India's Food Delivery Market Expands to Rs 2.2 Trillion, But Growth Prospects Remain Uncertain

India's Online Food Delivery Market Poised for Next Growth Phase

India's online food delivery market is entering a new phase of growth, driven by increasing order frequency, expanding penetration in Tier-2+ cities, and steady expansion of average order value (AOV), according to a report by Investec Equities.

The sector is expected to scale from USD 9.1 billion in 2024 to nearly USD 27 billion by 2030, growing at a 19 per cent Compound Annual Growth Rate (CAGR), as digital adoption and urbanisation reshape consumption patterns.

The broader food services market in India has grown from Rs 4 trillion in FY20 to Rs 7 trillion in FY25 and is projected to reach Rs 11-12 trillion by FY30, implying an 11-12 per cent CAGR. However, penetration remains low at 13 per cent of total food consumption, well below 58-62 per cent in the US and 42-46 per cent in China.

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Despite this, structural shifts such as smaller households, longer working hours, urbanisation, and migration away from family support systems are gradually increasing the frequency of eating out and ordering in.

Investec noted that the market share of the organised segment is expanding rapidly, rising from 36-41 per cent in FY20 to 47-52 per cent in FY25. It is expected to reach 60-65 per cent by FY30. At Rs 3.2-3.5 trillion in FY25, the organised market is projected to scale to Rs 6.6-7.8 trillion by FY30, led by branded restaurant chains, cloud kitchens, and delivery-led formats that offer greater consistency and convenience.

Within this, online food delivery remains the fastest-growing segment, expanding from Rs 270 billion in FY20 to Rs 790 billion in FY25 and expected to reach Rs 1.7-2.2 trillion by FY30 at a 17-23 per cent CAGR. Despite this, it still accounts for only 11 per cent of total food services, up from 3 per cent in 2018, indicating significant runway for further penetration.

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Growth is being supported by convenience-led consumption, smartphone proliferation, and improved supply density. On the demand side, nuclear households and younger working cohorts are accelerating the shift toward ordering in, while on the supply side, organised restaurant networks and logistics capabilities have improved assortment and delivery reliability.

The next leg of growth will be defined by engagement rather than user addition. The ecosystem had 85 million annual transacting users (ATUs) in 2024, with 27 per cent or 23 million converting into monthly transacting users (MTUs). This conversion is expected to rise to 32 per cent by 2029 as habit formation strengthens.

While metro and Tier-1 cities still contribute 75-80 per cent of market growth, Tier-2+ cities already account for 20-25 per cent, showing the market is broadening beyond traditional urban centres. The user base is projected to reach 137 million by 2029.

Indian consumers currently average 3-5 monthly orders, compared to 8-10 in the US and 5-10 in China, underscoring the frequency gap that platforms can bridge as accessibility improves. AOVs are also rising, with Zomato's and Swiggy's expected to scale from Rs 282/Rs 407 in FY22 to Rs 461/Rs 463 in FY26E. Redseer projects industry AOV to reach Rs 542 by 2028 at a 6-8 per cent CAGR, supported by premium restaurant additions and broader cuisine availability.

With formalisation accelerating and penetration still low, Investec sees a long runway for organised, delivery-led players to gain share, making India one of the most compelling food delivery markets globally.