Fast food chains queue up for battle in India’s secondary cities

By RJ Whitehead

- Last updated on GMT

Fast food chains queue up for battle in India’s secondary cities

Related tags Fast food

Indian middle-class households in the hinterland are now spending over twice as much on fast food feeds as they did just two years ago, according to figures released by Assocham.

While the metro cities usually provide the public face of India’s demographic boom, which has seen its middle-class grow significantly over recent years, smaller urban centres designated as Tier-II and Tier-III cities have been the real drivers of growth, and as such they have fast-food executives licking their lips at the prospect of more to come.

In its latest paper on the fast food market, Assocham, the Associated Chambers of Commerce and Industry of India, found that the average annual fast food spend by middle-class households in India’s smaller towns and cities has risen by Rs2,500 (US$41.70) to Rs5,200 (US$86.80) since 2012—corresponding to a 108% increase over the period.

Middle-class might

The report’s compilers put this growth down to increasing demand among Indians for convenience; their growing appetites, especially for international food; and more pervasive Western media bringing international tastes to Indian screens. 

India’s quick-service restaurant market has remained largely unaffected by India’s recent economic slowdown and grew to around Rs50bn (US$835m) from Rs35bn (US$584m) last year, according to the Assocham study.

The factors propelling this buoyancy include the changing economic and demographic profiles of consumers in India [who are being] exposed to international brands and are far more aware of global trends. Considering a large portion of customers are youth, this remains a key growth driver too​”, said DS Rawat, secretary general of the association.

Meanwhile, India’s metros are also seeing fast food growth, albeit at a more muted level. On average, each Tier-I household now spends Rs6,800 (US$113.50) each year at fast-food restaurants, an increase of over 35% in the last two years.

It’s in to eat out

Indians are eating out more often than ever before, with the average family visiting a restaurant of any category around eight times a month. While this is significantly lower than other countries, including the US (14 times), Brazil (11), Thailand (10) and China (9), it shows an important upswing based on the growth of India’s middle-class.

According to Rawat, quick-service chains are now targeting the hinterland after spending the last decade competing for share in the metros. As a result, there is room for growth in secondary and tertiary cities, with the “future of the Indian fast food industry lying in these places​”.

Indeed, cities like Chandigarh, Kochi and Bhopal have seen a recent growth in nuclear families with working mothers, rising incomes and changing lifestyles, all factors that matter for the quick-service restaurant industry.

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