Infrastructure, skilled manpower hampering growth in F&B services: report

27 May 2015


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 today at FICCI's seminar on food and beverage service industry.

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.

Addressing the event, Atul Chaturvedi, joint secretary, department of industrial policy and promotion (DIPP), said that the government recognises 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, being promoted across the globe to attract investments.

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

He 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.

By July end the result of the ranking would be declared, which would help in further attracting investments, he addd.

According Vinamra Shastri, partner, Grant Thornton India LLP, the government had 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,'' he said.

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 per cent of the overall market. The 'café' segment emerges as the third category with the market size around Rs25,000 crore, growing at 10 per cent per year. Though the 'fine dine' market constitutes only 3 per cent of the market, the segment is witnessing a renewed interest and a large number of multinational chains are entering the market.

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.''

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