Why India’s next unicorn could come from the food tech services industry

Why India’s next unicorn could come from the food tech services industry

Tuesday September 04, 2018,

4 min Read

Right now, Indian Food Services (Restaurants and Food Delivery) is a US$50 billion industry as compared to the US Food Services Industry, which is worth around US$600 billion easily. Macro trends like nuclear families, more women joining the workforce, and higher disposable incomes are going to make the food services industry grow at a very high rate in India. Food delivery is going to grow even more exponentially due to the high road traffic and easy access to hygienic and affordable food with huge choices.

With Zomato and Swiggy becoming unicorn successes and online food delivery orders crossing 1 million in daily deliveries, it is undeniable that the Indian food tech and services industry has been hot lately. Food is a necessity, as well as a passion for many, and choices for both eating out and delivery have exploded in the last few years.

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India vs the world

Meituan-Dianping China does more than 15 million food deliveries per day and is backed by Tencent. TMD (Toutiao, Meituan, and Didi Chuxing) is the new acronym for tech giants now after BAT (Baidu, Alibaba, and Tencent) and FAANG (Facebook, Apple, Amazon, Netflix, and Google). Zomato and Swiggy are both doing around 0.5 million daily food deliveries each in India, whereas the online food delivery market was almost non-existent around five years ago in India. Even in cities like Ludhiana and Jaipur, where online food delivery started just a few months ago, the market has exploded to more than 10,000-20,000 food deliveries daily.

Affordability and accessibility

The average person consumes three meals a day and approximately 90 meals a month. Out of this, in India, people eat out or get food delivery maybe 3-4 times a month. In countries like China or Singapore, this can be as high as 50 meals a month eaten out or delivered, as there are more choices, fast delivery, and affordability from food companies. An average person in India would like to spend between Rs 50-200 for their average meal, and food delivery companies are trying to hit the sweet spot of this price range. Food delivery logistics is getting better and cheaper, with more daily orders and higher density of population in big cities.

Increasing number of homegrown dine-in chains

Meanwhile, let's look at dine-in options. Dominos India – with more than 1,000 outlets – is doing Rs 3,000 crores yearly, top line. Restaurant chains like Barbeque Nation, with their 100 outlets, are doing more than Rs 500 crores in business per year. There will be many more dine-in chains, with more than US$1 billion yearly revenues, from India soon. Lots of these dine-in chains like Farzi Cafe, Mamagato, Saravana Bhawan, and Yellow Chilli have already started expanding outside India to scale faster and more profitably.

Delivery-only kitchens are on the rise

There are lots of delivery-only kitchens like Faasos, Box8, FreshMenu, and Biryani By Kilo which have more than 10-20 outlets each and are expanding rapidly. Given the high rental and CapEx required for dine-in restaurants, these delivery-only kitchens can give better quality meals at more affordable prices to customers – all in the convenience of customers’ homes and offices.

Biryani is the new pizza

Biryani as a delivery category, in particular in India, is going to surpass pizza soon due to its local taste, flavourful aromas, and better longevity during delivery. Biryani has the potential to be the first big food category worldwide originating from India.

Big retailers and taxi companies coming to the party

Premium hospitality brands worldwide – like Zuma Dine-in/Lounge and Nobu, with few outlets each – do around US$200 million in yearly sales or more, and big companies like McDonalds and Starbucks do more than US$20 billion in sales. Worldwide food delivery companies like Deliveroo, Delivery Hero, GrubHub, and Just Eat are all big unicorns today. Big retailers like Amazon and on-demand taxi companies like Uber and Ola all want a piece of the food delivery market as the daily use case and frequency in food consumption is much higher than most other e-commerce categories, including taxi services.

Many future unicorns from the food domain

Internet and ecommerce have upended lots of sectors, and food services are going to be the next big one. India is at the cusp of a great explosion in food tech and services, with big dine-in, delivery-only kitchens, and food aggregators becoming unicorns. Many companies will emerge with more than US$1 billion in revenue and international footprints in the future. There are going to be lots of big winners and excitement in the food services sector in India and worldwide, in the process bringing lots of better food choices and service to consumers.

Vishal Jindal is the Co-founder and Director for Sky Gate Hospitality (Biryani By Kilo).

(Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the views of YourStory.)