International Journal of Business and Management Invention (IJBMI)

ISSN (Online): 2319 – 8028, ISSN (Print): 2319 – 801X

www.ijbmi.org || Volume 7 Issue 8 Ver. III || August. 2018 || PP—59-63

Analysis Of Challenges And Opportunities Prevailing In The

Indian Food Industry
Ram Swaminathan, Shashank, Prof.J.N.V.Raghuram,
B.Tech-Vellore Institute of Technology
B.Tech- Vellore Institute of Technology
Associate Professor-Vellore Institute of Technology
Corresponding Author: Ram Swaminathan

ABSTRACT: According to Neilsen survey the middle-income urban millennials (Income from 3 lacs to 10 lacs
annually and age group is from 18 to 24 years) of India, spend roughly 10% of their total food expenditure, or
Rs7,914 annually, on dining out—purchasing cooked meals from restaurants, caterers, and canteens. This trend
is growing exponentially, as more and more youngsters are joining this group, the oppurtunities in the Indian
restaurant industry is booming. This study is an attempt to understand changing and diverse market scenario of
Indian food industry, the challenges and opportunities present in this sector. A careful study has been done,
taking into consideration various factors involved. It can be derieved that a restaurant which focuses on selling
traditional Indian cuisine has better changes of becoming a huge success.
KEY WORDS: Indian Cusine, Food Industry, Market Analysis
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Date of Submission: 09-08-2018 Date of acceptance: 24-08-2018
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I. INTRODUCTION
Food is a big part of the Indian culture.
In addition to the state-specific specialties, India is also home to a number of fusion cuisines that have
taken birth as a result of globalization. As more Indians travel abroad and foreigners travel to India, a cooking
style that is a blend of both Indian and foreign cuisines has emerged.
Thanks to the growth of restaurants, now people don’t have to wait to visit a particular state to taste its
local cuisine. Most tier 1 and 2 cities in India have specialty restaurants serving up authentic local dishes of
different Indian states to people who are missing home food or those keen to taste cuisines from different parts
of the country.
For any entrepreneur who plans to achieve success in the restaurant industry has to have a
understanding about the psyche of the typical Indian customer. Understand the strict and stringent rules
prevailing in the country regarding the establishment and running of quick service restaurant and multi-cuisine
restaurants.

II. CURRENT SCENARIO:

Food moves from the street to online space:
Fast growing city culture, higher spending capacity of people have encouraged people to eat outside
giving rise to restaurant and food outlet culture.
With the advent of Chinese and western cuisine and slowing them being termed as junk foods. People have
begun to turn towards indian cuisines served at the food outlets.
Developing on traditional cuisines:
Kulchas ,vadapavs , dosa , idli , litti-chokha and why not the entire haldiram’s product set. All these are
innovations on traditional indian food to give them brand value.
Competition from foreign players:
A lot of foreign players have entered QSR (Quick service restaurant) segment as the growth rate is phenomenal
it is estimated to grow from 9,125 crore in 2016 to 25,000 crore in 2021. Subway, McDonalds, Dominos, KFC,
barista and other foreign brands have made their presence felt and are also continuously investing in the indian
market. They have gained a huge market share in the urban cities where people are looking for quick and tasty
food.

E-COMMERCE IN THIS INDUSTRY:

As the e-commerce industry is growing day by day, the food industry is also keeping pace with the
changing trend. Some of the largest snack manufacturing companies are revamping their business model for e-
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 Analysis Of Challenges And Opportunities Prevailing In The Indian Food Industry
commerce. For example, Kellogg’s announced last year it would end direct-store delivery for its snacks
division, and instead shift resources and efforts to direct-to-consumer marketing. As, in the US, last year the e-
commerce sales of Kellogg grew by 70 percentage.
The consumers are enjoying groceries delivered to their door or meal kits with pre-measured
ingredients, but this had also led to a worry about the additional packaging needed to deliver that
convenience. Sixty-six percent of millennia’s said they would be willing to pay more for sustainable products.
So, many firms like nestle and coke are working to make bottles made of wood pulp rather than the
conventional plastic.
Packaging of food in right way is an integral part to succeed in the e-commerce segment. When it
comes to the Indian food industry the challenges involved in packaging them is very diverse and complicated.
As the gravies cannot be rolled up in a sheet of paper like the burger or cannot be put in a cardboard box like the
pizza, so there is a need to create indigenous and sustainable package material.
Other companies also have to come up with new and innovative products which should be packed in
recyclable meal kits, which can keep the freshness intact. Also, to succeed in direct delivery to customers, we
should maintain an effective supply chain system which can deliver the products in time to the customers.

