HoReCa: Reasons for FMCGs to Focus on This Channel

Not just FMCGs but online retail players are also looking beyond conventional trade HoReCa Channel to boost revenues while gaining entry in the HoReCa segment. In the recent years, hospitality industry, also known as HoReCa industry is one of the fastest growing markets across the world. B2B wholesale giants such as Metro Cash and Carry and Walmart are increasingly becoming part of the FMCG supply chain owing to their reach in the HoReCa (Hotels, Restaurants and Catering) space that services the hotel industry.

FMCGs are eying at this lucrative segment today since it outnumbers the mom and pop stores in India. According to German wholesale retailer Metro Cash and Carry, the HoReCa segment accounts for nearly 1.3 crore organizations against 1.2 crore kirana stores across the country.

What is HoReCa in FMCG?

HoReCa is an acronym for Hotels, Restaurants, and Cafés/Catering. In the FMCG (Fast-Moving Consumer Goods) sector, it is one of the most powerful sales and distribution channels, serving as a direct link between brands and the end consumers through the foodservice industry.

Unlike traditional retail channels, where products are purchased from supermarkets, departmental stores, or kirana shops, the HoReCa channel focuses on supplying FMCG goods to foodservice operators who then prepare and serve them as part of meals, beverages, or hospitality experiences.

For example, when you enjoy a soft drink at a restaurant, order a dessert at a café, or receive complimentary snacks at a hotel, chances are these items have entered the market through the HoReCa industry rather than through a retail outlet.

What are the major key Challenges in the HoReCa Industry?

The HoReCa industry—which covers hotels, restaurants, and cafés/catering—is one of the fastest-growing and most important channels for FMCG companies. It is not just a distribution route but also a powerful medium for influencing consumer preferences. However, despite its opportunities, the HoReCa sector comes with a unique set of challenges that FMCG brands must carefully navigate.

Below are the major challenges faced in the HoReCa channel:

1. Fragmented Supply Chain

The HoReCa market is extremely fragmented and often lacks standardization. Unlike modern retail chains that follow structured procurement processes, most HoReCa outlets rely on multiple local distributors and wholesalers to source their supplies.

• This creates irregular delivery schedules that make inventory planning difficult. For example, a restaurant might receive its beverage supplies on time but face delays in dairy or bakery items due to dependency on different distributors.

   

• The absence of centralized systems or technology-driven coordination means suppliers have little visibility into stock movements and order cycles.

   

• As a result, FMCG companies struggle to maintain consistent service quality, especially when scaling across multiple regions.

   

2. Price Sensitivity & Margins

Pricing remains one of the biggest challenges in the HoReCa industry. Outlets like restaurants and cafés operate under high competition and low margins themselves, which makes them extremely price-sensitive buyers.

• HoReCa operators tend to negotiate heavily with FMCG companies, especially when ordering in bulk.

   

• This constant pressure to reduce prices leads to shrinking profit margins for FMCG suppliers.

   

• Premium brands may still command better pricing, but for most products, the competition is tough and largely driven by cost.

   

For instance, a QSR chain may choose one beverage brand over another solely because of a better bulk deal, regardless of consumer demand.

3. Demand Volatility

Unlike retail trade, which is relatively stable and predictable, the HoReCa channel is highly volatile. Demand depends on several external factors such as:

• Seasonal trends: Hotels and restaurants see higher orders during tourist seasons, festivals, or wedding months, while off-seasons cause sudden demand drops.

   

• Events & occasions: Sporting events, concerts, or exhibitions can spike consumption in specific regions overnight.

   

• Economic or global factors: The pandemic showed how drastically HoReCa demand can collapse when dining out and travel slow down.

   

This unpredictability makes it difficult for FMCG companies to forecast demand and manage inventory efficiently.

4. Product Freshness & Quality

Maintaining consistent freshness and quality is a non-negotiable requirement in HoReCa. Since hotels and restaurants serve directly to consumers, any compromise in product quality can damage both the outlet’s and the supplier’s reputation.

• Perishable categories like dairy, frozen foods, and bakery items are especially challenging to manage because of shorter shelf life.

   

• Cold chain logistics are critical, but many distributors lack the infrastructure to maintain the required storage and transport conditions.

