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Foodservice delivery companies looking at disruptive technology
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Saturday, 25 May, 2019, 14 : 00 PM [IST]
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Shagun Sachdev
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 The Indian economy, though experienced strong GDP growth since 2010, slowed in 2017 due to the impact of demonetisation and GST. However, it is on the path of recovery since early 2018, supported by growing industrial production, exports, auto sales, and investment.
In the long term, economic growth will continue to be characterised by rapid urbanisation, fast-growing middle class, favourable policies and a positive sentiment. In the progressive Indian society, consumers’ food expenditures hold a lot of prominence as consumers’ growing spending power is driving growth for foodservice operators.
In the light of Indian foodservice industry, the sector has gained significant popularity in India and has evolved rapidly over the past few years. The industry is emerging as a key contributor for the Indian economy and its impact as a whole on the entire ecosystem – right from real estate to agriculture, kitchen equipment to supply chain and employment is massive.
New formats
The vibrant industry to witness rapid and unprecedented growth over the recent past is marked by key trends ranging from emergence of new formats, improvement of service levels, efficiency in supply chain practices to and increasing investment by a number of foreign as well as domestic players are significantly changing the face of the industry.
According to our statistics, the foodservice market in India is highly fragmented, with independents accounting for the vast majority of sales. The foodservice profit sector in India is set to experience a slight acceleration in sales value growth to a CAGR of 10.6% to 2022. This will be primarily driven by an increase in transaction numbers (CAGR of 5.1%), with outlet numbers growing by just 1.6%. Whilst this is obviously a positive sign for the market and stakeholders in India, operators will face increasing operational pressure to cater for a larger number of consumers with a slower-growing number of outlets. This makes it increasingly important for FSR to have an online service in order to increase their customer reach and sustain in this highly competitive market.
Key consumer trends in the Indian foodservice market
We cannot deny the set of operational challenges such as high real estate cost, fragmented supply chain, availability of quality manpower, high attrition rate, and over-licensing acting as headwind for growth of the industry. However, operators have recognised that innovation and technology adoption is the foremost growth mantra in the food service industry and there is ample space for innovative ideas and technology use.
Leading foodservice delivery companies are looking at disruptive technologies for their next horizon of performance improvement and to better target emerging consumer trends such as customisation, on-the-go experience and health and wellness to stay ahead of their competitors.
This is substantiated by our insights on India’s foodservice delivery market expected to grow at a compound annual growth rate of 15.9% to 2021 due to surge in Internet users and presents some interesting insights on how convenience, growing health awareness and adventurous palates looking for customised experiences among consumers are driving the use of technologies such as artificial intelligence (AI), visual recognition, 3D printing and robotics in the foodservice industry.
Unsurprisingly, consumers are increasingly ordering out, with the total food take-away market in India poised to reach $4.3 bn by 2022. Looking at the rising demand for take-away food and a growing ecosystem of connected devices foster a fertile environment for online food delivery apps. Blame it on cost or time constraints related to traffic congestion, poor roads, bad weather, short lunch breaks, or long commute times, or falling costs of smartphones and data contracts giving rise to plethora of mobile apps shaping every possible service industry.
Foodservice operators in India are partnering with delivery apps such as Zomato, Swiggy, Foodpanda and UberEats to widen their customer base across multiple online outlets, instead of relying on high levels of footfall or their own marketing. At the same time, these major foodservice aggregators such as Zomato, Swiggy and UberEats understand that the food delivery is a time-sensitive and service-oriented business and have kept their focus on diversifying their offerings, creating new consumer incentives, expanding their marketing budgets and setting up innovative delivery logistics to drive down costs and reduce delivery times.
From a technology standpoint, foodservice aggregators are embracing the latest technologies as they have realised that the business model needs to shift from discounts to cost-effective customer acquisition and servicing. Swiggy and Zomato are offering a cloud-kitchen model to help their partner restaurants with back-end supply.
Swiggy's remarkable growth in the fiercely competitive food aggregator market can be traced to its investment into automation, data sciences, engineering, and personalisation technologies. Its engineers are working on incorporating voice functions as well as local languages into the user interface to enable more consumers to use the app. In addition, the company is leveraging machine learning and artificial intelligence to augment its core technology develop the next-generation platform for on-demand hyper local delivery.
Regulatory framework
FSSAI (Food Safety and Standards Authority of India) is the apex food regulatory authority in India to keep customer protection at utmost priority and mandates compliance to regulations by food business operators along with ensuring the availability of safe food through means of inspections and non-compliance penalties.
Talking about regulatory bottlenecks, the current laws mandate the new businesses to acquire about 30 permits to become operational and the system of obtaining licence and approvals is still managed manually in various departments and above all, there is no-real time tracker of the application status.
There needs proper implementation plan to put things into action and each state and the concerned ministries are required to simplify the process by formulating guidelines favourable to foodservice businesses.
Some of the policies such as removing outdated licences that are no longer needed and creating single-window clearances would bridge the gap by eliminating unnecessary approvals and equipping new operators with better knowledge for swift operation. In addition to this, the National Restaurant Association of India wants to implement a code of conduct to deal with deep discounts to ensure a level playing field that is not breached by the online delivery platforms in the pit of cutthroat competition.
Inference
With foodservice delivery operators coming under pressure due to external headwinds such as evolving regulations, increasing costs, rapidly diverging consumer preferences, and infrastructure & transportation issues, their appetite for collaboration is growing.
While competition among online food delivery players in Indian market continues to intensify, creating a do or die situation at some point in future, the best foodservice delivery operators could do is strengthening their market position as a trusted and transparent delivery channel to their existing customer base, focus on operational efficiency and getting their unit economics right and partner with fintech firms for constant technology innovation to better align their offering with the consumer preferences.
(The author is consumer insights analyst at GlobalData Plc. She can be contacted at shagun.sachdevv@gmail.com.)
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