis 2016 © 2016 KPMG. FSSAI. and in case of packaged foods. FSSAI launches food concern portal for consumers to share consumer grievances. chemicals such as potassium bromate New regulations helping the situation Recently. 7/10/2016 102. Moreover. suppliers to partners. Potentially cancer-causing chemicals found in bread variants: CSE 100. etc. protocols and guidelines for suppliers as well as manufacturers of packaged 97. Also. location of any item is in India or handling.100 interests and health. helping items. wants to bring more transparency in packaged food business. Criteria for audit of food establishments. such as expiry date. the Indian government • It issued guidelines revolving is also contemplating to bring around the labelling of food items. Financial Express. conducting a by third-parties. generally supplied limited presence. FNB News.

the fact that more than 3. Lack of refrigerated transportation: There are no standard protocols for the construction and operation of Uneven distribution: Uttar Pradesh • India transports approximately cold chain facilities. with increased incentives and subsidies for the investors. with restaurants also facing challenges in terms of cold-chain infrastructure in the country. etc.000 MT transportation is used by dairy products. The technical and West Bengal contribute about 104 million tonnes of perishable standards provided are unsuitable for 65 per cent of India’s total cold chain produce annually.500 etc. is dedicated to potatoes. market in India. 10/03/2016 105. an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”). 2016 Top Markets Report Cold Chain Country Case Study: India. Major challenges106: Unorganised and fragmented cold cold storage facilities have • Further. vegetables. Cold chain industry in India – Present status and future prospects. pharmaceuticals.) in order to ensure the palatability of processed and un-processed food. etc. leaving just 25 per cent capacity for other • About 80 per cent cold stores in • The nature of fragmentation in the products — fruits. while the rest 100 Lack of infrastructure and capacity million tonnes move through non- • More than 35 per cent of India’s reefer mode. companies are engaged in cold Lack of well-defined standards: chain operations in India. 18 May 2016 International Trade Administration (ITA). However. GoI. a Swiss entity. humidity. Investments in the cold storage industry need to be encouraged through Public–Private Partnership (PPP) and Build–Operate–Transfer (BOT) models. last-mile connectivity. GoI. Although the cold storage market has been growing rapidly at about 20 per cent annual rate since 2011 and is expected to reach INR625 billion by 2017. 106. etc. 18/05/2016 © 2016 KPMG. four million tonnes are transported by reefers. especially perishable products such as meat. KPMG in India analysis Agricultural and Processed Food Products Export Development Agricultural and Processed Food Products Export Development Authority (APEDA). International Trade Administration (ITA). What could improve the situation? The Indian government has taken steps to prioritise the cold storage infrastructure in the country. dairy products. 10/03/2016 Authority (APEDA). 107. 80 per cent of the reefer chain network: capacities less than 1. implying substantial • Organised players contribute only 8 • More than 75 per cent of the lack of reefer transport for other to 10 per cent of the total cold chain cold chain warehousing capacity perishable food products. 40 Cold storage facilities The cold storage facilities are used by multiple sub-sets of Indian food industry. the current cold storage capacity meets less than 50 per cent of the country’s needs. Out of this. 108. only the Indian weather conditions. logistics parks.108 104. Cold chain industry in India – Present status and future prospects. facilities. the industry requires infrastructural investments to the tune of INR6.5 trillion over the course of next five years for its development. storage capacity. 2016 Top Markets Report Cold Chain Country Case Study: India. fish.107 There is a need to establish end-to-end supply chain with modern structures including integrated cold chain solutions. All rights reserved .105 The food service outlets are required to maintain necessary ambient conditions (temperature. India do not own any transportation industry can be estimated from processed food.104.

