New and innovative products to conquer F&B sector
Guest Column: Apurva Damani, Director, Artha India Ventures

The size of food and beverage sector in India today is nearly Rs 3,35,000 crore. The sector is expected to contribute 2.1 per cent of India’s GDP by 2021, and the food processing industry contributes 13 per cent of India’s manufacturing GDP. There is no doubt on the growth expected in the food and beverage sector over the next 5 years as India’s consumption story remains intact. With a rising national household income and a shift in consumer preferences, we’re seeing new and innovative products emerge in the food and beverage sector.

Healthy, organic & nutritious: With increase in lifestyle diseases such as diabetes and hypertension, consumers are trying to find healthier options and substitutes. There are a wide range of options available such as gluten-free, vegan, low carb, diabetic meals, mock meats and more. The average Indian consumer has become more conscious about what they’re eating and where it comes from, opting for healthier and organic food items. With this shift in mindset, both in household and office, start-ups are filling the gap for tasty yet healthy evening snacks. Food products such as quinoa puffs, packaged tal makhana, dehydrated fruits, baked chips, granola bars, cold-pressed juices, Greek yogurt and kombucha are finding their ways in the pantry. Non-native fruits such as avocados and mango stein are also on demand

Convenience in kitchen: As double income households have increased, women are spending less time in the kitchen and looking for healthy yet easy-to-make or ready-to-eat alternatives. This has given rise to a whole new industry of convenience food, i.e., food that do not require much time or effort to prepare. In India, the convenience food market has touched Rs 1,58,000 crore by the end of 2017, with a penetration of  30 million households which accounts for 32 per cent of the industry.

Among convenience food, the market for ready-to-eat food was about Rs 2,900 crore in FY 2016. The semi-processed and RTE packaged food segment constitute only 2 per cent of the Indian F&B market. However, it is growing at 20 per cent CAGR Year-on-Year. Various categories such as Ready-To-Eat (RTE), Ready-To-Cook (RTC), Ready-To-Serve (RTS) and Frozen Foods are finding shelf space in modern trade outlets. Dips such as cranberry and walnut, sundried tomato pesto, hummus, tzatziki, dill are making inroads into the daily Indian diet. Even the age-old nacho sauce comes in 10 variants. Sauces like aglio olio, pesto and arrabiata, ready-to-eat curries and ready-to-cook vegetables are all common occurrences in the Indian kitchen.

Bring on the meat, alcohol and hookah: With rise in disposable incomes and health awareness (largely on using meat as a muscle-building aid due to its high protein content), meat consumption has risen across the country. Studies predict that the volume of processed meat and fish consumption in India will grow at an annual rate of 15.9 per cent and 14.3 per cent respectively.

Similarly, due to rise in disposable incomes and a growing culture of social drinking, alcohol consumption has been steadily increasing in the country. According to the World Health Organization, around 30 per cent of Indians consume alcohol, and Indians are one of the top consumers of whisky. Also, hookah sales is a growing category for restaurants. While hookah consumption laws vary by state, restaurants such as Chai Break have opened 11 outlets across West Bengal and Orissa, attracting the youth with its ambience, menu options and hookah service.

Desserts and beverages – unconquered territory: Shifting away from the main menu of starters, salads and main course, start-ups are now battling it out over desserts and beverages. Dessert outlets such as Di Bella, The Belgian Waffle, Dr. Bubbles and Keventers are vying for a share of the Indian consumer’s wallet. Similarly, many tea and coffee brands such as Chai Point, Haazri, TGL, Sancha Tea House, Blue Tokai, Third Wave Coffee Roasters are creating space for Indians to experiment with their most-beloved beverage at different prices.

Global but local, desi videsi, fusion tadka: There is also a growing space for fusion foods. You can now get your traditional puchkas with a twist, with fruity water (like guava, watermelon, etc.), eat your parathas with Nutella, and eat bhaji in a waffle cone instead of pav. Many restaurants like Masala Library, Indian Accent, Bombay Canteen, 145 Kala Ghoda are pushing the envelope of what it means to have a globally desi palate.

New models: According to the National Restaurant Association of India (NRAI), the Indian restaurant market was valued at Rs 20,400 crore in 2016 and is expected to grow to Rs 51,000 crore by 2021. This growth will not only come from traditional restaurants but also Quick Service Restaurants (QSRs), home-restaurants and other on-the-go outlets (e.g., food trucks).

Wow! Momos has been the poster boy of success for QSRs, paving the way for other chains to follow. Other successful QSRs that have raised funding include Charcoal Biryani, Biryani Blues and Hello Curry. These funding stories prove that there is space for regional cuisines such as Northeastern food (Wow! Momos), Hyderabadi food (Charcoal Biryani) and Bohri Muslim food (The Bohri Kitchen).

With the growth of QSRs, there is also a growth in the American food truck concept. Food trucks, along with other on-the-go food outlets such as drive-through, takeaway joints and food courts are expanding across the country. Many start-ups burgeoning in the F&B and foodtech space are innovating with new business models (e.g., online food delivery, cloud kitchen, etc.).

According to a Bloomberg report, more than 400 food delivery apps were operational in India between 2013 and 2016. The online food delivery industry grew by 150 per cent Year-on-Year, with an estimated Gross Merchandise Value (GMV) of $300 Mn (Rs 300 lakh crore) in 2016.

While start-ups are receiving VC and PE support, there is an equally long deadpool list. Currently, out of the 105 Foodtech startups in India, only 58 are operational. These start-ups could learn a thing or two from established joints that have maintained consistent quality over decades.

While I frequently order from Swiggy or Zomato, I prefer going back to my favourite Mumbai haunts that my parents and grandparents frequented in their youth. They have created a legacy, having maintained high standards of quality and exceptional service over multiple generations: K Rustoms (estd. 1953), Cream Centre (estd. 1960), Sukh Sagar (estd. 1962), Swati Snacks (estd. 1963), Bachelorr’s Ice Cream (estd. in 1940s).