The Food & Beverages segment is thriving in India, with various new factors and trends emerging in and impacting the segment in significant ways. With over 2000 of its live customers belonging to the F&B space, NeoGrowth, an NBFC serving under-banked SME businesses to develop a robust segment-specific financial ecosystem, recently conducted a research to gain an insight into the nature and operational dynamics of players in this segment.
The research was led in 5 metro cities namely — Bangalore, Pune, Mumbai, Delhi, and Hyderabad, and maps the various trends emerging in the space.
One of the biggest trends impacting the F&B space is the emergence of first generation entrepreneurs. In a market that has historically been dominated by multi-generational established players running for several years, relatively newer players with no previous business lineage and a vintage of less than 10 years have been observed to emerge and thrive in.
These entrepreneurs mostly own restaurants or bars, operating out of rented premises. Even though walk-ins make up for as much as 85% of the revenue for bars and restaurants and 69% for restaurants, these players have been observed to leverage food aggregating applications like Swiggy and Zomato to a significant extent. Mostly constituting of millennial entrepreneurs, these businesses utilize social media as an effective channel for marketing and promotions.
Another key trend that has been observed in the segment is the robustly expanding network of Quick Service Restaurants (QSRs). Although in its nascent stages, the trend of QSRs is rapidly gaining traction with increased urbanization, and evolving consumer lifestyles and behaviour.
Because of factors like minimal dine-in space and ready availability at odd hours of the day, as much as 50% of the revenue generated by these QSRs is through takeaways and home deliveries. With more and more players emerging in this segment and experimenting with cuisines, the QSR segment has been thriving in the metro F&B markets is projected to continue growing and expanding in Tier-II and Tier-III cities.
According to the report, digital channels have witnessed a significant rise in adoption, whether in terms of payments or presence. For instance, the usage penetration of digital payments is about 62%, whereas the mode of cash has now been limited to 37%.Moreover, over 69% of thesegment players surveyed are present on Swiggy, closely followed by Zomato at 65%. Catering has also emerged as a key revenue resource, with over 40% of them taking it up for higher profit margins. The peak months have been observed to be the festival season of October-February whereas the monsoon months of July and August have been observed to be off-season, especially for walk-ins.
Sharing an insight behind the curation of this research, Piyush Khaitan, Founder, NeoGrowth remarked, “At NeoGrowth, we have always strived to equip ourselves with a deep understanding of the segments that our customers belong to, in order to facilitate better prospects for them to address their credit challenges. The Food & Beverages segment forms a significant part of our clientele, with over 2000 of our live customers belonging to this space. Therefore, through this research, we wanted to draw key insights and map the various trends impacting this segment. We believe that this survey conducted will enable NeoGrowth to extend support to the F&B customers in a more segment-specific and consequently, an effective manner.”
The financial behavior was also mapped in the survey, and it revealed key patterns and needs of these segment players. For instance, considering how a majority of the customers surveyed are first-generation entrepreneurs, securing funds especially during the initial set-up is a challenge they typically face. These small and emerging businesses are often rendered ineligible by the traditional underwriting mechanisms due to factors like a lack of financial returns or a formal business history and low to no credit bureau scores.
Further, since most of these businesses operate out of rented premises,a lack of collateral also leads to them remaining underbanked. In order to ensure a smooth functioning for their business, these players are on the lookout for lenders that would facilitate credit for them to meet their immediate as well as long-term financial needs. This is where NeoGrowth comes in the picture.
Through its innovative tech-enabled and smart analytics-led approach, NeoGrowth assesses both traditional as well as non-traditional data points to power its underwriting mechanisms. This enables it to accurately validate the creditworthiness of a business, consequently offering the best-suited loan product for their specific needs. This research also signifies how the platform has been extensively working towards serving its customers in a more effective and segment-specific manner by gaining a deeper understanding of the same.By facilitating financial aid to numerous small and medium business merchants belonging to different industries and verticals, NeoGrowth is actively working towards its mission of creating a positive social impact whilesimultaneously contributing to the inclusive growth of India.
NeoGrowth F&B Report Infographic
NeoGrowth is a pioneer in lending based on the underwriting of digital payments data. The Company’s proprietary technology platform offers unsecured loans to merchants who accept card or other digital payments from customers.
Flexible repayment is a hallmark of the NeoGrowth business, offering customer’s small daily auto-repayment facility from card-based sales. NeoGrowth’s mission is to have a positive social impact on the financial lives of small and medium business merchants across India, more than 50% of whom are creditworthy but until now have been excluded from accessing loans based on traditional underwriting methods.
NeoGrowth is backed by renowned investors, namely Omidyar Network, Aspada Investment Company, Khosla Impact, Accion Frontier Inclusion Fund – Quona Capital, IIFL Seed Ventures Fund and Leapfrog Investments.