The business of food is experiencing a palate cleanse in India.
40% of restaurants are expected to expected to The Ken Covid-19 has turned up the heat on Indian restaurants—orders are dropping by 60-70%; revenue is expected to fall by more than 40%. Restaurants are now turning to other options to bring home their bacon Read more shut down following the pandemic. Dine-in is no longer an attractive proposition in the times of social distancing, and restaurants need to find a way to sustain their businesses and pay massive rents.
In a way, Covid-19 has been a sudden equaliser. No dine-in has meant restaurants are reduced to their kitchens for food delivery, competing with quick-service restaurants (QSRs) and cloud kitchens—branded kitchens that deliver food and have no dine-in option. That too at a time when people are ordering in way less than before. Foodtech leaders Swiggy and Zomato have seen a 70% overall drop 70% overall drop The Economic Times Orders dropped from 2.5 million to 1 million a day after the first ten days of the lockdown in delivery.
Despite the odds, industry executives The Ken spoke to believe that cloud kitchens, especially brands that have a pan-India presence, would emerge stronger from the crisis. More so because rent is a huge fixed cost, and declining sales are bound to bring losses to restaurants. One way to eliminate that fixed cost for restaurants would be to pivot to a cloud kitchen model.
No surprise then that the business is getting love from other industries, too.
Ride-hailing giant Ola is pushing its food division Ola Foods forward. It plans to more than double its count of cloud kitchens from 40 to 100 in 2020, according to Pranay Jivrajka, chief executive of Ola Foods.
“We are making very, very aggressive expansion plans throughout the year and we feel that this is the right time,” said a senior Ola executive; he requested anonymity as he is not authorised to speak to the media. The company hired Rajeev Bakshi—a food and beverage veteran whose previous stints include F&B leaders PepsiCo International and Cadbury Schweppes—last year to advise on expansion strategy.
It’s almost an open challenge to industry leader, Rebel Foods, which has 300-plus kitchens and close to a dozen brands. The Ola executive said that the company will be increasing its number of brands from three—Khichdi Experiment, Bowlsome and Paratha Experiment—to eight in under a year.