Cloud kitchen: A Rising Stone for the Food Service Industry
It was found that the food delivery market of the country is likely to grow at over 16 per cent annually and touch $17.02 billion marks by the year 2023
Low input cost, a rising consumer base, secured profit margin, hassle-free business process, and great scope for business expansion — the perfect recipe for a successful business venture.
The cloud kitchen concept offers all the above, especially in a country like India, which is home to myriad restaurants, street stalls and food centres. These kitchens are restaurants that focus exclusively on takeaways and do not offer dine-in facilities. A consumer places his/her order online (via an app or website), then the outlets prepare the food and subsequently, the food is delivered to the door of the consumer.
The concept has already become the darling of the food business in metro cities and is penetrating rapidly into tier II and tier III cities. A recent study by the Indian Brand Equity Foundation concluded that India’s food delivery market alone is worth $15 billion today. In yet another study, conducted by business consultancy firm Market Research Future, it was found that the food delivery market of the country is likely to grow at over 16 per cent annually and touch $17.02 billion marks by the year 2023.
Quite visibly, the cloud kitchen concept is shaking the business of a conventional brick-and-mortar food store. But the concept is not to be taken for a passing shower or ‘a flash in the pan’, the cloud kitchens are here to stay. Experts and observers enlist several factors behind the meteoric rise and the rising fortunes of this new business concept.
The first and top-most cause being the high real estate rental costs. The cost of renting (or buying) a place for a food outlet has led thousands of restaurants across Indian metros shutting their shops each year. Besides good food, the success of a brick-and-mortar food outlet depends on its location and its clientele but renting the right space requires high working capital. Hence, while the players of the food and beverages industry sail through, the small fishes often are left with no option but to pull out. Thus, the new kitchen-centric model of the food businesses and is attracting the fascination of start-ups as it doesn’t require the investment needed to open a full-fledged dine-in restaurant.
The Other Side
The second factor which makes the experts bullish of the cloud kitchen concept is the home delivery trend, which is rapidly gaining momentum and giving jerks to the revenue of fine dining restaurants, primarily because of the shift in customer preference and an increased sense of hassle in dining out. After a day’s hard work, people don’t want to get stuck in hour-long traffic just to get to their favourite restaurants; they rather prefer relishing their favourite cuisines in the comforts of their homes watching their favourite flick or web series.
Entrepreneurs have now realized that while there are specific days when the consumers like to venture out to dine, but mostly it’s the food, which overpowers the dining experience.
In a rather contrary opinion, some experts believe that these cloud kitchens serve a market that was earlier being neglected by traditional restaurants. So, the new business concept is not taking market share away from current restaurant owners but only expanding the consumer base making it a win-win situation.
Yet another crucial aspect of driving the cloud kitchen concept is the practicality of the phenomenon. The business stands firm on its pragmatism by focusing on maximizing the number of orders per day and decreasing the overall production and packaging time. Leading food delivery apps are also tapping the cloud kitchen market by creating cloud kitchens for different entrepreneurs.
The cloud kitchen concept, rightly hailed as the future of takeaway, is hassle-free, cost-efficient, and avoids unnecessary expenses. Further, the cost of advertising is also low for these ventures as they do not go for big billboards but penetrate into their audience through social media marketing, which is relatively less expensive. These outlets chalk out an extensive social media strategy with Facebook, Twitter, and Instagram ads being their favourite as these platforms provide a great way to interact and reach out to consumers and also convert followers to loyalists. These start-ups also make use of SMS marketing.
Technology has also been a big driving force for these outlets. Earlier, it was inconvenient for businesses to manage to punch in orders from different sources on multiple screens but the advent of sophisticated tech tools has streamlined all orders. Further, customer loyalty programs are also launched on a regular basis to retain customers by cloud kitchens. This includes giving special benefits to regular customers which encourage them to order more.
In future, these cloud kitchen outlets might not just remain B2C but may also become a B2B venture. These centralised cooking hubs say, observers, may well support dine-in restaurants with food.
For India’s rising middle class, these cloud kitchens offer a profitable way to service their burgeoning demand.
Pawan, with more than 20 years of experience in the food service industry, is a co-founder of Hoi Foods, a very fast scaling cloud kitchen business currently operating close to 100 kitchen in NCR.
In his different roles as an entrepreneur and investor, Pawan is very positive about the prospects of food delivery and feels that convenience is the hall mark of any consumer demand. During his stint in leading successful commercial foodservice equipment business called Continental Equipment, Pawan worked extensively with various QSRs like McDonalds, KFC, Pizza Hut etc. His experience with these chains has come in very handy in setting up scalable and standardized supply chain for HOI.
He is also a founder of a packaged food business which sells CPG food products under the brands SUPACORN and MISHT.
Pawan is an Engineering Graduate from IIT Delhi and an MBA from IIM Lucknow.