.41 Way fo r wa rd © 2016 KPMG. a Swiss entity. an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”). All rights reserved.

each serving around 8. Food Safety in India – Regulatory framework and challenges.8 Million. state and local authorities food safety authorities currently.110. an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”). at a faster pace for record keeping. 1 Laboratory For 8. compliance • Relevant actions can be taken by the authorities based on the inspection reports published by the companies. Sector. state and local authorities. • Stringent punitive measures would ensure compliance to the regulatory norms as stated by the Stringent respective authorities. along with stringent punitive priority/urgency based on the Indian measures for non-compliance. Use of technology • Food business operators should be mandated to upload their recent food inspection reports on the as a tool for web. Further. as emanated from such meetings. skill development and trainings are essential to bridge the of Codex HACCP current knowledge gap. More focus on the below represents recommendations prevention of hazards/malpractices is to different focus areas and their required. across the country • The HACCP implementation requires a strong inter-relation among the governments. accessible to the relevant authorities and public. 42 Our recommendations There is a need to alter the regulatory collaboration among central. with minimum overlap adherence to norms in the food among their responsibilities. self and third- party inspections of their operational practices. HACCP System and Difficulties in its Implementation in Food 111. India Spend website. authorities at different levels • Recommendations. 7/04/2015 © 2016 KPMG. To and global food service industry be efficient and effective to this end. and could also help impart adequate skills to bridge the gap in human capital. Indian Journal of Research.2 million per laboratory in China). compliance required • Food business operators could be encouraged to conduct frequent and periodic. state approach from being reactive to and local authorities/agencies is becoming proactive. Greater and other concerned stakeholders need to form an advisory committee/council to discuss and collaboration among address the needs of the food service industry. industry and other stakeholders.111 human capital • Private sector participation must be encouraged in setting up and maintaining laboratories. As India Faces Food-Safety Crisis. health departments.109 Uniform • Need to impart knowledge and awareness regarding the benefits of adopting the globally implementation acknowledged principles. • Members from the government. Discernible roles of • There is a substantial overlap and ambiguity among responsibilities of the central. analysis: Focus area Our recommendation(s) Priority Regulatory landscape • Uniform and extensive implementation of the HACCP principles across sub-segments of the industry throughout the country. could be used in formulating regulations for the industry 109. • Digitisation needs to be adopted throughout the authorities at all levels. The table service industry. All rights reserved . • Clearly distinct roles and supervisory norms must be defined for effective enforcement of regulatory and safe practices. industry leaders. compared infrastructure and with 0. a Swiss entity. The industry requires adequate funding to set up the process and implement the HACCP principles uniformly • Urgent need to upgrade the infrastructure in the current laboratories and set up adequate facilities Development of (India has only 148 food testing laboratories.8 million people. July 2015 Swaniti website. towards imperative. June 2015 110. • Local authorities must share greater responsibility of ensuring strict adherence to the regulatory norms owing to their higher penetration.

to help ensure that the industry progresses at an ideal pace and emerges to be competitive globally. governments A three-tier structured approach (high.43 Focus area Our recommendation(s) Priority EoDB Expedition in A comprehensive plan by states to implement single-window clearance system for restaurant implementing industry would rationalise and simplify the process of licensing to create a favourable environment reforms by state for the operators. Digital transitioning Creating online platforms for all types of approvals. © 2016 KPMG. there are challenges which need stakeholders’ immediate attention. an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”). However. licensing and application tracking. structured programmes Referring to Need for restaurant operators to refer several occupational standards for each departments and levels occupational laid down by The National Skill Development Corporation (NSDC) while hiring/preparing their staff for standards respective roles. managers collaborative and leaders — to determine their preparedness and adeptness for handling diverse functions. moderate and low) could be followed to remove the non- Removing essential and operational licences to abridge the process of eliminating redundancy and giving dispensable licences priority to customer protection. licensing Addressing skill gap Developing in- house curriculum/ Devising a suggested three-layer training plan for each level — entry-level or semi-skilled. Following the government’s intention of improving the investment sentiment in the industry and country as a whole. . making the of approvals/ procedure stress-free and prompt. it is imperative for all the stakeholders to work hand-in-hand towards redefining the norms for betterment of the industry. The country presents significant opportunities in the food services industry and is poised for future growth. a Swiss entity. All rights reserved.

an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”). All rights reserved . a Swiss entity. 44 © 2016 KPMG.

