The domestic organised food service market will overtake the unorganised food service market for the first time by calendar year 2025, a report by consultancy and investment advisory firm Wazir Advisors says.
Released at the India Food Forum in Mumbai on Friday, the report says that the organised segment is projected to touch 51% ($36.46 billion) of the total $71-billion domestic food service market in 2025, while the unorganised segment will stand at 49%.
“By 2026, the organised market is projected to touch 53% in terms of share of the total domestic food industry, while the unorganised segment will shrink further to 47%,” Pakhi Saxena, business director – retail and consumer products group, Wazir Advisors, said.
She said a combination of factors are contributors to the growth, including the shift from unorganised to organised in food and the work that food aggregators are doing to increase accessibility of small and big food chains and establishments.
“At a broader level, time-pressed schedules and the propensity to eat out or even order in, has grown. There is also greater retail space availability for food service brands today. Additionally, the rising smartphone penetration has aided the emergence of hybrid formats as well as the growth of a strong delivery ecosystem and a surge in food kitchens,” Saxena says.
The report projects the domestic food service market to grow at a compounded annual growth rate of 11.3% over the next three years, taking the total market size to $78 billion by 2026. Of this, the organised segment will stand at $41.7 billion (in 2026), while the unorganised segment is projected to touch $37.1 billion by then.
Within the organised segment, the chained market is projected to nearly double in terms of size to $9.8 billion from $5.9 billion in 2023. While independent food establishments will touch $31.9 billion in terms of size versus $21.2 billion now.
However, Saxena also highlighted some challenges the organised food service market might face in the coming years, including the popularity of ready-to-eat and ready-to-cook meals, which could act as a substitute for food service businesses.
“Supply chain inefficiencies are another factor that could pose a challenge to growth (to the organised segment), since wastage increases as a result. However, the biggest challenge is the spike in food prices, which could, in turn, increase input costs for food service operators. This could squeeze margins, forcing operators to hike menu prices. This could pose a retention challenge with value-conscious consumers,” she says.