Food and Beverages Challenges in the Indian market Domain

The Food & Beverage industry is one of the well established service industry in India. It has registered unprecedented growth in recent years and is expanding continuously owing to change in demographics, urbanisation, rise in disposable income and growth of retail industry. The Indian food & Beverage industry had a value of USD 33.22 billion in 2020 and it stood at USD 156.25 billion by 2026. The CAGR value of this sector was registered as 29.88% during the forecast period between 2021-2026. Due to increased demand for packaged food and requirement for quality products, there has been a sustainable rise of the F&B sector.

The global Food and beverage industry stood at a value of USD 5,943 billion in 2019 and is expected to grow at a CAGR of 6.1% from 2019 and reach USD 7525.7 billion in 2023. It is expected that by 2025 the market will reach USD 8639 billion and it will reach around USD 11980 billion by 2030.

The rapid growth of this sector can be attributed to following parameters:
I. Higher ratio of agriculture sector in India
II. Rising consumption culture
III. High percentage of young and working population with rising disposable income IV. Favourable macroeconomic conditions

V. Cost competitiveness
VI. Abundant livestock, India is emerging as a sourcing hub for processed food at a

rapid pace.

Availability of organised retail space has also helped the industry to encourage the growth of local and international brands across different formats. The impact of this segment on the entire ecosystem is significant from the initial stage of launching a food variant or setting up a restaurant to setting up the entire supply chain.

The Indian food service sector has witnessed several changes with evolving and varying consumer landscape, increasing food tech models and marketing through social media platforms. These trends will continue shaping the food service sector of India.

According to a report provided by the Confederation of Indian Industry (CII) and Grant Thornton, it is estimated that by 2025 India will become the world’s fifth- largest consumer market. Food and beverage segment is the largest in the consumption category . The vast agriculture sector of India is one of the major contributing factor for the food and beverage sector. India is the world’s largest producer of pulses and the world’s second-largest producer of rice, wheat, sugarcane, and fruits and vegetables. It is also the world’s largest producer of milk and buffalo meat, as well as the fifth-largest producer of poultry. Other factors contributing F&B sector include vast areas of arable land, a pleasant climate, a long coastline, and low wages. The total number of registered food and beverage manufacturing enterprises in India remained consistent from the year 2018 to 2020 with slight changes in their numbers.

As per reports of march 2021, the total revenue generated from the food and beverage industry in India significantly increased from 75,046 (100 crore INR) to 119,949 (100 crore INR).

Source: MDPI


Currently the food and beverage industry holds approx. 3% of India’s GDP and this single industry employs the largest manpower with more than 7.3 million workforce. Due to nationwide lockdown, it was expected that almost a quarter of the restaurants and hotels will shut down, impacting the food and beverage industry the most. India’s restaurant industry is a 50 billion dollar industry and according to NHAI(NAtional Restaurant Association of India), it was expected that there would be a loss of 9 billion dollars by 2020.

In order to overcome these challenges and to gain the customer’s confidence, the industry has been adapting innovative methods and COVID hygiene protocols after the lockdown was lifted. Following strategies have been adopted to boost the sector:

  1. Ensuring good standards of hygiene have led to unprecedented growth of F&B sector in recent times when prioritising health has become the prime focus of its customer base. The food delivery apps are focussing on the food safety and good hygiene features. The new norms applied by F&B sector include temperature control,safe packing, usage of masks, frequent sanitization. In order to ensure that all the measures have been incorporated effectively different agencies have been employed for the health and safety audits in order to gain consumer confidence. In order to meet the stringent hygiene standards and safety protocols, FSSAI i.e the Food Safety Standards Authority of India has launched a checklist of 48 point for the restaurants to comply with.
  2. The F&B industry has used the downtime of pandemic situation to evolve and invest in technologies that are customer centric in order to boat their transaction stats. Self service station and contactless solutions have also been included to comply with the health, safety and security norms.Contactless solutions are based on AI and include digital menus, in-app ordering and digital payment options.
  1. Due to the pandemic situation, the restaurants were operating at reduced capacity of 50% which has surely affected the customer base opting for in-dining experience. Thus to ensure physical distancing measures due to pandemic and to attract the customer base, the food and beverage brands have offered at home services to their customers. Home deliveries of food and beverage items have seen a recent upsurge during the pandemic. More people are opting for this service in order to meet their gourmet experience in their comfort of home.
  2. Gourmet street food brands are also likely to increase in order to meet the hygiene, taste and convenient delivery expectations of customer.
  3. Healthy, organic and vegan diet has become the recent preference of consumers and is likely to become lifestyle in coming years. Considering the healthy and immunity boosting factors of Indian diet, this transition to vegan friendly diet is likely to be quick and easy for consumers and F&B sector as well.
  4. This transition from the in dining experience to delivery and at home services will completely change the entire landscape of this sector. A constant effort is being put on improved and quick delivery services with cut throat services in it.
  5. Curating a better experience right from hygiene and safety to packing and customer-centric content will put forward a new wave of doing business in the food delivery sector.
  6. Most businesses have started transitioning to a cloud kitchen model, due to the decline in customer footfalls in the QSR sector, as it provides significant savings in infrastructure costs. This model is serviced by tie-ups with food aggregators offering online ordering and delivery options for customer convenience. The major challenge for operators in this segment is that they are completely dependent on promotions by food aggregators for getting customers aboard. According to a leading good aggregator, “In India, takeaway and drive-through contributed ~1% of the overall revenue of the restaurant industry as compared to 15-20% in the US and Europe during pre-COVID times. However, given the current trends in India, it is expected to go up to 15% over the next 6 months.”

