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SPECIAL REPORTS

Trends determine the robust growth potential of cloud kitchens in India
Wednesday, 28 September, 2022, 08 : 00 AM [IST]
Sanjay Vazirani
In the last couple of years, the foodservice industry has undergone some fundamental changes that have given a facelift to the food and beverage industry. The pandemic era has rekindled some behavioural shifts which have triggered the rise of the ‘cloud kitchens’. With lower investment and operating costs, convenient expansion opportunities, and better margins than restaurants, the cloud kitchen industry has recently become among India's most successful, booming, and lucrative business models.

The technological advancements and increased usage of smartphones have further helped the food delivery concept grow faster and reach millions of consumers. The convenience quotient has made cloud kitchen an ideal solution to meet the rising consumer demand for hassle-free food ordering service and quick delivery with access to a variety of cuisines. In terms of the gross merchandise value (GMV), the Indian cloud kitchen market is expected to become a $3 billion industry by 2024, up from about $400 million in 2019, according to RedSeer Consulting.

The domestic food and beverages industry has significantly grown with the evolving changes in the past few years. It has adapted to the challenges and customers’ expectations by setting new trends in the industry.

Rising growth potential in tier II and III cities:
The growing market competitiveness in the cloud kitchen segment has made metro cities saturated with too many options. However, there are tremendous growth opportunities in tier II and III cities. Cities like Ludhiana, Jaipur, Meerut, Jabalpur, Guwahati and Patna are poised to demonstrate higher return on investment due to customers’ higher disposable income, growing aspirations and limited experience-led avenues. Considering the huge demand, even online food aggregators such as Swiggy and Zomato are targeting these cities to expand their business.

Additionally, in comparison to the metro cities, tier II and III cities offer beneficial incentives to run a successful cloud kitchen venture such as lower investment, smaller cities providing a complete radius to cover by food aggregators, lower cost of manpower, an increased culture of food order rather than dine in, and less competition.

Demand for exotic and traditional food:
The cloud kitchen market is capitalising on the growing trend for regional & exotic cuisines in the metro cities. Regional cuisine is already gaining popularity in metro cities as regional communities gradually move to metros creating demand for authentic food and taste. Today, most cloud kitchens offer a wide range of vegan, healthy and regional cuisine options. Considering such a trend, a speciality cuisine from Jammu & Kashmir, Himachal Pradesh and, the Northeast will see a rise in demand, in recent times. Also, healthy delicacies of a specific region such as ‘Thukpa’ is becoming popular amongst customers as it serves as a wholesome meal with a healthier proportion of carbs and proteins.

Growth for digitisation and technology innovation:
The last few years have seen tremendous growth in digitisation and innovation in India. Cloud kitchen entrepreneurs have realised the benefits and significance of adopting kitchen automation as it aids in effective kitchen management, culinary innovation, and product consistency. Machine Learning (ML) and open data are essential in enabling real-time data visibility, inventory management and more. This helps in enhancing the customer experience and efficiency of the kitchen staff. Also, technologies such as Artificial Intelligence (AI) could aid in accurately predicting measurements for meals and providing quick solutions for kitchen issues.

Innovative and sustainable packaging solutions:

Today, many cloud kitchens have adopted a sustainable and authentic approach to food delivery that reflects in their cooking techniques and food packaging material. The food is delivered in authentic earthenware, steel cutlery, reusable glass jars, paper bags and cardboard boxes that encourage the customers to help minimise plastic waste and pollution. These initiatives not only help in preserving the flavour and nutrition of the food but also promotes a sustainable and healthy lifestyle among customers. Our cloud kitchen ‘Art Of Dum’ for instance is a front runner when it comes to this aspect.

Self-sufficiency in food delivery:
Though food delivery aggregators provide a great platform for cloud kitchens, however, they also come with hefty commissions. Hence, with the upward growth trajectory of the cloud kitchen business, many companies have started investing in their own food delivery service apps, staff and transportation.

India’s cloud kitchen and restaurant market are vastly underpenetrated when compared to the US and China. Hence, an entry into the cloud kitchen with new, unique, and innovative offerings has become an essential strategy to establish brands in new geographies. The investment in research and innovative product development and mergers and acquisitions with global giants are set to transform the cloud kitchen industry in India.

(The author is founder, Foodlink F&B Holdings India Pvt. Ltd)
 
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