On-going Projects Cost (INR Bn) Project Status Project Name Sterling Construction Systems

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Market Research

Customer Experience

Strategic Business Advisory

Implementation Assistance

Feedback Business Consulting Services Pvt. Ltd. www.feedbackconsulting.com

2013

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Disclaimer

• All Rights Reserved

No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior permission of the publisher, Feedback Business Consulting Services Pvt. Limited. The information contained herein has been obtained from sources believed to be reliable. Feedback Business Consulting disclaims all warranties as to the accuracy, completeness or adequacy of such information. Feedback Business Consulting shall have no liability for errors, omissions or inadequacies in the information contained herein, or for interpretations thereof

• For information regarding permission, write to:

Feedback Business Consulting Services Private Limited,

5th floor, Oxford Towers, 139, Airport Road,

Bangalore 560 008 | India

Phone: +91 80 4062 3801

Email: [email protected]



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Contents

01 Background

a. Scope of this research

b. Research aim and objectives

02 Industry Snapshot

03 Industry Segment Overview

04 Major Clusters

05 Growth Drivers

06 Issues and Challenges

07 Prevailing Govt. Policies

08 Future Outlook

09 Key Opportunities

10 On-going projects

11 About Us



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Scope and limitations

• Scope and timelines

– Assessment of the Restaurant Industry for 2013

– Feedback has considered the FY 13 for this market assessment, which represents the

period between April 2012 and March 2013

– Study was conducted during April 2014

• Limitations

– Qualitative information is based on secondary data reports published by various

stakeholders in the sector



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Research aim and objectives

The aim of the research is

to present a

comprehensive overview

of Restaurant Industry in

India

Market estimate for Restaurant Industry in India for 2013

Research aim

Geographical presence of key players

Research objectives

Providing insights into challenges, market drivers and govt. policies and their impact on the future market

Future market projections for next 5 years

Key Opportunities and On-going projects



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Industry Snapshot

Source: Feedback Analysis, News Articles, Industry Reports

• The size of the restaurants industry in India is estimated at $ 48 Billion in 2013. This is projected to grow at a CAGR of 11 per cent over the next five years to reach $ 78 Billion by 2018. This market is largely unorganised. Chains account for as much as five per cent of the total market.

• The industry is 24 times bigger than the film industry and is Rs. 900 billion ahead of the telecom sector. The industry has witnessed a sound growth which has been fuelled by the advent of large number of national as well as international chains in the organized market. Many international chains such as the Mc Donald’s, KFC, Dominos and Pizza Hut largely have dominated the organized restaurant market in the country over the years.

• The industry is highly fragmented with 1.5 million eating outlets across the country, of which close to 2,00,000 outlets form the organized segment. However, the organized segment is rapidly growing at an annual rate of 16%.

• Quick service segment is the winner in the eating out market with a growth rate of 21%. There is an estimated growth in urban consumption at potentially 20% per annum in nominal terms (16% in real terms) for at least the next 5-7 years period.

• The total number of employees employed by 66% of the restaurants is under 40 with only 3 % restaurants having more than 100 employees.

• The overall number of restaurants in India is 10,78,306 and out of this 7,02,108 are own account enterprises and rest 3,76,128 are establishments.

1,605 1,805 1,950

2,205 2,476

-

500

1,000

1,500

2,000

2,500

3,000

FY 09 FY 10 FY 11 FY 12 FY 13

INR Bn



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Segment Overview


• The industry is highly fragmented with 1.5 million eating outlets, of which close to 200,000 outlets form the organized segment. However, the organized segment is rapidly growing at an annual rate of 16% where Quick service segment is the winner with a growth rate of 21%.

• Domino’s now has 513 outlets across 112 cities in India, with a restaurant and delivery business.

• 83 % of the restaurants do not levy any service charge on the restaurant bill, 77% of the restaurants do not charge a service charge in banquets. A majority of the restaurants have tip pools.

• The industry has witnessed a sound growth which has been fuelled by the advent of large number of national as well as international chains in the organized market. Many international chains such as the Mc Donald’s, KFC, Dominos and Pizza Hut largely have dominated the organized restaurant market in the country over the years.

