What's Keeping Cloud Kitchens Flavorful Even though experts expected the space to slow down post-pandemic, cloud kitchens are growing steadily

Delhi Chief Minister Arvind Kejriwal recently announced that he will soon introduce Cloud Kitchen Policy that aims to streamline the licensing procedures for the cloud kitchen by implementing a user-friendly single-window system through a digital platform.

The Chief Minister's Office, in an official release, said that the initiative aims to support independent food outlets and generate numerous job opportunities within the sector. Chandni Chowk and Majnu Ka Tila will be transformed into Delhi's Food Hubs for this.

Even though experts expected the space to slow down post-pandemic, food delivery is flourishing and so are the cloud kitchens. Some developments in the space that validates that are:

• Cloud kitchen startup Rebel Foods recently entered the Saudi Arabian market with the launch of two cloud kitchens in Riyadh.
• It also granted employee stock ownership plans (ESOPs) to 5,000 employees of its over 350 kitchens and corporate offices.
• Last month, Salad Days announced that it is going to open three new cloud kitchens in Bengaluru, India.
• This month, Ankit Nagori-founded Cloud kitchen startup Curefoods has made a strategic investment in Hyderabad-based millet startup Millet Express.

• Rebel also announced running 150 Wendy's restaurants in India. With this, it becomes a master franchisee of the burger brand about two years after the companies signed a cloud kitchen deliveries-only deal.

According to a RedSeer report, cloud kitchens would be worth $2 billion in India by 2024, up from $400 million in 2019. Additionally, the cloud kitchen sector is going through some interesting trends, such as consolidation, where one or two players assemble some well-known cloud kitchen brands. Further, kitchen as a service (KAAS) is also fast picking up and may see many players adopting the business 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 has speeded up expansion, opening cloud kitchens in 80 cities in the last two years, up from 30+ cities before the pandemic.

Ankit Nagori, co-founder, Curefoods believes that India is a brand-starved country and so, either they can order from big American QSR (quick service restaurant) chains, or they can order from stand-alone restaurants. "There's nothing in the middle and that's where the Indian multi-brand cloud kitchen companies are fitting in, which is us and a bunch of other skilled players."

Experts also say that the 15% to 20% year-on-year growth that the segment is seeing now will continue for the next ten years.

This means that a lot of these cloud kitchen players can become a huge part of the Indian F&B ecosystem, and in many cases, even surpass American QSRs. Curefoods claims to be the second-largest cloud kitchen player in India in terms of footprint. Along with EatFit, the company houses brands like CakeZone, Nomad Pizza, Great Indian Khichdi, Sharief Bhai, and Iceberg Ice Cream, among others. It has over 150 kitchens that cater to over 10 cuisines, across 15 cities in India.

Habit formation, ease of delivery and use of tech are the three key reasons behind the success of cloud kitchens even after the pandemic. "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 Shashank Randev, cofounder, 100X.VC, in an earlier interview.

In addition to that, the flexibility and lower CAPEX it offered as compared to traditional restaurants has made the business model sustainable. Overall, experts say that the cloud kitchen industry will likely remain dynamic and evolve in the next five years. Especially, players that innovate will continue to excel.