Rapid change in food consumption habits in India has spurred domestic and foreign quick service restaurant (QSR) chains to implement aggressive expansion plans.

According to a new Rabobank report, this growth is set to accelerate. To sustain this growth, while focusing on quality and profits, QSRs will have to build collaborative and dedicated supply chains from the ground up—connecting local business partners, high quality vendors, the right commissaries and state-wide or nation-wide supply chain solution providers.

"QSRs will be a double-digit growth story in India in the medium to long term, as food consumption habits in India are changing fast," commented Rabobank India Head F&A Research & Advisory (FAR), Asitava Sen. "A younger population, higher rate of urbanisation, larger disposable incomes, higher protein consumption, increased participation of women in the workforce and exposure to western lifestyles are leading to the experimentation with, and adoption of, new dietary habits and more occasions to eat out for all levels of society". 

"As a result, we believe the time is right for both global and Indian QSR chains and their supply chain partners to expand in India. This growth will support the development of a new generation of Indian food processors and supply chain partners. We believe that there is significant potential for commissaries to establish themselves as a link between QSRs and food producers and processors", Sen added. 

Total industry size for the Indian foodservice sector was INR 460 billion (USD 8.6 billion) in 2011 and is expected to grow at a compound annual growth rate (CAGR) of 10 percent until 2015. Out of this, the QSR segment is worth INR 33 billion (USD 600 million) and is expected to grow at a CAGR of 30 percent over the same period. At present, according to the National Restaurant Association of India, 50 percent of consumers are eating out at least once every three months, and this shift is epitomised by the growing presence of QSR concepts, including many global QSR players.

An efficient supply chain will help provide standard product quality to customers across stores, but supply fragmentation in India is significant, creating quality issues at the ‘back-end'. Limited modern storage and transportation infrastructure adds to the problem, which is even more pronounced in perishable products. As such, capital investments in the upstream and midstream processing parts of the supply chain are critical, especially since food production, processing and preparation on a large scale are just beginning in India. 

Relationships between QSRs and their channel partners have worked well in categories such as cheese, poultry and frozen foods in India and there is room for such partnerships to flourish in other key categories of commodities and processed foods. 

QSR players prefer to have multiple supplier options to diversify the risk and help in price negotiations. In segments such as poultry, cheese and French fries there are only a few processors currently, but QSRs may look at either developing small players as vendor partners or even consider backward integration into the business.

www.rabobank.com