Brands By Segments

• Quick Service Restaurants (QSR): Domino's, KFC, McDonalds, Pizza Hut,

• Casual dining restaurants: Yo! China, Sagar Ratna, Saravana bavan, MTR, Halidrams , Bikanervala

• Cafes: Cafe Coffee Day, Barista Lavazza, Costa Coffee

• Fine Dining Restaurants: Mainland China, Sahib Sindh Sultan, Copper Chimney, Barbeque Nation, Rajdhani

• Pubs, bars, clubs, lounges: Hard Rock Cafe, Xtreme Sports Bar, TGIF

1,090

640

75

545

125

-

200

400

600

800

1,000

1,200

Quick service Restaurants Casual dining Cafes Fine dining Pubs, bars, clubs, lounges

Current Market in INR Bn



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Major Clusters

Head Office

Mumbai

Pune

Delhi NCR

Bangalore

Source: Industry reports and Feedback BoK

Clusters Major local Players

Vasudev Adiga’s,

MTR, Maiyya’s

Delhi Darbar, Delhi

Zaika, Delhi Walle

Gateway Hyderabad,

Biryani House

The Chocolate room,

Ahmedabad 51

Café Bay Leaf,

Snaxpress

Golden Chain,

Mumbai Tawa

Aminia, Arsalan,

Shiraz, Oh! Calcutta Hyderabad

Ahmedabad Kolkata

City HQ of QSR & Branded Restaurant

Mumbai McDonald’s, Barbeque Nation,

Specialty group Restaurants

Delhi NCR Jubilant Food works, KFC, Pind

Balluchi, Sagar Ratna

Kolkata Shiraz, Arsalan

Bangalore UpSouth, Mani’s Dum Biryani



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Growth Drivers

Rising consumerism and affluence

Changing Lifestyles

Taste & Experience

Growing Demand

• Growth in the affluent and middle classes, backed by the Indian youth, is driving India's consumption story, and restaurants are no exception. With spending power rising, affluent Indians are increasingly seeking more entertainment options, which are driving the growth of the restaurants segment, among others.

• The changing lifestyles with the increasing nuclear families and a rise in the urbanization in India over the past years have also supported the growth of the restaurant industry in India. The increasing trend of eating out is almost becoming a habit with working people and is one of the major key drivers behind the success of the restaurant industry in India.

• Due to growing exposure to the international cultures and lifestyles, the Indian population has started developing their tastes and is reaching out to restaurants more often which offer different cuisines apart from Indian cuisine. This had motivated many international and Indian players to expand in the Indian restaurant market.

• Consumers are eating out nearly sic to seven times a month as per recent surbvey. According to NRAI report, the chain restaurant space is market by the presence opf almost 100 brands with more than 3,000 outlets spread across various cities.

• Media explosion and the emergence of celebrity shows have increased awareness among the consuming class. Moreover, with rising international travel, people are becoming progressively exposed to different cuisines and culinary styles, and this has given impetus to the experience-seeking behavior of consumers while eating out.

Media proliferation and enhanced exposure



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Issues and Challenges

• Economic / Market Factor, Rising Food Costs

– Food price inflation is a key factor affecting the food services market in India, and is impacted by delayed monsoons, the economic slowdown, and unfavourable demand- supply conditions.

• Fragmented Market, Increasing Competition

– The Indian food services market has many small and mid-size unorganized players competing with large chain players. This fragmented market reflects a number of challenges, including the unclear format segmentation, varied consumer options for eating out, and the lack of best practices for food services outlets.

• Operational Factors

– The Indian hospitality industry is highly labour-intensive, but the availability of trained chefs, managerial staff and other support staff is low. According to a study by the Ministry of Tourism, the current supply of skilled/ professionally trained manpower is estimated to be 9% of the total manpower requirement. Given this shortfall of quality manpower and the industry’s high attrition rate of 20-25%, the cost of labour is high.

• Fragmented Supply Chain

– The industry’s supply chain is fragmented in nature and marked by the presence of multiple intermediaries. The lack of appropriate infrastructure, inadequate technologies and non-integration of the food value chain are the key factors leading to the nearly 30-40% food wastage across to supply chain.

• Warehousing

– There exists a shortage of quality warehousing space in India. Warehouse lack the optimal size, design, and storage system. Further, the presently available warehousing space is inadequate with respect to the growing demand. According to industry sources, the total warehousing space in India is estimated at 80-100 million metric tons (MT), whereas the demand is for a much larger space.



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Prevailing Govt. policies

• Government/ Regulatory Factors (Over- Licensing)

— In India, obtaining the requisite licenses, e.g. health license, food safety license, police license, No Objection Certificate (NOC), from the fire department and the state pollution control board, etc. is a major obstacle hindering the smooth operations of a restaurant. The process is not centralized as yet and requires filing applications with individual stakeholders, which involves a lot of paperwork and is a time-consuming activity. The licenses required to start a restaurant are the same throughout India, expect in some states like Maharashtra. A player needs approximately 12-15 licenses just to open a restaurant each from a government department

• Laws governing the Restaurant Industry in India:

– The Prevention of Food Adulteration Act, 1954

– The Fruit Products Order, 1955

– The Meat Food Products Order, 1973

– The Vegetable Oil Products (Control) Order, 1947

– The Edible Oils Packaging (Regulation) Order, 1998

– The Solvent Extracted Oil, De oiled Meal, and Edible Flour (Control) Order, 1967

– The Milk and Milk Products Order, 1992

– Essential Commodities Act, 1955 (in relation to food)

– Regulation 2.12 of the Food Safety and Standards (Food Products Standards and Food Additives).



