INDIA—According to a report by Kotak Securities, the quick-service restaurant sector has experienced significant underperformance since mid-2023 due to decreased demand and competition from food aggregators in India.
Reports released in Q4 2023 and Q1 2024 showed continued weakness in bottom-line and topline growth for many players in the sector.
Almost all players in India’s fast food sector reported negative year-to-date (YTD) stock performance, indicating uniform dismal performance.
The most affected companies are Barbeque-Nation Hospitality, which recorded a YTD performance of -22.5%; Deyvani International, which recorded a -15.9%; and Jubilant Foodworks, which recorded a YTD performance of -14.8% after the release of Q1 2024 reports.
After the release of Q1 2024 reports, Coffee Day Enterprises recorded a YTD performance of -7.8%, Westlife Foods recorded -6.2%, Restaurant Brands International recorded -3.3% and Sapphire Foods India recorded a YTD performance of -1%.
Weak market sentiments and speculations regarding high food inflation also accompanied it.
Although there is a slight moderation in inflation, the trends in demand persist.
The slowdown in the Indian quick-service restaurant sector will continue until the fourth quarter of 2024.
The Indian QSR sector is also affected by the increased presence of delivery apps in India.
The delivery platform Zomato Ltd.’s monthly restaurant partners have increased from 61,000 in 2019 to 254,000 in December 2023.
Swiggy, another delivery platform, boasted 272,000 active restaurant partners in December 2023.
The growth of such platforms has benefitted smaller eateries through enhanced distribution, impacting major QSR players in India.
However, this competition has led to sales and market fragmentation, further dampening QSR sales.
Jubilant Foodworks is the most affected QSR player- the company’s market share has decreased from 35.1% in 2023 to 33.1% in 2024.
Westlife Foodworks’ market share also decreased from 15.2% to 14.7% during the same period, and Barbeque Nation restaurant’s market share decreased by 0.9%.
The report predicts the current demand trend will continue to the second quarter of 2025.
However, this prediction depends on other factors, such as the inflection of the high market penetration and competition witnessed in the QSR market in the past two years.
Although the current market state is an attractive entry point for many players, management prudence is needed to balance the current demand trends.
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