Transfin.
HomeNewsGuidesReadsPodcastsVideosTech
  1. Reads
  2. Lite

Impact of the Coronavirus Pandemic on Restaurant and Food Industry in India

Former Managing Director of Ahmedabad Stock Exchange
Sep 23, 2020 2:02 PM 4 min read
Editorial

"This is one industry that’ll never see a recession - people will always eat and drink!" one of the top restaurateurs in the country had flamboyantly boasted about the recession-proof business of restaurant industry.

But the industry veteran was wrong.  A few months down the line, the Government began closing down bars and restricting restaurants to only takeout service, to stem the spread of the coronavirus. His business is among thousands of restaurants where sales plunged across the board. Hotels and restaurants in India have been among the most affected due to the COVID-19 pandemic and the nationwide lockdown that was enforced to curb the virus from spreading.  

As per a story published by The Sunday Guardian on July 4th, the COVID-19 pandemic has left the restaurant industry in India bleeding with an estimated loss of about ₹1trn ($13bn) in the last 100 days. By now, the losses of the industry might have doubled.

The size of India’s restaurant industry is estimated at ₹4.2trn ($57bn).

As per a CRISIL report: 

India’s organised dine-in restaurants are on course for a 40-50% cut in revenue this fiscal because of the disruptions caused by COVID-19 pandemic, which have led to outlet closures, job cuts and trickle-down effect on the food supply chain.

“In our industry, the proportion of fixed operating expenses by way of rentals, utility expenses and salaries is quite significant and with little or no revenues, it is getting very difficult for restaurants to survive through this pandemic. I won’t be surprised if 30%-40% of the restaurants close down in the coming days. Closure in bigger cities would be much higher due to higher cost of operations in these cities,” Anurag Katriar, President of the National Restaurant Association of India (NRAI), told The Sunday Guardian

 

Impact of the Coronavirus Pandemic on Restaurant and Food Industry in India

 

Restaurateurs in Delhi say that many of them are not being able to stay afloat at this time since the rentals are very high. At Connaught Place, which over the years had turned into a destination for partygoers in the heart of Delhi, at least 12 restaurants and pubs have shut down, as per The Sunday Guardian report. Even at the upmarket Khan Market in Central Delhi, several restaurants, including the iconic Cafe Turtle, have shut shop because of the massive rentals. Over two million people directly employed in the sector may be rendered jobless, according to NRAI.

"Dining out industry in India is yet to bounce back and operating at 8-10% of pre-COVID levels. Slump in the industry is largely driven by markets being in lockdown, consumers not stepping out due to fear of transmission and restaurants not opening up, even if the city is not in lockdown" according to Zomato’s mid Covid-19 report. 

Even in cities where restrictions have been lifted, only 17% dining out restaurants are open for business at the moment which are also running at low capacity. Out of the 83% restaurants that are not open for business, 10% restaurants have already shut down permanently and the Zomato report anticipates an additional 30% restaurants to not reopen at all. Remaining 43% are closed right now but likely to open, as the situation becomes better.

 

Impact of the Coronavirus Pandemic on Restaurant and Food Industry in India

 

Most of the customers plan to decrease spending on dining out in the near future and some of this spend will shift to food delivery. 60% of restaurateurs said they estimate to retain less than half of their original business volumes for a few months even post-COVID. Zomato has delivered 7 crore food orders since the lockdown started on March 25th. Zomato report estimates that between other food aggregators and direct restaurant channels, Indians have placed 20 crore online orders since the lockdown.

While online food deliveries were allowed even through the lockdown, they were only operational in select cities. Moreover, only 20% of the restaurants listed on online platforms were open for deliveries and they were also operating only at 40% of their normal sales volumes, noted CRISIL.

Due to the coronavirus crisis, not just restaurants, horticulture farmers, dairy producers, food processing companies, suppliers, logistics companies and even delivery partners will also see a hit on revenues.

FIN.

There's so much happening around that simply keeping up can be a task! How about more such fun Quizzes to help you retain? Subscribe to our Quiz Knock Newsletter to receive them straight to your inbox.