Urban India spending nearly 50 percent of food budget on dining out and deliveries: Deloitte-FICCI report

In fact, since 2000, rural India's spending on staples such as cereals, vegetables and pulses has declined, and expenditures on beverages and processed foods have surpassed those on cereals for the first time.

India's urban consumers now allocate almost 50 percent of their food budget to packaged and prepared foods, dining out and deliveries, said a Deloitte-FICCI report, underscoring a boom for the food processing business, riding on the rise in per capita income in recent years.

The consumption pattern in rural India too is shifting from cereals to beverages and processed foods, potentially setting up the food processing industry at the cusp of a booming demand. The rural FMCG consumption outpaced urban growth in FY24, said the report, supported by 'increased rural coverage and innovation in smaller SKUs'. In fact, since 2000, rural India's spending on staples such as cereals, vegetables and pulses has declined, and expenditures on beverages and processed foods have surpassed those on cereals for the first time.

"Consumers across income groups are moving beyond traditional staples toward more varied, protein-rich, processed diets. Premiumisation is also an emerging trend, with higher-income consumers driving growth through demand for quality, convenience and indulgence," the report said.

This trend is also coinciding with a rising demand for health and wellness in food choices, reflecting in the increasing consumption of superfoods. "There is a growing preference for high-protein, low-sugar, gut-friendly, organic and functional foods, reflected through the resurgence of traditional Indian superfoods such as millets and makhana," said the report. The findings also point at the rising trend of global R&D hubs and start-ups reformulating products for Indian tastes, and focusing on health-conscious aspects such as protein enrichment and gut health.

"As India moves towards a $5 trillion GDP by FY28 and aims to become a developed country by 2047, a larger and more affluent consumer base will demand better, safer and more convenient food options," said the report, pitching food processing companies to potentially benefit from this growing demand boom.

Among the factors driving this trend is the shifting consumer preference towards snacking, demand for on-the-go formats due to faster urbanization and more women joining workforce, along with easier access to e-commerce options.

Quick commerce has helped democratize product access, significantly affecting the food FMCG sector's range of products. "As rural prosperity increases, consumer behaviours are converging, with tier 2, tier 3 cities and beyond emerging as key growth powerhouses. While local players dominate these markets, competition is expected to intensify as national FMCG leaders expand their presence in these growing markets," said Anand Ramanathan Partner and Consumer Industry Leader, Deloitte South Asia.

More money finding into ready-to-cook and ready-to-eat format has also fuelled this hunger for processed food items. This is potentially a big and under-tapped market, according to the Deloitte-FICCI report, which cites nearly 52 percent of India's total land area as cultivable or suitable for agriculture, suggesting there is a bigger opportunity present to be unlocked.

The consumer surveys conduct by Deloitte showed that there is growing demand for healthy, organic and high-protein foods, along with low or no-sugar alternatives among urban consumers.

Products enriched with probiotics and prebiotics such as functional beverages, fortified dairy items and gut-friendly snacks are seeing growing adoption, along with millets, which are gaining popularity due to their nutritional profile, said the survey.

"The urban youth population is increasingly becoming health-conscious and shifting towards millet consumption. This trend has led to the emergence of numerous start-ups offering millet-based food products. The growth in demand is evident in urban and semi-urban areas and is expected to continue rising through 2030," said the report.

Urban consumers were also increasingly seeking products with minimal, recognisable and natural ingredients. "Over 90 percent of urban consumers consider clean labels important while purchasing food products. About 31 percent of urban consumers are willing to pay a more than 10 percent premium for products with clean labels and natural claims," said the Deloitte survey. Clean label products often emphasize being free from artificial additives, preservatives and allergens, catering to health-conscious consumers.