In the last decade, cloud kitchens were dubbed as the future of the food industry and have been emerging across India rapidly. Fassos, operated by Rebel Foods, founded in 2011, was one of the pioneers of this business model in the country. TTSF Cloud One, another internet-first multi-brand cloud kitchen, raised $5.3 million in a seed funding round led by Brand Capital, the investment arm of Bennett Coleman & Co Ltd. Today, India has 20 cloud brands cutting across every food category—from khichdi to burgers. Nine of these brands were created during the pandemic. Biryani by Kilo has 60 outlets across India, with only 10% of them acting as dine-in restaurants. 18 of the 60 outlets opened after March 2020.
With lower capital investment and operating costs such as rents and payroll, coupled with the ability to maximize orders and target multiple market segments, a cloud kitchen can break even within the first year itself. They also have greater flexibility, better efficiency, lesser risks, and increased opportunity to re-evaluate their offerings with evolving market trends. Needless to say, cloud kitchens offer a better margin to entrepreneurs compared to brick and mortar restaurants.
Apart from small, local players and home cooks, this space also has big players like Swiggy creating dark kitchens in multiple cities. The success of cloud kitchen ventures has spurred a rise in ‘plug and play kitchen’ spaces. For example, infrastructure providers such a Hyderabad-based Book Your Kitchen and Speciality Group of Kitchens can provide ready-to-move-in kitchens where all you have to do is supply equipment and manpower.
“The Indian food tech space is at the cusp of disruption right now with largely unorganized brands operating in the market. We are now aiming to create, license, acquire & operate several brands using our technology stack which will enable our ecosystem brands to rapidly scale like never before & consolidate some categories. We believe with economies of scale, it is very much possible to build an extremely interesting play within a short period,” Yeshwanth Nag Mocherla, Co-Founder, TTSF Cloud One, said in a statement.
Restaurants will increasingly explore D2C channels (Direct-to-consumer) in 2021. A growing percentage of their orders are already coming from direct channels. This is a shift coming on the back of a change in customer behaviour and lucrative deals restaurants offer to customers on orders from their owned channels. Cloud kitchens will help create an efficient connection to some of the D2C channels such as websites, social media, and messaging platforms that will allow restaurateurs to set up their digital storefront, customize the guest experience, save commission charged by aggregators and manage online orders, ultimately enabling them to adapt to a new normal of dining.
As per industry reports, the Indian cloud kitchen market is expected to grow five times from US $400 million in 2019 to US $2 billion in 2024.
Cloud kitchens have grown in conjunction with dine-in restaurants in the past decade, both globally and India, driven by changing demographics, consumer preferences, and an increasing reliance on digital and mobile-friendly solutions. However, the clear line between dine-in restaurants and delivery-focused brands has blurred post the pandemic. Several hotel and restaurant operators are entering this space by introducing their own separate food delivery-centric brands. The hybrid business model – combining elements of delivery and takeaway with dine-in – offers quick service, convenience, and a restaurant-style experience to customers and diversified revenue streams for operators, while helping them keep their costs minimal as they adapt to these evolving times.
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