   

• Even minor lapses—such as inconsistent texture of sauces, stale bread, or melted frozen desserts—can result in customer dissatisfaction and outlet-level rejection of consignments.

   

For FMCG brands, this means higher operational risk and potential wastage.

5. Credit & Payment Issues

Another major challenge in the HoReCa channel is the widespread use of credit-based purchasing. Unlike retail stores that typically pay upfront, hotels and restaurants often prefer extended credit terms.

• While this helps HoReCa operators manage their cash flows, it leads to delayed payments for FMCG suppliers.

   

• In some cases, small-scale outlets may even default, creating bad debt risks.

   

• Managing credit cycles also adds significant administrative overhead for suppliers, as they need to track multiple clients, outstanding amounts, and payment schedules.

   

This directly impacts the working capital of FMCG businesses and slows down reinvestment in operations.

Solutions for Challenges in the HoReCa Industry :

The HoReCa industry is a high-potential channel for FMCG companies, but success depends on overcoming operational inefficiencies and business risks. By leveraging technology, smarter strategies, and structured processes, FMCG players can build stronger, more profitable partnerships with hotels, restaurants, and cafés.

Here are the key solutions:

1. Streamlining the Supply Chain

• Adopt digital platforms for order management, route optimization, and delivery tracking to reduce delays.

   

• Work with specialized distributors or aggregators who can consolidate demand and provide last-mile efficiency.

   

• Set up centralized warehouses or regional hubs to improve service consistency across geographies.

   

2. Smarter Pricing & Margin Management

• Implement volume-based discounts and tiered pricing models to encourage bulk orders.

   

• Use product bundling strategies (e.g., pairing beverages with condiments) to increase order value.

   

• Implement reward programs to encourage repeat purchases and foster long-term customer loyalty.

• Position select SKUs as premium offerings, allowing better margins despite competitive negotiations.
  

3. Managing Demand Fluctuations

• Use AI-driven forecasting tools to analyze seasonal demand patterns and plan production accordingly.

   

• Build flexible distribution networks that can scale up or down during peak and off-peak seasons.

   

• Collaborate with HoReCa outlets for event-based demand planning (weddings, festivals, conferences, tourism inflows).

   

• Maintain buffer capacity in production and inventory to quickly meet demand surges.

   

4. Ensuring Consistent Quality & Freshness

• Invest in cold chain logistics, including refrigerated trucks and insulated storage solutions.

   

• Establish real-time quality monitoring systems to track freshness during transit.

   

• Opt for smaller, more frequent deliveries for perishable categories instead of bulk drops.

   

• Conduct training programs for distributors and staff to ensure proper product handling.

   

5. Strengthening Credit & Payment Systems

• Define structured credit policies with clear terms, limits, and repayment cycles.

   

• Offer digital payment options like UPI, wallets, and automated invoicing to speed up collections.

   

• Provide early payment incentives such as discounts for clients who settle dues before the deadline.

   

• Use data-driven risk assessment to extend credit only to reliable partners and reduce defaults.

What are the best Practices in the HoReCa Channel?

The HoReCa channel (Hotels, Restaurants, and Cafés/Catering) is one of the most strategic distribution routes for FMCG companies. It not only drives bulk sales but also helps brands influence consumer behavior directly in foodservice environments. To maximize returns and build long-term partnerships, FMCG players must adopt a set of best practices tailored to the unique dynamics of this industry.

1. Build Strong Distributor Partnerships

• Collaborate with reliable HoReCa-focused distributors to ensure consistent supply.

   

• Consolidate procurement through regional hubs to reduce fragmentation.

   

• Establish joint business plans with distributors to align on growth targets, service quality, and expansion.

   

2. Leverage Data & Technology

• Use demand forecasting tools to anticipate seasonal and event-based consumption spikes.

   

• Implement digital order management systems that allow real-time tracking of orders and inventory.

   

• Adopt CRM solutions to track client history, preferences, and order cycles for personalized service.

   

3. Offer Flexible Pricing & Value-Added Deals

• Design tiered pricing models based on volume and loyalty.

   

• Introduce bundled offers (e.g., beverages with snacks, sauces with frozen foods) to increase order value.

