Though spending has increased throughout the country it is in its smaller cities, those referred to as India’s second and third tier, that the growth is most apparent. According to the Associated Chambers of Commerce and Industry in India (ASSOCHAM), the average spend of middle class families in these smaller cities has increased from Rs. 2,500 to Rs. 5,600 (£56.80), a growth of 108%.
And this spike in consumer spending is reflected in the strength of the market. Releasing its figures for the full year ending March 2014, Jubilant Foodworks, the company responsible for Dunkin’ Donuts and Dominos Pizza in India, reported significant growth.
In the full year ending March 2014, the company opened 150 new Domino’s Pizza restaurants, there are now 726 outlets in 152 Indian cities.
In a statement, Shyam S Bhartia and Hari S Bhartia, chairman and co-chairman respectively, say that the firm’s performance was a sign of the sector’s strength.
“These numbers are encouraging and proof of our confidence in the potential of the food service industry and our commitment to be at the forefront,” they said.
A young population, getting younger
The growth, says ASSOCHAM, is due to a change in cultural appetites, driven by an increasingly young population. Currently, 65% of the population are under the age of 35 and, it is expected, by 2020 the average age in the country will be 29.
An increasing exposure to and appetite for global brands have spurred this younger generation on, says D S Rawat, ASSOCHAM’s secretary general.
He says, “The factors propelling this buoyancy include the changing economic and demographic profiles of consumers in India and also 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.”
In the report, ASSOCHAM refers to a general change in the culture and standard of living of the Indian middle class, giving way to a more “metropolitan” outlook, and opening up to investment from global brands.
It says “Increase in literacy, high disposable income, exposure to media, greater availability and penetration of a variety of consumer goods into the interiors of the country, have all resulted in creating lifestyle and aspiration levels on a par with other fast-moving metropolitan cities”
Adapting to a different market
But, chains can’t be complacent. Although the appetite for global brands is growing, it is important to know and understand the tastes of their particular market.
After Dunkin’ Donuts was introduced to the Indian market in 2012 it enjoyed initial success. But, said president and COO of the brand in India, Dev Amritesh, the company discovered that it needed to adapt its western model of donuts and coffee to appeal to Indian tastes. Under the “Get your Mojo back” marketing campaign, the brand introduced new menus, including spicy sandwiches and wraps, and redesigned the restaurant to occupy a space somewhere between cafes and quick-service.
Speaking to the BBC, Amritesh stressed the importance of understanding the crucial place food takes in Indian society. “You’re competing against centuries of culture and tradition of food,” he said. “What works in the united states and works in the western market, a simple reproduction of that in the Indian context might have some excitement in the initial few months but the reality hits after one or two years in the Indian market.”
Opportunities for growth
As competition intensifies in India’s biggest cities, it is in its second and third tiers that there is most opportunity for growth, ASSOCHAM says. Developing infrastructure and an increase in disposable income means the Indian fast food market is “spreading its wings” in smaller cities, says Rawat.
However, he says, there is still room for growth in “untapped” cities. “The future of the Indian fast food industry lies in Tier II and Tier III cities.”
Ellie Clayton
