Indians spending more on packaged food, eating out as home cooking declines

Spending on processed food by the urban elite consumer more than doubled in FY23; it surged more than threefold for middle-income consumers

Households labeled as urban elite backgrounds in FY23 spent almost 50 per cent of their monthly food budget on packaged food, dining out, and food delivery services. That is compared to 41.2 per cent of such spending 10 years ago, according to data from the Ministry of Statistics and Programme Implementation (Mospi) and ICICI Securities.

According to the data, there has been a noticeable decline in home cooking among Indians in 10 years, as shown by a rise in expenditure on eating out and purchasing processed foods. This trend is expected to grow, driven by the expansion of rapid commerce and food delivery applications, escalating incomes, and evolving culinary preferences, according to a report in the Economic Times (ET).

 

“Given the proliferation of food delivery and quick commerce apps, the share of processed food would have increased. As households move up the income ladder, their consumption trends also change," Paras Jasrai, senior analyst at India Ratings and Research, was quoted as saying by the newspaper.

During the period analysed, spending on processed food by the urban elite consumer more than doubled, whereas it surged over threefold for middle-income consumers. This occurred even as the share of food items in total expenditures saw a decrease.

Spending by middle-income households on processed food and beverages as part of their food budget went up from 16 per cent to almost 25 per cent in the same period.

Madan Sabnavis, chief economist at Bank of Baroda, told ET: "With the spending power of the middle class going up, demand will rise. Also, more working couples add to the demand." He added that innovations in products such as low-sugar and organic food and drink are likely to appeal to higher-income groups and contribute to growth.

According to the ICICI Securities report, for the top 5 per cent of urban population, "there is a reduction in absolute spend on staples, which "indicates the kitchen is slowly dying for elite urban households". It said the urban elite spend per head on food delivery was at Rs 971 per month in FY23, compared with Rs 60 per head in a mid-to-high income family.

Mospi’s data showed there was an increase in spending on processed food and beverages as the income level of urban households increased, while that on cereals, eggs, fish, meat, and edible oil remained flat.

B Krishna Rao, senior category head at Parle Products, said that urban households are using more branded packaged food as ingredients instead of plain staples, leading to a surge in demand for processed food. "Even the latest fad of millet-based food sold by companies would fall into (category of) processed food," he said.

The Mospi data showed that the "spending on dry fruits has risen to 1.3 per cent of total household expenditure from 0.8 per cent a decade ago for urban areas, and 1.2 per cent from 0.6 per cent for rural households, another sign of rising incomes and aspiration".