Food and beverage industry has completed an extra mile over the centuries, yet their operations are complicated, chaotic and complex.Following are the possible challenges faced by the food and beverages sector in India:
i. Frequent changes in ingredient Prices

ii. Inventory control
iii. Stringent food safety requirements
iv. Long and complex supply chain
v. Sustainable manufacturing
vi. Controlling food wastage
vii. Constant innovation
viii. Flickering customer’s demand and consumption pattern ix. Thin margins
x. Managing perishable food items
xi. Lack of skilled manpower
xii. Unorganised sector

Fig: Key challenges of F&B sector

Frequent changes in ingredient pricing majorly impacts the demand side and thus it has been a concern for this sector. The higher percentage of food wastage is majorly due to the loopholes in the supply chain which also leads to increasing food prices. Unskilled manpower without requisite skills for the F & B sector leads to inefficiencies in the supply chain which in turn impacts the demand side. Innovation and new product development is also a major challenge of this sector. Most of the F&B sector is primarily driven by the existing product and operation models with fewer innovations in the last few years because of the lack of investment in this sector.Ensuring the proper quality, variety and convenience and the product availability is another challenge of this sector as it largely drives the demand side.The F&B sector majorly forms the unorganised sector with increasing retail outlets and food services. Ambiguity in compliance cost and food regulations has abated the growth of this sector.

Key focus areas for government initiatives

Government initiatives in implementation of Food Safety and Standards Authority of India at the ground levelspecific segments have resulted in development of the segments; however new challenges are arising that needs to be considered to overcome the challenges of F&B industry. Ambiguity in the food regulations and cost of compliance have restricted the growth in the sector. Following initiatives can be taken by government to boost this sector:

  1. The regulations needs to be revamped in order to address supply chain inefficiencies like multiple layers and simplify the procedures to start business
  2. Attract investments in back end infrastructure, especially cold storage facilities and setting up farm collection centers to address food wastage and prices issue
  3. Different awareness programs, incentive schemes and vocational training programs needs to be implemented to encourage employment in the sector
  1. Single window clearance for starting a business and low cost finance options aimed at removing bottlenecks in setting and expanding the business can be considered
  2. Regular audits of the compliance in the sector along with aggressive implementation of Food Safety and Standards Authority of India needs to be oat the ground level


Due to mega shift in the F&B industry from its traditional way of operations all these years, various new trends are emerging in the present and upcoming years. And the leading change is observed in food technology. Due to stringent food safety norms in place, restaurants have shown much diligence in maintaining high standards of hygiene. In order to maintain hygiene in current pandemic situation, Commercial kitchens are moving towards automation technology. This will also reduce manpower cost and will help to serve customers overall in a better way with the latest technology. State-of-the-art hot preparation systems are fast finding their place in Commercial kitchens including Cloud kitchens across the country and changing the way kitchens function. Human intervention will reduce tremendously by adoption of these advanced technology like RATIONAL iCombi Pro which is a smart combi-oven that can work wonders with minimal human intervention. By using different programming options, the chef can curate his/her dishes easily. This smart combi-oven never compromises on quality. It can multi-load and also has self clean facility.

Because of the incorporation of these advanced technology in recent years, the consumer expectation has also changed rapidly in all these years. The Food and Beverage industry is a consumer-oriented market. On one end the consumer wishes for increasingly personalized products and services and on the other side, sustainability of products and production systems also plays a major role. The restaurant are also implementing customer oriented facilities including electronic menu cards to food ordering apps.

Anticipating the future growth, many big international players are entering the Indian market by partnering with the domestic players. There are tremendous opportunities for large investments in food and food processing technologies, skills and equipment, especially in the areas of canning, dairy and food processing, specialty processing, packaging, frozen food/refrigeration and thermo processing.

A lot of efforts is being done by the Ministry of Food Processing Industries in order to encourage investments in the sector. Various incentives for cold chain development and also grant-in-aid for setting up laboratories that are equipped for testing food products will be provided by the government.

The food and beverage sector in India is benefited from its supportive demographic trends, including rising affluence due to the country’s economic growth over the past few decades, and a young population displaying a greater affinity for spending when compared with their price-conscious predecessors.

Also due to rapid digitization, the F&B industry is heading for a transformation at its core. All the Services are becoming more personalized and customer-centric. Different creative service offerings will be launched in coming times along with standardization of health and safety parameters, operations will become less labour intensive and balance sheets will become leaner. Due to the adoption of these changes, the customer experience will become more enhanced which will set new standards for the industry in the post-pandemic era.