A report by the Economic Times states that top online food delivery players are now looking to build out captive supply of kitchens that can cater to their customers.
Zomato is set to invest about Rs 100 crore in tranches in Bengaluru-based Loyal Hospitality to expand its cloud kitchen operations in Bengaluru.
The first tranche of about $5 million (above Rs 30 crore) has already been invested in the firm which provides a platform for restaurants to expand their operations and outlets through a shadow kitchen model.
Zomato confirmed the investment even as it added that it is shutting down its own cloud kitchen operations under Zomato Infrastructure Services (ZIS). “The purpose of ZIS was to bridge the supply and demand gaps in various micro localities across the country. We only had one pilot kitchen in Dwarka and we are in the process of winding it down,” said Naina Sahni, VP-Public Relations at Zomato.
Zomato’s success rate with expanding the cloud kitchen model has been rather slow with only a few locations being served even after a year of the model’s launch.
Swiggy and UberEats were also in the fray for a possible minority investment or revenue share agreement with Loyal Hospitality, before the investment by Zomato was finalised. Interestingly, after having begun this model organically in their respective home turfs, both Swiggy and Zomato are looking to enter the cloud kitchen model through strategic investments as they take on each other’s market in this battle.
“Swiggy has not held any talks of this nature with Loyal Hospitality,” said a spokesperson of the company who has been quoted in the report.
Zomato’s investment in Loyal Hospitality comes in the wake of reports earlier that food delivery companies have held talks with cloud kitchen startups like Faasos, Freshmenu, Holachef and Box8.
“Swiggy has been in talks with restaurants and cloud kitchen infrastructure providers in Delhi and Gurgaon and is likely to launch its Access programme in the Northern belt soon,” said one of the restaurant owners with whom the talks have been held. The investment in Loyal Hospitality will be a boost for Zomato’s delivery volume currently at over 7 million per month behind Swiggy’s 10 million monthly orders. UberEATS and Ola-owned Foodpanda clock about 25,000 and 40,000 orders per day as per industry sources.
Currently online ordering and deliveries form about 40-50% of restaurants’ revenues and is likely to go upto 70% over the next three years, believe industry experts.
As part of this investment Zomato will be the sole delivery partner for the kitchens to be covered under this programme for the near term. The deal will give Zomato access to deliveries from 200-220 kitchens across 10 restaurants in Bengaluru followed by an expansion to seven more cities by the end of the year. Loyal Hospitality is looking to set up 8,000-10,000 kitchens across India over the next three years and will enable cross-city launches of restaurants through this model. In its first phase, the platform will enable Zomato to get delivery access to some high order frequency restaurants in Bengaluru such as Empire Restaurants, Adigas, Hyderabadi Biryani House, Al Bake amongst others.
Swiggy, which launched a cloud kitchen business called Swiggy Access in November last year, has also found expansion of the model to vicinities within Bengaluru itself a rather slow process.
