THOUGH THE DEAL took two-and-a-half years to mature, it was always going to make news. So when American fast food chain Wendy’s announced a tie-up with India’s Rebel Foods to scale up its presence in the country on December 1st, it cemented what has already emerged as the biggest trend of the eating out culture in India during the Covid-19 pandemic—cloud kitchens.
Cloud kitchens, ghost kitchens, dark kitchens, the names are aplenty but they all mean the same thing: commercial kitchens of brands that only have an online presence and cater only to delivery orders. Rebel Foods, which calls itself the world’s largest internet restaurant company, pioneered the concept of the cloud kitchen in India a few years ago when they took their flagship brand, Faasos, which specialised in wraps, completely online. The decision was prompted by the high street rentals the company was paying for its outlets. Today, the company has 350 multi-brand cloud kitchens across the country with an international presence in Indonesia and Dubai. Its investors include Sequoia Capital and Uber founder Travis Kalanick. “There is a lot of popular interest in this model (cloud kitchens) now but, for us, this ‘internetisation’ of restaurants is not a flash in the pan but a steady progress,” says Kallol Banerjee, co-founder, Rebel Foods. Considering that management consultancy RedSeer has projected cloud kitchens to become a $2 billion industry by 2024, it is definitely no flash in the pan. Be it in Bengaluru or Bhopal, the possibility that the food you just ordered has been prepared in a cloud kitchen is rather high.
It was only last year that the National Restaurant Association of India (NRAI) released a survey showing how more and more Indians were consuming food from outside, be it dining out or ordering in. New Delhi’s organised food market, for instance, was pegged at Rs 31,132 crore, with people eating out six times a month on average. Fast forward to August 2020 when food delivery company Zomato put out a mid-Covid report, which said that nearly 10 per cent of dine-out restaurants across the country shut down due to the pandemic, with more in tow. The only silver lining was food delivery, with sales (in August at the time of the release of the report) clocking about 75-80 per cent of pre-Covid times.
Breakfast 7-11 is a Gurugram-based cloud kitchen that has enjoyed considerable popularity with the corporate crowd of the city. The orders would start in the morning itself, keeping the kitchen staff on their toes. Yet, overnight, it all went away. “The bulk of our orders came from officegoers and with the lockdown, the drop in business was sheer and terrifying,” says Abhishek Srivastava, owner of the brand.
“It was like the Nike swoosh in India, everything came crumbling down,” says Banerjee. “In Dubai and Indonesia, we saw a significant jump in orders but over here, people simply stopped ordering.” His reasoning for this is very simple; it is because even today, homes in India tend to have fully functional, well-stocked kitchens unlike other countries where a kitchen can simply mean a hot plate and a microwave. There were stories, of course, of young men and women, living far away from home, stuck without proper meals. Heavily dependent on take-outs for their daily meals, these urban migrants, who had moved cities for white-collar jobs and were mostly unable to cook, were left to fend for themselves even as Maggi sales went through the roof.
But as the lockdown started lifting and food delivery was recognised as an essential service, there was some movement. Work-from-home combined with cooking duties had created fatigue and people were keen to order, but were they willing to risk it? This was still the first half of the year when there wasn’t much clarity on transmission of the virus through surfaces. “We realised that we had to win the trust of the customer all over again but, this time, by sharing our sanitation practices.
So we spoke about the thermal screening of employees and deep cleaning processes of the kitchen. We started printing the temperature of the staff on the invoice. Slowly, orders have picked up.
We are still not back to 2019 levels but it is a lot better than what things were like in April,” says Srivastava.
From the outside, the concept of a cloud kitchen business sounds like the easiest entry point in the food and beverages industry. There is no pressure to be on the high street and, as such, they save on rentals and require fewer staff on the payroll. And now with the pandemic raging, they also take care of the customers’ desire for social distancing. It is not unusual for several brands to be functioning out of one cloud kitchen as market research has proven that customers prefer to order from a specialised brand as opposed to a multi-cuisine one. Rebel Foods, for instance, has pizza, Chinese and biryani-focused brands under its umbrella. The presence of multiple brands allows companies to target different demographics and pay points.
