However, in spite of its fast growth pace, the segment will remain a negligible part of India’s food economy, occupying just 2-3% said research agency Crisil.
The QSR industry’s growth over the next three years will be primarily propelled by an average 16-18 per cent growth in store additions, while same-store sales growth will be muted, says Crisil. Same-store average growth of 6-8% will be seen as a significant drop compared to the what has been experienced over recent years.
Same-store growth on the mend
Same-store growth was strongest between 2010 and 2012, registering an increase of 20-25%, though this has since dropped sharply because of cannibalisation from brands opening multiple outlets in the same area, stiff competition, high food inflation and India’s economic slowdown.
Same-store sales will see growth largely through price hikes as a continuation of the 5-6% annual price rises seen in the segment. However, average transactions per outlet should stay relatively flat mainly due to increased competition and the greater number of mature stores that have been open for more than two year. New entrants, though, could see an increase in transactions per outlet, says Crisil.
Companies hoping for a return to historic same-store levels in the earlier part of this decade will be disappointed, even though India’s economy is again warming up after a slump.
International brans most popular
Established chains should account for around two-thirds of store additions, while international brands like Domino’s, Subway, McDonald’s, KFC and Pizza Hut will make up around 40% of new stores.
The contribution of relatively new entrants, like Dunkin’ Donuts and Krispy Kreme, will also be significant, accounting for over 30% market share due to their continuing initial expansion. Burger King, Wendy's and Johnny Rockets are also expected to enter the market soon.
Foreign brands dominate the QSR industry with over 60% market share, in terms of their number of outlets. In terms of value, the market share of foreign brands is also higher than that of domestic brands as most have better average transaction size, as well as overall number of transactions per outlet. The strong brand image and larger store area allows foreign brands to cater to larger number of customers.
As more international chains decamp to India, the domestic market is also witnessing the emergence of brands such as Jumbo King, Goli Vadapav, Faaso's, Kaati Zone, Yo! China and Smokin’ Joes. However, most domestic players continue to struggle to adapt to the quick service format, says Crisil, which doesn’t expect a dramatic change in the ratio of foreign to domestic QSR brands.