III. REVIEW OF LITERATURE:-

There are papers which explain the changing trend in the food system and consumption pattern in
India, and how the asian food has undergone westernization.[1] It discusses about various determinants such as
globalization, rapid spread of global supermarket chains like walmart and food chains like Dominos etc. In
another paper, a Survey has been taken to understand the customer’s perception of service quality.[2] For
collecting information to analyse the case, interview techniques were adapted. Around 270 members visiting 4
and 5 star hotels in delhi were the participants in the survey. A paper written by students of IIMT focused on the
challenges faced in the Indian hospitality industry, and also it spoke about some possible feasible solution.[3]
The study collected primary data from the structured interviews of senior finance managers working in major
hotels. Another paper published in the USA tries to understand the perception of Indian restaurants by South
Asians, Americans and people of different ethnic background.[4] The findings suggest that they are some
universal patterns of likes and dislikes, as well as different perception between ethnic groups.

IV. ANALYSIS
To understand the challenges and opportunities facing the Indian food industry, we need to analyse the
macro environmental factors which play a major role in the functioning of the industry. By the PESTEL analysis
we can get a holistic view about the market.
A PESTEL TOOL ANALYSIS OF THE MARKET AND CONSUMER SCENARIO:
Political: The Indian market has been thrown open for direct foreign investments. A single cell for the
facilitation of foreign investors and various schemes has been launched to attract multi-national corporations.
So, the small scale restaurateurs and local food manufacturers will have to adapt themselves to technological
advancement so as to stay relevant in the field. There are several initiatives by the food processing and
packaging department of central and state governments that determine the standards and incentives for these
enterprises like subsidies , food parks , equipment fairs and distribution centres and several related schemes
(yojanas) that help promote or fund these industries. In the 2018 budget, funds have been allotted to establishing
infrastructures such as cold storages and processing units which will help the food industry prosper.
Economic:In terms of market size, the Indian food market was worth $193 billion in 2016 and is
expected to cross $540 billion in 2020, so there is huge scope. Though, theavailability of raw materials to be
used as ingredients is varying due to inflationary effects. Healthier alternative foods are pricier compared to fast
food or easy-to-make meals, but are in demand in the upper class societies of cities, so a niche market has
already been created in this segment. There is an increase in the number of small eateries and snack
manufacturers, so as other brands or outlets throwing up discounts and offers one is forced to keep the price low
even if the qualitative input from his side is good. Also, as the middle class is price sensitive and they form the
major chunk, it is important to price competitively.
Social: There is plenty of scope and opportunity in this aspect as there is rising concern for healthier
and closer to home-made food among youth and parenting population, still around 48 percent of the Indian
youth prefer traditional food when they eat out. Rising purchasing capacity especially among consumers of big
cities has enabled them to taste and try new food centres and items. So, the market for new innovative cuisines
is increasing day by day. Though, there is agitation and protest by people against the sale of red meat especially
beef, so it is better to avoid venturing into this segment
Technological: New entrants face obstacles in investing on and opting to advanced preparation and
packaging techniques but the well-established ones find it easier to switch over to new technologies. Some
brands like yellow diamond and golivadapav have expanded successfully by purchasing new technology as they

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 Analysis Of Challenges And Opportunities Prevailing In The Indian Food Industry
have been able to get investors on board. Also, making machines is quite difficult as the traditional food
preparation process is complex and labour intensive, difficult to automate.
Environmental:Changing government rules and regulations have pressed the brands to adopt a greener
approach; snack manufacturers like cola are trying to give back water more than they draw. These factors have a
cascading impact on cost of raw ingredients. Also, the degrading qualities of fruits and vegetables due to
excessive usage of chemical fertilisers and pesticides on field and increased customer awareness have paved the
way for organic farming. There is growing craze for organic products but only among a small affluent class is
buying it as it is costlier, the price can come down only if the organic farming is taken up on a large scale.
Legal: The usage of preservatives in packaged products has sparked controversies in the past as well;
consumer laws and quality standards for food industry are very important and somewhat challenging for the
owners to keep up with it. Even though, India has gone up in the ease of doing business list, when it comes to
food industry, there are stringent rules and various government bodies have to provide approval