All rights reserved. an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”). . a Swiss entity.© 2016 KPMG.

A non-government. and has rapidly built a significant competitive presence in the country. including SMEs and MNCs.000 companies from various regional chambers of commerce. Kochi. Our Vision: To be the thought leader for industry. FICCI enjoys an indirect membership of over 2. Bangalore. an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”). education. About KPMG in India KPMG is a global network of professional firms providing Audit. and offers its clients a full range of services. performance-based. KPMG was established in India in September 1993. industry-focussed and technology-enabled services. To enhance efficiency and global competitiveness of Indian industry and to expand business opportunities both in domestic and foreign markets through a range of specialised services and global linkages. FICCI provides a platform for sector specific consensus building and networking and as the first port of call for Indian industry and the international business community. a Swiss cooperative. its voice for policy change and its guardian for effective implementation. a Swiss entity. Hyderabad. All rights reserved . Chennai. and its emergence as one of the most rapidly growing global economies. Mumbai and Pune. Tax and Advisory services. Each KPMG firm is a legally distinct and separate entity and describes itself as such. and risk advisory services. its industrialization. governance and skill development. not-for-profit organisation. Delhi. which reflect a shared knowledge of global and local industries and our experience of the Indian business environment. both private and public. tax and regulatory. The independent member firms of the KPMG network are affiliated with KPMG International. livelihood. articulating the private sector’s views and influencing policy. FICCI is the voice of India’s business and industry. About FICCI Established in 1927. © 2016 KPMG.50. Kolkata. he firm operates from its offices in Ahmedabad. We strive to provide rapid. Our Mission: To carry forward our initiatives in support of rapid. Its history is closely interwoven with India’s struggle for independence. Chandigarh. inclusive and sustainable growth that encompass health. FICCI draws its membership from the corporate sector. including financial and business advisory. FICCI has contributed to this historical process by encouraging debate. FICCI is the largest and oldest apex business organisation in India.

a Swiss entity. Acknowledgements Strategic direction: yy Rajat Wahi yy Leena Jaisani (FICCI) Authors: yy Anshuman Maheshwari yy Suvasis Ghosh yy Damandeep Marwah yy Bhavesh Verma yy Ankit Kapoor yy Ankit Saxena yy Jigyasa Narula (FICCI) yy Kumar Shivam (FICCI) Support team: yy Sanjeev Bhar yy Rishabh Rane yy Nikhilesh Shetty yy Priyanka Agarwal © 2016 KPMG. All rights reserved. an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”). .

a Swiss entity. All rights reserved .© 2016 KPMG. an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”).

com Rajat Wahi Partner and Head Consumer Markets T: +91 124 307 5052 E: rajatwahi@kpmg.KPMG in India contacts: FICCI contacts: Nitin Atroley Ms. This document is meant for e-communications only. All rights reserved. a Swiss entity. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.com Anshuman Maheshwari Associate Director Consumer Markets T: +91 997 179 5825 E: amaheshwari5@kpmg. FMCG.com/in/socialmedia The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. © 2016 KPMG.com KPMG. Direct Selling E: nitinatroley@kpmg.com T: +91 11 2373 8760-70 (Extn 505) E: leena. T: +91 124 307 4887 E – Commerce. Leena Jaisani Partner and Head Senior Director Sales and Markets Retail.com Suvasis Ghosh Associate Director Consumer Markets T: +91 852 720 8999 E: suvasisghosh@kpmg. Gems & Jewellery. Although we endeavour to provide accurate and timely information. The KPMG name and logo are registered trademarks or trademarks of KPMG International.jaisani@ficci. there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future.com/in Follow us on: kpmg. . an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”).