Goopy and Bagha are ostracised from their respective villages due to their questionable musical abilities. They team up and meet the King of Ghosts in the jungle. The king, who has a more evolved ear, is delighted by the duo’s music, and grants them three wishes. One of them is that they can get food whenever they want by clapping one hand with each other.
In the legendary filmmaker Satyajit Ray’s epic, Goopy Gyne Bagha Byne (IMDb 8.8/10), on the clap of hands, food descended from the heavens. 51 years ago, the visionary film maker had seen what was coming.
Cloud Kitchens
RedSeer Consulting estimates that India’s food delivery market will touch $2.5-3.5 billion by the end of 2021.
Rebel Foods, the poster boy in the category, recently raised $50 million in its 18th funding round, taking total investments to $331.5 million (Travis Kalanick, founder of ride aggregator Uber, is also reportedly an investor through his CloudKitchens venture). According to the Economic Times, the company operates over 2,100 internet restaurants and an estimated 300 cloud kitchens across three countries. All this from a startup that sold rolls in Pune under the brand, Faasos.
A cloud kitchen is a restaurant that only exists online. Instead of clapping, you click on a few links and food appears at your doorstep. Players are of different hues though:
The Pure Play Cloud Kitchen: Here we have the single brand and the multi-brand. Biryani by Kilo is a good example of the former. Focussed on one product, expanding rapidly geographically. In four years, it has grown its revenues from ₹8.6 million to Rs 480 million ($120,000 to $6.5million). Rebel Foods falls in the latter category, where multiple brands are housed in a single kitchen. Both these take orders directly and are also dependent on aggregators (like Zomato) for business.
The Aggregators Infrastructure Play: Swiggy and Zomato are both infrastructure providers and demand creators. Swiggy provides a shell, Zomato built up kitchens. The power of consumer data (who they are, where are they, what they like) allows them to pick the right cuisines for the right geography. The Zomato model also has brands with storefronts.
The Old Guard: Food brands from the mortar world and holding valuable real estate in the consumer’s mind are getting into the game. Jubiliant Foodworks, which operates Domino’s, and Dunkin Donuts are looking at the space and not just for these brands but other cuisines. Lite Bite Foods, that has over 200 restaurants in India spread across malls, high streets, airports under brands like Punjab Grill, TRES, The Artful Baker, Zambar, Street foods by Punjab grill, Asia seven express is moving in.
How do these three groups stack up against each other?
The pure play bunch have the advantage of focus and that has helped build formidable technical knowledge which may not be that easily replaceable by putting up a shell. The aggregators have the massive advantage of owning the customer.
Zomato and Swiggy are the go-to option for online food. With that, comes tremendous information about customer’s choices. Especially by geography, even perhaps locality. In such a culinary diverse country, this could be the deciding edge.
The Old Guard have brands that are on speed dial in the consumer’s mind. The aggregators need brands that consumers want on their platforms.
Each of these groups have their own Achilles’ heel. The pure play gang need to build powerful brands and create customer demand at scale. Rebel Foods did just that with their biryani brand, Behrouz. They went to town. They hired BBH (an advertising agency), who made this grand film playing up the Persian origins of the biryani. Have a look:
The extensive media plan also included large print ads and an extensive outdoor (billboard) campaign.
This expensive brand building will have to be done for each brand separately. The shared kitchen will not help.
The aggregators seem to be in the strongest position. After all, they are strong technology companies. Surely, they can play catch up on that front. There is a minor problem. The definition of a marketplace, and accusations of “insider trading”. As Business Today put it in an article detailing tensions between restaurants and aggregators:
But the real friction happened when aggregators started their own cloud kitchens. Swiggy has four private labels - The Bowl Company, Homely, Goodness Kitchen and Breakfast Express - which compete with restaurant partners on its platform. For restaurants, these are anti-partner activities because these private kitchens are fed with a lot of data that aggregators have gathered over a period of time from restaurants' order histories and customers' behaviour. Aided by algorithm and data science, this gives aggregators access to the demand and pricing situation across regions and localities.
Then, the Department for Promotion of Industry and Internal Trade (DPIIT) had a meeting in January where Zomato, Swiggy Uber Eats, the National Restaurant Association of India (NRAI), Ministry of Commerce and Industry, Ministry of Consumer Affairs and the Ministry of Law were present. The Economic Times reported the proceedings:
“If you go by the definition of marketplace in Press Note 2, these (online food ordering) platforms are transgressing the rules,” said a senior government official who was present at the meeting. “It needs to be decided whether to change the FDI norms to accommodate cloud kitchens or that it is not going to be allowed at all.”
According to the Press Note 2, which came out in December 2018, ecommerce marketplaces are not allowed to control the inventory of goods sold on their platform or to engage in exclusivity deals with vendors.
The FDI norms also disallow online marketplaces from offering preferential treatment to vendors. Swiggy and Zomato both demand exclusivity from restaurants using their cloud kitchen infrastructure.
Maybe Swiggy has seen the writing on the wall as they laid of 1100 people last month, largely from the kitchen business.
The Old Guard have invaluable assets, brands recognized and wanted by customers. However, they do not have the technology prowess or the in-depth customer data, both critical in the cloud game. Their existing mortar business will keep taking up most of their investment-in time and cash. Their best bet looks like aligning with the aggregators.
Meanwhile, the cloud kitchen industry has not been immune to impact from the pandemic.
Cloud-kitchens too are feeling the pain, with the likes of Mukesh Bansal-founded Eat Fit scouting for buyers as it puts as many as 18 of its facilities up for sale in cities like Chandigarh, Jaipur, Ahmedabad, and Vadodara, expecting orders over the year to significantly decline, according to documents seen by ET.
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RedSeer Consulting estimates food delivery alone will take at least a year to come back to pre-lockdown levels, and even longer in smaller towns and cities. A survey conducted by the firm showed that wallet share for dine-in restaurants will decrease sharply, as per 68% of respondents.
It will be interesting to see how the industry will shape up once the pandemic has passed us by.
The climax of Goopy Gyne Bagha Byne has an army descending on an unsuspecting neighbour. The soldiers are haggard, look like death, as they have not eaten in days. Our heroes, Goopy and Bagha, use their powers and pots of succulent rosogollas descend from heaven. Chaos ensues. The war is over. Perhaps, that’s why Zomato started testing drone deliveries in 2019. Each drone has a payload of five kilos. That’s a lot of rosogollas!