But the business has its own share of challenges, chief among them being brand recall. The absence of a brick-and-mortar store is a double-edged sword because while the company saves on rentals, it also struggles to make an association in the customer’s mind. Rohit Kataria has over 15 years of experience in the food and beverage industry and he saw the shift in the tide two years ago when he realised that delivery would soon outpace eating out. He started Bento Kitchen in his hometown of Bhopal in December 2018. “However, opening after the lockdown was akin to starting from scratch.” The focus had shifted from discounts and food quality to hygiene and sanitisation. His company went back to the drawing board to chalk up a marketing strategy that highlighted their precautionary measures, but that alone wasn’t going to be enough. “The biggest drawback of a cloud kitchen is that there is no association in the customer’s mind. If you are on an aggregator platform, the only factor the consumer looks for is discount, which means they can order from anyone, so you have to work very hard on building a brand,” he says. When he had a restaurant, he had hoardings to market it. “But now an online brand, the rules of engagement are also negotiated online through platforms like Facebook, Instagram, LinkedIn, etcetera.” In a pandemic world, these platforms also become a way of showcasing a brand’s hygiene practices through live feeds and videos in an attempt to reassure the customer.
AGGREGATORS LIKE Swiggy and Zomato pioneered the concept of home delivery and set the standard for customer experience. New entrants to the cloud kitchen business find themselves signing up with them because their popularity guarantees immediate exposure and the algorithm ensures repeated visibility to the target consumer. But aggregators also charge a hefty fee in commissions which, coupled with the huge discounts that are offered by brands in order to bag a consumer, can deal a massive blow to a new brand’s survival chances. Thus, your own website and a well-oiled delivery system are key to ensuring the success of your cloud kitchen.
The Indian consumer is very price-sensitive and the right pricing strategy is crucial to a brand’s success. It becomes even more challenging as the customer is lured by additional discounts. Cloud kitchen owners talk about the struggle for repeat orders unless fabulous discounts are offered, but Banerjee is not sure the argument holds. “Food has to work for the consumer across three points—price, value and consistency. These have to be managed every time a consumer orders food for them to return to your brand at a certain frequency. You cannot lure customers with discounts, it will never work whether it is a cloud kitchen or a restaurant.”
The starting of cloud kitchens in Tier II cities after their success in metros was a foregone conclusion, though it is not a simple matter of just replicating whatever works in Delhi or Bengaluru. Satyam Anil was an Amazon employee in Bengaluru when he first started taking a keen interest in the business models of cloud kitchens. “I started mapping the frequency with which we (his colleagues) would order food. What were the criteria on which we based our decisions, apart from, of course, cravings, and what was the quality like?” In 2019, he decided the time was right to take the plunge. His only concern was whether to start the kitchen in Bengaluru or Lucknow, his hometown where his father already had a catering business. “I finally preferred Lucknow because we had the knowhow here already, plus the market wasn’t so crowded.” Anil’s company, Bowls & Boxes, has two brands, Nosh and Noodle Pot, that cater to the two most popular cuisines across north India—Mughlai and Chinese. “In smaller cities, it is families who do the ordering so even if there are members who want to order in more frequently, it is not always possible.” Bowls & Boxes did not even have a customer base of 200 when the lockdown was announced, but Anil now says that they are averaging 400 orders a week. A price list that keeps in mind the sensibilities of the average Indian consumer and their own delivery system are factors that help the brand, Anil feels. “We have a website where we offer loyalty programmes and our own discounts. Aggregators do bring in great exposure and a big amount of orders, but their discount campaigns are funded by restaurants and are not sustainable.”
The pandemic has, if anything, actually intensified our love affair with good food. The only difference is that people now want this played out on their dining tables instead of stepping out. Cloud kitchens may focus on different cuisines but the menu choices are more rooted in everyday eating rather than special occasions. And this is where restaurants will still manage to hold a special place in the customer’s heart. Eating out is not going to return to its 2019 levels anytime soon, but the desire to go out and socialise over a big happy meal is not going away either. But till we feel comfortable doing that, home in on cloud kitchens for a moveable feast.