Growth opportunities in foodservice seen for China, India in 2020
This is amidst sluggish growth in both economies.
Amidst a perceived sluggish economic growth in 2020, growth opportunities in the foodservice industries in China and India were underscored in the latest RaboResearch outlook report.
In China, foodservice growth is forecasted to be slightly below 2019’s 6% in the new year.
The industry is expected to maintain a “healthy” growth rate for the year, backed by an uptick in disposable income and increasing popularity of dining out, plus continued efforts by major food operators to increase their revenues via product innovation, format diversification and added investment in digitalisation and delivery capabilities.
Meanwhile, input costs will continue to rise, including labor and rent, as well as protein inputs due to the impact of African Swine fever on pork, poultry and beef prices.
Other industry issues noted were risks in commodity pricing and fast-changing consumer preferences.
Q1 sales in China likely to decline amidst COVID-19 outbreak
Whilst the impact of the new coronavirus outbreak is still hard to predict, the bank stressed that Q1 sales within the industry in China are likely to decline due to slumping consumer spending on eat out and to the government’s “aggressive” measures to curb the disease.
The report noted from 2003’s SARS situation that whilst the foodservice growth in Q2 declined more than the GDP growth, the industry rebounded at a “faster” rate than other sectors in the following quarter.
“The efforts from foodservice players in providing a better experience, differentiation, and high-quality food, helped to restore consumer trust,” it added.
Big chains like Yum China and McDonald’s have temporarily halted their operations in some cities within the country, which would affect their Q1 revenues, the report underscored.
“Operators may also be confronted with supply chain disruptions and a shortage of labor once they reopen, as staff members may have difficulties returning to their jobs,” it added.
Food delivery to become ‘more critical’
Enhancing partnerships with delivery firms is one area in which foodservice players could do well in the long-term, according to RaboResearch.
The country’s delivery segment, the report wrote, will contribute 18% to the whole industry for the year, as key delivery players have been looking for ways to improve their profit margins.
This space is also seen to increase their efforts in offering partner restaurants with online marketing and advertising, restaurant food raw-material distribution with logistics, scale, and integrated payment services, in addition to their core food delivery and in-store dining review business.
“In the near future, food delivery will become more critical, due to its convenience and ability to cope with disruptions. Thus, foodservice players may need to co-develop the future strategy with the platforms to ensure a balanced ‘food plus platform’ ecosystem,” it stressed.
Besides this, a review of their supply chains and improving their food quality, safety, and traceability were also emphasized.
Niche Indian cuisine going mainstream, further chain expansions
There is still a “bright” prospect for long-term growth for the industry in India despite continuing downturn in consumption growth in H1 2020, RaboResearch stressed.
For this year, India’s foodservice industry is forecasted to grow by 7.2%.
One area to monitor is the growing consumer interest in localised or niche Indian cuisines, like biryani and Chinese-Indian foods. The report cited Domino’s India franchisee Jubilant Foodworks and its Hong’s Kitchen opening and Rebel Foods’ Mandarin Oak launch via cloud kitchens across the country.
More local food operators are also expanding to a nationwide scale, such as the case of Thalappakatti and Wow! Momo seeing private equity investment.
Major chains, meanwhile, are seen launching in second and third-tier cities in the year, with their benefits from lower operating costs, labor, and rent, compared to metro cities.
However, restaurant chains will remain to be a small portion of the industry due to the “overwhelming” presence of independent operators, which sales make up 96.2% of the total foodservice sales.