International Top 25: 4 global hot spots with untapped potentialInternational Top 25: 4 global hot spots with untapped potential

Global expansion in the foodservice industry has become increasingly complicated.

Gone are the days when restaurant operators could focus on a select few markets, riding runaway top-line growth to double-digit returns and limitless expansion opportunities. Still, opportunities remain, but in a broader pool of consistently growing regions.

While none will offer the returns of China or the U.S. in decades past, they are all poised to offer significant long-term opportunities to the right player, with the right local strategy.

India

India is a major long-term target for restaurant chains, boasting an enormous population and a competitive restaurant chain landscape that is far less developed than similar markets.

India is expected to see average annual sales growth of 6 percent from 2015 to 2020, jumping from $109 billion to $144 billion. Though India’s restaurant chain industry remains much smaller than many wealthier markets, at just $3.1 billion in 2015, growth promises to be strong and steady, increasing at an average annual rate of over 12 percent through 2020, to reach $5.4 billion.

Operators looking to build a long-term presence will benefit from significant growth in India’s middle class. India expects to see median income per household increase 90 percent in real terms from 2015 to 2030, according to Euromonitor International.

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This will not only bring discretionary spending power to large groups of new potential restaurant chain customers, but it will also help India transition from a “bottom of the pyramid” market towards a middle-class consumer market with greater and more sophisticated dining-out demand. 

Southeast Asia

While Southeast Asia’s markets are much smaller in size than other Asian powerhouses, when considered together, the region offers significant opportunities.

Regional restaurant sales in 2015 totaled more than $100 billion, ranking the region alongside markets like India and Brazil in terms of size. Southeast Asia’s restaurant chain industry was valued at $20.9 billion in 2015, and is expected to rise to $27.3 billion by 2020.

While individual market conditions and consumer preferences vary significantly across the region, Southeast Asia is united by well-developed local food cultures, generally strong interest in dining out, and large populations of young people who are eager for new experiences.

Indonesia and Vietnam will offer the largest absolute value increases from 2015 to 2020, at over $6 billion each. However, the Philippines will see the largest growth, specifically from restaurant chains, at an increase of $2.2 billion and average annual growth of 7 percent. This will bring the Philippines’ total restaurant chain market from $5.3 billion to $7.5 billion, larger than Italy, Russia and Saudi Arabia.

In terms of speed of growth, Vietnam is the clear winner, with the restaurant chain industry to grow from $612 million to $1.2 billion from 2015 to 2020, at an average annual rate of over 15 percent in constant terms.

The United Arab Emirates

The United Arab Emirates, or UAE, and more specifically Dubai, has become a magnet for up-and-coming U.S. chains.

The smaller ($14 billion in 2015 sales), but highly lucrative market has become a gateway to international expansion for many premium chains, offering high disposable incomes, a well developed dining-out culture and, most importantly, a number of very large, highly experienced master franchisees who have built empires around importing the best of the world’s restaurant brands and installing them in highly trafficked luxury shopping malls.

By 2020, consumer foodservice in the UAE is expected to grow to $19.2 billion in constant terms, with $4.6 billion of that amount going to restaurant chains. This will represent average annual growth of just over 6 percent among both chains and independent operators alike.

Beyond the numbers, Dubai offers less tangible benefits for operators, specifically a highly diverse expat population, high rates of tourism, and bustling social and dining scenes.

China

While China doesn’t offer the opportunity it once did, the market’s potential only suffers in direct comparison with its former self.

China is still expected to see by far the largest value growth from 2015 to 2020, growing from $617.1 billion to $851.6 billion, at an average annual rate of 6.7 percent. This represents $234.5 billion in new sales by 2020, considerably more than all other global markets combined.

Notably, this growth heavily favors independents, which will contribute 92 percent of that value increase. However, restaurant chains will still see strong, consistent growth driven by young, urban professionals who are continually seeking out new dining experiences, as well as more generally by the country’s very large and rapidly expanding middle class.

But, international operators in China face pressure from local chains, which have been successful in marrying a premium, hygienic, restaurant chain experience with familiar and authentic local cuisine.

As a result, opportunities in China are present, but elusive. Operators looking to build a new presence will need to fight hard to stand out from the crowd. n

Note: All forecast values and growth rates are in U.S. dollars and shown in constant terms.

Elizabeth Friend is the consumer foodservice strategy analyst at Euromonitor International. Contact her at [email protected].