Lack of quality infrastructure, shortage of adequate skilled manpower among key issues hampering the growth of F&B service industry

FICCI-Grant Thornton Report

The lack of quality infrastructure and shortage of adequate skilled manpower are among the issues hampering the growth of the Food & Beverage (F&B) service industry in India, according to a FICCI-Grant Thornton report, 'Unlocking the potential in the food and beverage services sector', released here today at FICCI's seminar on Food & Beverage service industry by Atul Chaturvedi, Joint Secretary, Department of Industrial Policy & Promotion (DIPP). The other issues faced by the industry are high real estate costs, the large number of licenses required to operate in the sector and a plethora of taxes, the report highlighted.

The report suggests that the government's intervention in creating good infrastructure and developing skilled manpower would help boost the growth of the sector. It furthermore proposes that real estate costs can be reduced by lobbying with real estate developers to develop a better formula of rent sharing and developing innovative models for rent.

Simplified licensing requirements with a single-window clearance approach and rationalisation of taxes levied on the restaurant industry are a few solutions proposed in the report to effectively tackle licensing and taxation issues, faced by the industry.

Atul Chaturvedi said that the government recognizes the F&B sector's great potential for growth and job creation. Hence, it has been identified as a priority sector in the National Manufacturing Policy and is also amongst the top 25 priority sectors, which are being promoted across the globe to attract investments.

Chaturvedi said that F&B has emerged as one of the sectors, which receives highest FDIs. Hence, the government is running awareness campaigns through digital and social platforms to attract both domestic and global investments.

Speaking about the way forward, Chaturvedi said that the government is now looking at identifying potential markets and then engaging with potential investors in specified and targeted interactions to convert prospective investments into real ventures.

On ease of doing business, he stated that in June and July state governments will be assessed and ranked on ease of doing business in their respective states for which help was being sought from the World Bank and third party agencies. Chaturvedi added that the states were striving to attract investments. By July end the result of the ranking would be declared, which would help in further alluring investments.

The government has been of late focused on developing the food processing infrastructure through the promotion of cold chains and integrated food parks by subsidising the capital cost. This will not only ensure the right infrastructure availability to setup processing units to provide quality inputs to the restaurant sector, but also provide a big boost to the availability of processed foods within the country, which were in a number of cases, imported. These initiatives will go a long way in promoting the 'Make in India' initiative, said Vinamra Shastri, Partner, Grant Thornton India LLP.

The report highlights that food expenditure constitutes the majority of India's consumption basket and with an increasing young population, eating out will only grow. Eating out has evolved from an occasion driven activity to an occasion in itself for the youth.

According to the report, the maximum growth being witnessed is still in the standalone restaurant space where local taste along with uniqueness of concept is the key deciding factor. Also, amongst the various segments within the restaurant sector, Quick Service Restaurants and Casual Dining Restaurants constitute the largest categories - combined they constitute more than 77% of the overall market. Cafsegment emerges as the third category with the market size around INR 25,000 crore and is growing at 10% per year. Though the Fine Dine market constitutes only 3% of the market, the segment is witnessing a renewed interest and a large number of multinational chains are entering the market.

Dr. Arbind Prasad, Director General, FICCI, said that the Indian F&B service industry is one of the most vibrant industries that has seen unprecedented growth in the recent past and continues to expand rapidly. Hence understanding the opportunities available in this sector, FICCI last year decided to create a subcommittee within the Retail division of FICCI. This subcommittee aspires to create a focused thought-leadership for this sector. FICCI will endeavour to voice the concerns of this niche sector to the right authorities. He added that the investment scenario also looks bright for the sector.

While launching the report, Piyush Patodia, Executive Director, Grant Thornton India LLP, said, Foreign brands need to ensure that although they see India as a large opportunity, there needs to be an appetite for risk taking. India is a difficult terrain to operate out of with multiple taxes, complex licensing and high operating costs. In addition, tastes and preferences vary significantly based on the location within India. With correct planning and customisations, companies can see explosive growth of their concept in India.

Devendra Chawla, Group President - Food, FMCG, Brands at Future Group & Co-Chair, FICCI Food Retail Services Task-force, said that the food industry has evolved over the years and India needs to be prepared for the new importance that would be given to the sector. He added that like the developed economies, India too had begun indulging in lavish food and experimenting with new cuisines and it's a new beginning for the sector.

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