India’s online food-ordering sector to become $8B industry by 2022: Google, BCG report

According to a new report by Google and Boston Consulting Group (BCG), the sector is expected to grow at a 25-30% CAGR

e4m by exchange4media Staff
Updated: Jan 28, 2020 5:32 PM
Google BCG

The Indian food-tech industry has grown exponentially in the past few years with a proposition anchored around convenience & value. According to a new report by Google and Boston Consulting Group (BCG), the sector is expected to grow at a 25-30 per cent CAGR to become a $8 billion market in the next two years. The study titled ‘Demystifying the online food consumer’ outlines the potential growth opportunities in the sector through a deep understanding of the drivers & barriers of Indian consumers as well as their expectations from the platforms.

BCG & Google state that there is significant potential for the industry to grow. All key drivers are well in place – especially with India’s rapid advancement in internet adoption as well as continued investments behind consumer trials & delivery satisfaction. No wonder that the food-tech space is one of the fastest-growing e-commerce segments in terms of reach, engagement & investment. Demystifying the online food consumer further, the report highlights that a variety in cuisines (35 per cent) was one of the top reasons for recurrent use of online food ordering apps, followed by good discounts and convenience.  In fact, once users are satisfied with the service & start becoming habitual, they become more discerning about value – this behaviour is observable independent of town class, social status, age and gender.

The study also cites that peer or network advocacy (52 per cent) played a critical role in drawing people to try online food ordering for the first time. This was followed by advertisements (19 per cent) that emerged to be a strong driver in metros and amongst the higher income groups across the country.

Speaking about the report’s insights, Roma Datta Chobey, Director - Travel, BFSI, Classifieds, Gaming, Telco & Payments, Google said, “The food tech industry is nascent but one of the fastest growing in the country. With this report, we have aimed to highlight the opportunities for the food-tech industry, and demystify the consumer behavior across cities, who are in different stages of maturity. Food tech has now made its presence in greater than 500 cities in India and with consumer confidence growing, there are new opportunities for the players to ‘win with the consumer’ in an evolving market.”

 “Overall online spending in India is rising rapidly and expected to grow at 25 per cent over the next 5 years to reach over $130 Bn. Riding on the wave of rapid digitization and steadily growing consumption, the reach of Food Tech companies has grown six times over the last couple of years and will continue to increase further. This report dives deep into the trends which are driving market, decodes consumption habits, gives a perspective of the industry globally and elucidates opportunities in the Indian Food tech space,” said Rachit Mathur, Managing Director and Partner; India Lead of BCG’s Consumer & Retail Practice.

The report suggests that consumers have common impediments that hinder adoption. A fifth of the respondents stated a lack of trust in the app as the main barrier to usage – they believe that the role & control of the aggregators in the actual food preparation is low. Delivery charges (18 per cent), food quality concerns (13 per cent) and lack of customization (10 per cent) are other reasons why customers have, so far, not experimented with online food ordering. Interestingly, these observations vary based on the maturity of the market. While delivery charges is the top reason for not ordering food online in metro cities; in Tier I cities, lack of trust in apps (29 per cent) is the primary roadblock.

“Food tech startups have revolutionized the way Indians eat. There is now a greater demand for healthy, home-cooked meals leading to the emergence of new business models like cloud kitchen and meal subscriptions. Ordering food online is now a habit. There is large headroom to increase reach, engagement and usage frequency for food tech apps,” said Abheek Singhi, Senior Partner and Managing Director at Boston Consulting Group.

 The report also highlights some very interesting global food tech industry exemplars as action opportunities for Indian players. BCG elucidates with examples of how Personalization on the basis of ordering pattern & custom preferences has been deployed to very good effect by some international players. In addition, there are examples which show diversification beyond food delivery into other products and services as a clear growth lever.  Best-in-class players continue to use data in next generational applications driving the next wave of consumer wow, delivery efficiency & product assurance.

 Report Methodology:

This report was commissioned by Google India to BCG that conducted the overall research and analysis, interviewed industry experts for qualitative inputs and authored the report. The quantitative surveys and primary interviews with customers were conducted by AC Nielsen.

 For the purpose of the study, Nielsen conducted direct interviews, focused group discussions and quantitative face-to-face surveys, across 12 cities in India and ~1500 respondents across diverse demographics of age, gender, income and town class.

 Notes/Definitions:

  • Metro: More than 40 lakh people or 10 lakh households (average size of an Indian household = 4)
  • Tier 1: 10 to 40 lakh people or 1 to 10 lakh households
  • Tier 2: Less than 10 lakh people or 1 lakh households

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