FEW ANALYTICAL STUDIES

CASE STUDY 1:-
Golivadapav
This food outlet brand was launched in the year 2004 on its first centre in kalyan- a suburb near
Mumbai. Indian traditional cuisines are abundant in variety but choosing one that could be both mass produced
and in minimum time was a challenge.
The search for the appropriate food item ended on vadapav because it was quick to prepare and easy to
fit in the mould of a snack cum dish. In 5 minutes you can make 5 vadapavs, but you can’t make 5 masala dosas
in 5 minutes.Adding to its features was it being a finger food not necessary to be eaten with a spoon and on
table.Venky and Shivadas started with their own investment and the conventional way of hiring a cook and
other staff. However, this model presented them with many problems initially: from wastage, pilferage and even
the risk of shutdown, in case the cook decided to move out. This unpredictability didn’t go down well with
Venky and he started looking for solutions.The much needed help poured in from someone who was heading the
processed food business of a US company that supplied frozen vegetables and chicken patties to McDonald’s in
India. This was how vadapavs started getting automated when machines helped make standard sizes that could
be uniformly packed , accomplishing the finished product in minimum time.Thanks to this investment in
technology, Goli overcome three big problems in a single shot – of wastage, pilferage and standardization.
Today, Goli prepares vadas and ships them across the country from a central manufacturing capacity.
The technology employed by them enablesvadas to be stored in a frozen form and sent every 2 or 3 days to the
actual shops, where they are again stored properly. These changes have translated for the Golivadas to have a
shelf life of as much as nine months.This approach is also what has helped Goli grow aggressively to have 277
stores across 61 cities, while other Indian foods chains like SaravanaBhavan and Haldiram’s still have lower
double digit stores.according to Venky dependence on human capital lone has restricted the capability of other
stores from growing.

CASE STUDY 2:-

This enterprise carries a name that easily strikes a chord with the local tradition of rajasthan state,
chokhidhani was established in 1990. Their aim was to make affordable and authentic rajsthani food and offer a
dining experience that gave customers the feel of being in a traditional village in rajasthan. This feature drew
customers from all over the country and world as it became their unique selling point when compared with other
centres of restaurants.

CASE STUDY 3:-

Due to the hectic lifestyle of an average working class youth in indiancities . It is difficult to find time
to prepare dishes like idli,dosa, uttapamandvada at their home .therefore there is a market for batter of these
items. Some brands like IDfresh have become a huge success on this segment by providing natural and reliable
products.

PROBLEMS FACED IN THE CURRENT SCENARIO:-

According to 2017 Ease of Doing Business (EoDB) rankings released by the World Bank, the overall
scenario of doing business in India is relatively less favourable as compared with other emerging economies in
the world. The number of permissions required are usually dependent on service offerings of a restaurant and
state-level requirements where the restaurant or QSR is set up.
While the number of licences and no-objection certificate can go more than 30 to set-up a restaurant.
Also, the licensing are from various different bodies, no single regulatory body is in place to take care of the
process. This doesn’t allow the smooth opening of new restaurants and fast food chains. The rich and powerful

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 Analysis Of Challenges And Opportunities Prevailing In The Indian Food Industry
alone are able to gain permissions by using their money and muscle to heave their way through the corrupt
system.
Also, in some conservative places in India like the south, it is difficult to make people get accustomed
to the different and new cuisines which any food chain wants to introduce. People are no so comfortable in
trying out new variety of food. To overcome this the food related enterprises need to invest huge amounts to
market their products, which again makes it very difficult for small and medium scale entrepreneurs.

In case of food trucks, the rules and regulations are not very clear about the permissions which are to
be taken as it is a very new concept in our country. The permissions required are lot and some of them are the
Shop Act License, Fire Safety Certificate, NOC from RTO and Municipal Corporation, Food and Drug license
(FSSAI) and updated vehicle papers. Other than this in many states they have to take special licenses from the
local bodies put up by the state governments.

