September 4, 2022, 3:39 am 0

The future of F&B industry in India – A general overview

The food industry sees one of the highest churns compared to other industries. If we take a look at the number of small and medium eateries that are opening and shutting shop, the numbers will be simply mind boggling.  At an average of 500,000 INR investment for a small eatery, if in a local area we have 20 such eateries closing down on average between 6-12 months after opening, the losses are around 10 million INR on capital invested. Add to this the revenue generated that has gone into maintaining operations we can easily add another 50-75% of the initial invested costs. The point here is why is this happening and why are entrepreneurs even more eager to open a food business knowing the challenges.

The reason I feel are many but some of the key ones is the fact that with the coming up of delivery apps, most businesses are optimistic that they can get the daily customer number rolling thanks to these apps. With the revenue dependent on deep discounting and commissions, restaurant owners lose out on the margin that would have otherwise accrued on their books. However, it becomes tough for them because on one hand they have to manage their staff, rent and other operational expenses and at the same time keep offering deep discounts which leads to a stress on their resources. As a result, if volumes do not show up things go downhill and many of them are forced to close down. Unfortunate!

In FY21, the restaurant industry declined by 53 per cent and was estimated to be worth ₹2,00,762 crore compared to ₹4,23,624 crore in FY20. However, the industry body expects that in FY22, the sector will see significant resurgence and is expected to reach a size of ₹4,72,285 crore. This is as per National Restaurant Association of India (NRAI) report. However what is saddening is that the capital that has been wiped out will never be recovered. There will be fresh investments, fair but the cost borne by those who had started only to be wiped out is large.

The restaurant industry also saw a marked decrease in average revenue and profitability across formats due to Covid-induced restrictions. The average revenue post the first lockdown witnessed a de-growth of 46 per cent and average profitability saw a de-growth of 88 per cent compared to pre-Covid times. The most significant reduction was witnessed by fine-dining restaurants and pubs, bars, cafes and lounges (PBCL) segments compared to quick service restaurants and casual dining restaurants. However, post the second lockdown, industry player’s revenue saw a growth of 33 per cent compared to the first lockdown but is still to get back to pre-Covid levels.

The only way is fresh investments which I am sure is happening as per the figures provided by NRAI. Some of the new trends that the food industry is adopting include Direct to Consumer channels, Hyperlocal targeting and digital ordering. D2C channels such as websites, social media, and messaging platforms allow restaurateurs to set up their own digital storefront, customize the guest experience, manage online orders, and open new revenue streams in addition to third-party networks, ultimately enabling them to adapt to the new normal of dining.

Hyperlocal targeting means that restaurants and eateries will direct their marketing efforts towards a local area and make their offerings more aligned with the preferences of the local population. 

Restaurants in India operate on a lean margin of 10 to 15% of their earnings before taxes with around 3 weeks of cash flow and excessive debts. Amid the pandemic, the restaurants had zero cash flows, so it became very difficult for the restaurant entrepreneurs to sustain their businesses. As the economy tries to recover, demand recovery will be unpredictable and slow to return to the pre‐pandemic levels.

Reopening the restaurants comes with its own set of challenges.  After the reopening of restaurants, many entrepreneurs face a shortage of staff as the staff members had migrated to their hometowns. Most of the staff working in the Indian metropolitan cities are migrant workers who migrate from small towns and rural areas to work in the cities. Hiring and training appropriate staff members are crucial for service quality in the restaurant industry and this will continue to remain a challenge.

Also, the restaurants had been completely shut down for almost 6 months due to which the interiors and infrastructure in these restaurants required some renovation and maintenance. This would require more funds, which again is a major problem for the small entrepreneurs because they were using their savings during the shutdown period for salary and other utility payments.

Another challenge is to manage the change in consumer behavior. Consumers have become increasingly conscious about hygiene and sanitation and averse to the idea of dining out. The restaurant entrepreneurs might be required to raise consumer awareness through online exercises or digital mediums to inform the consumers about the precautions being taken for ensuring their safety at the restaurants.

With so many ifs and buts we have to see how the restaurant industry comes up in the near future. While there will be challenges, fresh capital and the entrepreneurship spirit will surely alleviate some of the pain caused by the pandemic. 

If you want to undertake a detailed market study of the F&B industry in India for opening a restaurant cloud kitchen or a hotel, please connect with us at  



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