   

• Run exclusive promotions for HoReCa partners to strengthen engagement.
  

4. Ensure Consistent Product Quality

• Maintain a robust cold chain system for perishables like dairy, frozen, and bakery items.

   

• Schedule consistent quality reviews to ensure freshness and compliance with standards.
• Offer smaller, more frequent deliveries for sensitive products to avoid wastage.
  

5. Train and Support Partners

• Provide product training for chefs, managers, and kitchen staff to highlight the benefits and usage of your FMCG products.

   

• Share recipes, menu ideas, and usage best practices to help outlets integrate your products better.

   

• Offer after-sales support and quick response mechanisms for complaints or replacements.
  

6. Improve Credit & Payment Systems

• Define clear credit policies with transparent terms and repayment cycles.

   

• Encourage digital payments for faster and more reliable collections.

   

• Incentivize early payments through discounts or loyalty points.
  

7. Strengthen Relationship Management

• Treat HoReCa clients as long-term partners, not just buyers.

   

• Conduct regular business reviews to discuss performance, feedback, and growth opportunities.

   

• Recognize loyal clients with special privileges such as priority delivery or exclusive product launches.

   

Why Focus on the HoReCa Channel in the FMCG Industry?

The HoReCa industry in India is expanding rapidly, making it a highly attractive space for FMCG players. For those asking what HoReCa is in FMCG, it refers to Hotels, Restaurants, and Cafés/Catering – a distinct distribution channel where FMCG products are delivered straight to food service outlets instead of retail shops.

However, only a few companies have developed a strong GTM approach for the HoReCa channel. As highlighted by the leadership team at Metro Cash and Carry, many brands do not have a clear market strategy for this segment and often depend on their natural advantage to tap into it. This gap partly explains why FMCG product launches see such a low success rate — as per Nielsen, just 31 out of 15,000 product introductions succeed each year, which is only 0.2%.

The core reason behind most failures is the lack of a comprehensive distribution strategy. Even top FMCG companies are only able to reach about 30–40% of kirana stores, and their leading brands rarely cross a penetration level of 50%. In contrast, the HoReCa model has gained much more traction because its contribution is often higher than retail.

As a result, alongside traditional kirana outlets, modern trade, and general trade, FMCG companies are now placing a sharper focus on the HoReCa channel. With HoReCa channels delivering stronger growth potential, better margins, and enhanced consumer touchpoints, they are becoming an essential pillar of FMCG expansion strategies

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Thus, delivering premium quality raw material is a pre-requisite for brands to thrive in the HoReCa segment since the returns here are significantly attractive than retail. In fact, a leading food brand explains that QSRs (Quick Service Restaurants) and HoReCa channels have registered a higher use of convenience products as compared to the fine dining restaurants. In a nutshell, they present a huge market that is still nascent and untapped in India.

HoReCa and SFA

However, brighter prospects bring in new sets of operational challenges. These challenges can be addressed through technology. Mobility based SFA Apps such as FieldAssist is one of the tools to efficiently manage daily HoReCa operations. Currently servicing leading brands in the Food Processing industry and Frozen Food category that has strong HoReCa channel, FieldAssist solution has successfully optimized their sales processes through its product features. Veeba is one such example

Read the full Veeba customer story.

 Conclusion

The HoReCa model is no longer just an alternate sales channel; it is fast becoming a central pillar of FMCG growth. With rising consumer demand for convenience, eating out, and premium dining experiences, the HoReCa channels provide unmatched opportunities for brand visibility, faster adoption of new products, and stronger revenue growth compared to retail.

FMCG players who build a comprehensive distribution strategy and invest in the right systems for the HoReCa industry will not only overcome the traditional limitations of kirana and general trade but also future-proof their growth in a highly competitive market.

Ready to win in HoReCa? Book a quick demo.

Source:

1. https://www.business-standard.com/article/companies/metro-cash-carry-expects-faster-growth-from-horeca-segment-118012800602_1.html
2. https://www.business-standard.com/article/companies/most-new-consumer-goods-bomb-says-nielsen-report-114062600095_1.html
3. https://retail.economictimes.indiatimes.com/news/food-entertainment/grocery/bigbasket-eyes-rs-500-crore-revenue-from-horeca-segment/58143741

 

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