Challenges faced by indian cuisine based industries:

1. Due to implementation of GST in the country, packed food items (like papads, pickles, namkeen snacks like
khakhra, have been levied with more taxation amount, hitting their business, making it less profitable.
2. Large scale production of traditional Indian prepared food item needs expertise and automated machines.
Packaging is an issue with them.
3. Availability of fresh fruits and vegetables grown and ripen without excessive chemical treatment is short in
big metropolis.
4. Some Indian snack items are mistaken to contain excessive oils and trans-fat because of long years of
roadside stall experience. However in reality fast-food items contain more bad fats and calories.
5. Due to inflation among cereals, fruits and vegetables keeping the price of traditional Indian cuisines within
attractive limits is a growing challenge.
6. Also acquiring and managing skilled work force is a major concern related to the food industry.
7. Creating a foreign market for traditional Indian taste is a pending challenge.
8. Taste is a very personal attribute of a person, so many a times some people may not find the taste and
quality good enough, may spread bad word of mouth about the brand or outlet, making the seller lose out on
people who would have appreciated the taste and quality if they would have themselves eaten.
9. Creating a very distinguishable brand of taste and quality is difficult in case of food and beverage industry.

Scope for Indian cuisine industries:

1. Unlike fast-food items which can be easily prepared with readily available ingredients, traditional Indian
food need more time and effort to get prepared. In a fast moving lifestyle of bi cities, these food outlets
serve them will fulfil the needs of a nutritional and healthier snack rather than junk food.
2. Working professionals in big cities either bachelor or young couples lack time for preparing but still have a
craving to eat their traditional and nutritious food as they got at home.
3. With improved income levels of people in big cities, evening outings and also people are prefering to taste
on some improvised versions of traditional cuisines as exploring various food outlets is on the card.
4. Growing awareness about the ill effects of junk food and growing alertness towards road side and not so
hygiene vendors with Indian food, have given rise to standard and reliable enterprises of Indian food items.
5. These major factors are creating inroads for traditional Indian cuisines in the market.

(Source:-APEDA)
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 Analysis Of Challenges And Opportunities Prevailing In The Indian Food Industry
 During FY11–16, India's exports of processed food and related products (inclusive of animal products)
grew at a CAGR of 11.74 per cent, reaching US$ 16.2 billion.
 Main export destinations for food products have been the Middle East and Southeast Asia

V. CONCLUSION
Inspite of some entry barriers such as high initial investments, licenses and permissions needed from
different bodies, the food industry in India is very lucrative business venture.It is one of the fastest growing
economies of the world and has a huge potential market for food related industries. It is to be noted that,Indians
still lure for the traditional and homely food, but want it readily available due to their hectic life style. New
technology has enabled faster modified formats for production and packaging of food items which were served
in our kitchens since ages, such as dosa ad roti maker machines. Indian cuisines are considered quantitatively
fulfilling and also retaining nutritional value unlike foreign products like Pizzas and burgers. If a restaurateur
can manufacture traditional Indian food and deliver it efficiently to the customers, there is huge scope for
growth.

REFERENCES
[1]. Westernization of Asian diets and the transformation of food systems: Implications for research and policy, PrabhuPingali,
Agricultural and Development Economics Division, Food and Agriculture Organisation (FAO), United Nations,VialedelleTerme di
Caracalla, 00100 Rome, Italy.
[2]. Customer perceptions of service quality in luxury hotels in NewDelhi, India: an exploratory study, AsadMohsin and Tim Lockyer
Tourism and Hospitality Management, University of Waikato, Hamilton, New Zealand.
[3]. Financial challenges in the Indian hospitality industry, article in ,Worldwide hospitality and tourism themes , Rumkibandopadhyay,
Gujan M. sanjeev, Kanikagupta .
[4]. Tandoori tastes: perceptions of Indian restaurants in America; Bharath M Josiam; Prema A Monteiro,International Journal of
Contemporary Hospitality Management; 2004
[5]. https://www.ibef.org/industry/indian-food-industry.aspx
[6]. https://assets.kpmg.com/content/dam/kpmg/in/pdf/2016/11/Indias-food-service.pdf
[7]. http://www.indianmirror.com/indian-industries/food.html

Ram Swaminathan"Analysis Of Challenges And Opportunities Prevailing In The Indian Food

Industry.”International Journal of Business and Management Invention (IJBMI) , vol. 07, no.
08, 2018, pp. 59-63.

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