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Future Outlook


• The total size of the food service industry in India as per the current estimates is Rs. 2,476 billion and projected to grow to Rs. 4,080 billion by 2018 at a CAGR of 11%. Currently, the unorganized market holds 70% share, and remaining 30% by organised players. However, the organized industry is projected to grow at a CAGR of 16% to reach Rs. 1,457 billion compared to the current Rs. 679 billion over the next five years.

• The Indian restaurant industry’s current market size is Rs. 103 billion and is expected to grow with significant growth rates with Quick Service Restaurants growing at 21.5%, casual dining at 11.9%, Cafes at 12.3%, Fine Dining at 12.0%, Pubs Bars and Lounges at 11.0%.

• Organised market players such as McDonald’s, Sagar Ratna and Cafe Coffee Day are looking to increase their market share in the QSR category by capitalising on untapped locations such as highways and airports or by creating new destinations with customised menu offerings.

• The entry of a number of players in the QSR space has pushed the chain market and the size is estimated at INR 55 billion crore by 2013. It is projected to grow at a CAGR of 25% to reach INR 167.85 billion by 2018.

• Market is largely unorganized and dominated by several ‘dhabas’ and other such eating-out places. However, significant growth is expected in the organized sector, which is currently estimated to be only around Rs. 90 Billion.

2,476 2,750

3,050 3,385

3,760 4,080

- 500

1,000 1,500 2,000 2,500 3,000 3,500 4,000 4,500

FY13 FY14 FY15 FY16 FY17 FY18

INR Bn



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Key Opportunities

• The Indian Food Service industry is projected to grow to Rs. 4,080 billion by 2018 at a CAGR of 11% according to a survey commissioned by Technopak for National Restaurant Association of India (NRAI).

• Franchisee India, the integrated franchise solution company at its 3rd edition of the India Restaurant Congress created a platform where Indian and International Restaurant Entrepreneurs and Professionals, investors and allied businesses together can present topics addressing current issues and trends in the restaurant industry and independent operators and people who want to start a Restaurant business can learn on how to create the art of “Indulgence” – not just with food but also with their brand.

• The current size of the Indian food industry stands at Rs. 2,476 billion per annum and is expected to grow at 11 percent to touch a staggering Rs. 4,080 billion by 2018.

• the chain and licensed stand-alone industry would contribute around Rs. 115-119 billion in 2013, which will more than double to Rs. 250 billion by 2018.

• The growing popularity of restaurants signifies an increase in the work force engaged in this segment of the food industry.

• Organized market players such as McDonald’s, Sagar Ratna and Café Coffee Day are looking to increase their market share in the QSR category by capitalizing on untapped locations such as highways and airports or by creating new destinations with customised menu offerings.

• The demand for segments like ready-to-eat, convenience foods, functional foods, health drinks, flavored milk and fruit juices are growing very fast.



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On-going Projects

Company Name Project Name Cost (INR Bn) Project Status Location Announcement Date

Sterling Construction Systems Ltd.

Neral Condo Service Apartments Project

7.0 Under Implementation

Mumbai 24-06-2008

Rattha Somerset Greenways (chennai) Pvt. Ltd.

Greenways Chennai Somerset Serviced Residences Project


Chennai 25-08-2006

Suraj Inn Pvt. Ltd. Bangalore Serviced Apartments Project


Bangalore 23-11-2007

Prestige Garden Constructions Pvt. Ltd.

Bangalore Service Apartments Project

0.9 Announced Bangalore 08-06-2012

Massive Restaurants Pvt. Ltd. Masala Library Restaurants Project 0.3 Under Implementation

Delhi 01-12-2012

Mysore City Corpn. Mysore Guest House Renovation Project


Mysore 27-01-2010

Jumboking Foods Pvt. Ltd. Mumbai Vada Paav Stores Project 0.2 Announced Mumbai 24-12-2009

Speciality Restaurants Ltd. Rajarhat Food Plaza Project 0.2 Under Implementation

North 24 Parganas

30-01-2011

M G M Entertainments Pvt. Ltd. Bangalore Ten Marrybrown Restaurants Project


Bangalore 30-07-2011

Greater Visakhapatnam Municipal Corpn.

Kirlampudi Guest House Project 0.1 Announced Visakhapatnam 01-04-2012



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About Us



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Our experience

There is no comparable research and consulting firm in India



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Market Research Services | Information and Insights



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Chennai 1A, KG Retreat, 119, GN Chetty Road, T Nagar Chennai – 600 017 +91 44 – 4227 7888



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On-going Projects Cost (INR Bn) Project Status Project Name Sterling Construction Systems