What's Cooking In Cloud Kitchens Lower costs alone cannot guarantee success; in order to survive and thrive, great customer experiences must be delivered consistently and efficiently, say experts watching the space

Cloud kitchens or ghost kitchens came to the rescue of the F&B industry when dine-in came to a standstill. In no time, many first-time restaurateurs also embraced the model and many others added a cloud kitchen layer to their existing restaurants. The reason was simple. The overall capital expenditure was very low in this model.

"Another prominent trend in the last two years which accelerated growth was when people moved from large metros back to their hometowns, driving the popularity and use of food delivery platforms in tier-2 markets," said Ankush Grover, cofounder, Rebel Foods.

Rebel Foods, too, speeded up expansion, opening cloud kitchens in 80 cities in the last two years, up from 30+ cities prior to the pandemic. The company continues to focus on expanding its base in the existing 80 cities while planning its entry to other cities.

Prasuma, which ventured into the cloud kitchen space with Momo Kitchen in early 2022, also aims to launch 200+ cloud kitchens by the end of 2025. The brand claims to have expanded from 0 to 18 kitchens in 3 cities in just a few months. "We started operations earlier this year, this is the time when things were returning to normalcy. However, we have been achieving profitability within just 3 months of the launch of a kitchen given our sticky consumer base and established product quality," said Lisa Suwal, CEO, Prasuma.

However, of late, not all players in the space seem to be expanding. In fact, some have shut shop or scaled down as well. For instance, according to news reports, online food delivery platform Swiggy has shut down its cloud kitchen outlets such as The Bowl Company in Delhi NCR. Not to forget the slump in funding, across sectors, due to negative market conditions.

Sustaining pandemic push

"Lower costs alone cannot guarantee success; in order to survive and thrive, great customer experiences must be delivered consistently and efficiently. While cloud kitchens reduce running costs, they do not help in solving multiple other problems of scaling up, which could potentially dilute consistent customer experience. By leveraging technology and developing smart cloud kitchens, essential solutions to accurate order forecasting, dependable supply chain, quality assurance, etc. can be determined and help create memorable brands," said Shashank Randev, cofounder, 100X.VC.

In the recent past, we have seen social media exposing dingy cloud kitchens, raising the question of trust in the space. Food aggregator, Zomato, in fact, went ahead and said that it would be manually checking the physical location of any cloud kitchen running more than 10 brands out of a single location. "These brands have little to no differentiation in the product offering; instead they confuse/cheat customers by creating a false perception of choice, while none of it actually exists," the company was quoted as saying.

"For ghost kitchens, hygiene seems like an open question as delivery is the only interaction the consumer has with the kitchen. The lack of opportunity to interact with the consumer makes it less easy for the restaurant to establish credibility. Hygiene will be a big factor and can be used as a feature to set them apart from others. Initiatives such as clean and sturdy packaging or obtaining routine hygiene ratings from FSSAI will add to the user interest and confidence. The concept of 'ordering in' over 'going out' will prevail, hence anything positive done in this direction will only add to the credibility of the kitchen," said Ankur Mittal, cofounder and COO, Inflection Point Ventures

Cloud kitchens in 2023

Besides automation and smart kitchen, the cloud kitchen sector is witnessing an interesting trend, that is, consolidation, where one or two players assemble some well-known cloud kitchen brands. Kitchen as a service (KAAS) is fast picking up and may see many players adopting the business model. This year, kitchen automation and technology company Mukunda Foods ventured into the space with Nucleus Kitchens, offering a shared space for cloud kitchens when they are looking at expansion. "Purchasing products on a larger scale would lead to an increase in quality with best practices adoption as well as cost savings. Additionally, many cloud kitchens are looking at expanding to multiple locations along with splitting the cost of real estate and equipment across these locations," said Mittal.

Also called co-working kitchen spaces, these are enormous kitchen infrastructures that are outfitted with all of the essential equipment and utilities to run a cloud kitchen enterprise. These are well-organised co-working facilities that can house various restaurant brands. Cloud kitchens can now be rented and can be operated to its full capacity thereby saving the setup cost and time.

"Large cloud kitchen companies will continue to create reliable supply chains and innovate further to automate kitchens to keep costs down with the help of technology. Integration of Tech Stack in marketing, kitchen management, supply chain control, or human resources management and Innovation can be induced in how food is prepared, packaged, and delivered to improve the overall consumer experience," said Randev.

With customers increasingly getting habituated to ordering in, cloud kitchens that are customer-centric will continue to rise and shine. This includes incorporating data analytics-based supply chain management to discover demand-supply gaps, decreasing food waste and stock-out risk, exploring alternative digital income streams to leverage market demand, streamlining procedures, expediting delivery and above all focussing on hygiene.