NEW DELHI: India's fast food market is growing rapidly and reaching beyond metros into Tier 2 and 3 cities new research has shown.

A report from the Associated Chambers of Commerce and Industry of India (ASSOCHAM) said that the quick service restaurant market had been largely unaffected by the economic slowdown and had grown by 43% in the past year to reach almost $50bn.

"The factors propelling this buoyancy include the changing economic and demographic profiles of consumers in India," said ASSOCHAM secretary general D S Rawat.

In particular, the annual spending of middle-class households in Tier 2 and 3 cities had more than doubled over the past two years, from Rs. 2,500 to Rs. 5,200. In comparison, spending by the same economic group in Tier 1 cities was up just 35% over the same period to Rs. 6,000.

Rawat also identified younger consumers as a key driver of growth, pointing out that more than 65% of the population was under 30 years of age. This group was also more exposed to global media and international brands and was keen to try new things.

Indian consumers were showing an increased propensity for eating out, averaging eight times a month, although this was still behind other countries in the region. China stood at nine times a month and Thailand at ten.

ASSOCHAM further noted the growing demand for convenience with the rise of the 'nuclear family' and more women working outside the home.

Increasing literacy, higher disposable income, the greater availability and penetration of a variety of consumer goods into the interior of the country were combining, said the report, to "create lifestyle and aspiration levels on a par with other fast-moving metropolitan cities".

Another factor the report did not address but one which exercises international brands is that of localisation. Both Dominos and Burger King have adapted their menus to suit local tastes and in the case of the former half its Indian offerings are localised.
Rawat declared that future of the Indian fast food industry lay in lower tier cities which offered better growth prospects for brands facing increasing competition and rising costs in metros and Tier 1 cities.

Data sourced from ASSOCHAM; additional content by Warc staff