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HoReCa industry is one of the fastest growing markets across India
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Thursday, 30 June, 2022, 08 : 00 AM [IST]
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Nitin Kumar
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HoReCa, an acronym for hotels, restaurants, and cafes, was created in Lebanon by Hospitality Services in 1994. Subsequently, its subsidiaries were established in Jordan, Saudi Arabia, and Kuwait. A group of hotel industry experts with over 25 years of combined experience in the hospitality and associated industries launched HoReCa Concepts India in 2016.
HoReCa Concepts India intends to become one of the top hospitality firms in the area rapidly with its excellent range of brands, expert service, and competitive price. HoReCa Concepts India is committed to giving the hospitality business the best concepts, including flatware, glassware, fine china, banquet, and outdoor furniture, among other things. With the addition of individualised service, you have the most cutting-edge hotel in your neighbourhood and the first step to success.
Growth in HoReCa Segment
Online retailer Big Basket recently revealed aspirations to achieve 500 crores in income from their newly introduced HoReCa section in 2018. The new market is so appealing that the corporation is establishing specialised distribution centers in eight cities so that scaling up won't hinder growth. A significant number of organized food processors with a strong focus on HoReCa have emerged over the past ten years.
Since this channel accounts for the majority of their revenue, frozen food producers and marketers have a stronghold in this sector. As a result of the expansion of the food and services industries, there is an increase in demand for higher-quality raw materials in the organised food services sector. Better procedures and the spread of technology result from this.
This sector accounts for 75% of revenues vs. retail while expanding more quickly. In addition to promoting expansion, it also contributes to the definition of contemporary consumers' changing lifestyles. What could be the driving forces behind the development of this new sector of the economy? Well, the tendency for nuclear families to travel together has become the norm.
This suggests enjoying favourite meals in a cozy third home. The possibility of eating meals away from home has increased because metrosexual Indians have better spending power. This also explains why the development of food apps has rapidly gained popularity.
Delivering high-grade raw materials is therefore a requirement for companies to succeed in the HoReCa sector as the returns are far more alluring than those in retail. According to a major food company, convenience products are used more frequently in QSRs (Quick Service Restaurants) and HoReCa channels than in fine dining establishments. In a word, they demonstrate a sizable market in India that is still developing and underserved.
There are over 13 million Ho-ReCa establishments nationwide; given their tremendous potential and the shifting needs of their clientele, there are several opportunities and plenty of room for other players and formats to flourish in this market.
The chief executive at Walmart India acknowledged the growing significance of this market for the business.
“For us at Walmart India's cash-and-carry business, HoReCa is a crucial member segment. This area of our business is expanding quickly. We have in-depth knowledge of the market and a solid grasp of the major factors influencing HoReCa growth, we have been their provider for more than ten years.”
“We can meet their needs because of our unique location. This market demands consistency in quality, availability, and delivery timing. Express delivery and customized solutions tailored to our Ho-ReCa members' demands are at the heart of our unique value proposition. We have devoted teams that comprehend their needs and provide them with services in line with those needs.”
The newest player in the cash-and-carry market, LOTS Wholesale Solutions, has been experiencing steady expansion in both the HoReCa and retail markets.
When it comes to their overall contribution to the cash & carry industry in India, Kirana/Resellers still dominate. However, HoReCa as a commercial sector is starting to receive more attention.
In light of Kiranas' exorbitant price, this might be a different avenue for growth. Additionally, if we look at Kiranas, the huge FMCG distributors and the cash and carry merchants do end up in competition. As the HoReCa segment is the final consumer as opposed to the Kirana who are resellers, dealing with this segment could help prevent channel conflict difficulties.
Ankur Pahwa, Partner and National Leader- Ecommerce and Consumer Internet at EY India, estimated that the HoReCa sector of the food buying market in India is between $55 billion to $65 billion. According to Pahwa, 3/4 of the HoReCa business is now concentrated in Tier I and II cities, which presents a big opportunity for cash and carry players due to the larger volumes and quicker access compared to Kiranas.
One of the reasons why HoReCa firms are now gravitating toward the cash and carry players is because of stricter standards and food laws.
However, institutional, QSR, premium, and hotels segment largely choose the cash and carry players since they offer consistent quality, specialized assortments, and a single basket for simplicity of purchasing. While undoubtedly a substantial portion of the HoReCa category is price-conscious. Given the increased stringency of regulations like FSSAI and HACCP, we should observe a stronger movement toward the organized segment for purchases, including those made via cash and carry players.
With an emphasis on categories including frozen, private labels, and non-food categories, the HoReCa segment will also assist Cash and carry players in driving greater margins. By providing more options, door-to-door delivery, a mix of private labels, and bulk packaging, Cash and Carry players can increase growth and profitability in the HoReCa category, but credit that is available from the traditional channels to HoReCa will need to be appropriately managed.
The cash and carry companies are also using innovative tactics to expand their businesses because they recognise the significance and prospects that the HoReCa segment provides.
Players in this market are also using a range of strategies, such as establishing connections with star chefs at large hotels and giving them the necessary assortments to boost sales.
At the same time, some cash-and-carry businesses are implementing aggressive strategies to collaborate with several start-up vendors to expand their selection, partly because small businesses are more willing to introduce new products than large food corporations.
With our own brand’s product line, it is simpler to draught fixed-rate contracts for hotels, restaurants, and cafés to control their food expenditures. Customers of HoReCa receive the same quality food for nearly half the cost of other brands, which finally results in juices or Hakka noodles; Customers at HoReCa don't care about brands and think of our own-brand selection is excellent value. The success of LOTS Wholesale Solutions' brands has also allowed it to forge strong connections with consumers through its brands.
The food service sector's performance is likely to improve, with an expected compound annual growth rate of 10% for the five years between 2017 and 2022. According to a FICCI-PwC analysis, this will cause the industry to grow to a value of Rs 5, 52,000 crores by the end of 2022.
(The author is assistant professor, Sunder deep college of Hotel Management, Ghaziabad. He can be reached at mail4nitin95@gmail.com)
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