The online food delivery market in India is expected to be at $3 billion in revenues by 2018. With the market is expected to grow at an annual rate 15–18%, most of the startup that is bootstrapped these days are more towards the food tech. The range may vary from big players like Uber Eats, Zomato, Food Panda and Swiggy to some of the niche market players that target this potentially larger market.
Right from selling fresh juices to baked goods, every eatable product has come online. But all these platforms are facing the toughest challenge with their operations where they want to scale themselves over the larger market. Nowadays, we are able to see a subscription based food tech startups as well; where they deliver your usual breakfast, lunch, and dinner on a subscription basis.
From the traditional retail food chains that operate at a high capital investment for setting up, many people once get bored with their usual jobs think about creating a business out of their own. Hence, they get into setting up the retail food outlets where they presume that the margin associated with this industry at Himalayan heights. But, the actual reality is that even the top players operate a wafer-thin margin of 7–9%. This increase in the number of restaurants across the country is well supported by the increase in the disposable income of the people post 2015, the change in consumer lifestyle and the exponential increase in the women workforce from a traditional country like India. But, out of the new restaurants that are launched only 20% of them succeed in staying with the competition, where they offer niche foods while others get out of the business with the intense competition that exists in the industry.
But the real problem with the existing food tech startup is that they all act as a marketplace rather than solving out the real problem of making profits for their business. Many of these startups operate on smaller margins with the restaurants for every order where they also have to take care of the delivery of the food. The average loss that these startups make on every order is around 100% of the revenue earned; for an example for every rupee earned as revenue, they spend two rupees on that order. This loss could well be explained by price sensitive market that exists in India where people buy goods on the basis of the price, while the people are not that comfortable in paying up for the services.
In order to solve the current losses, the investment groups are coming with the concept of cloud kitchen where every city has around 3 to 5 kitchens in every city that caters across the entire city limits. This could save a lot on the operational losses and the cost of goods or food items that are sourced from the external restaurants. Setting up the kitchen on their own would save the cost of producing the food menu and thereby reduce the dependency on the external restaurants to cater to their user’s needs. Hence, we could now witness yet another revolution in the food tech industry where we could witness better international menus at better prices that are attractive to the local audiences.