What OYO's 'experiment' with biryani means for the foodtech space in India
The rising demand for food delivery and the need for a presence close to your customer means that every major foodtech player is looking for cloud kitchens. On the flip side, players with existing kitchens too are thinking of monetising their underutilised spaces.
Foodtech, the reinstated darling of investors and entrepreneurs alike, is back in the news, this time with an unlikely stakeholder, hotel aggregator - OYO.
If you’re based out of Delhi-NCR and happen to use the food delivery app Zomato, you might have spotted a new restaurant delivering food - OYO’s Biryani.
OYO in food? It all started with some rumours. For the past few weeks, speculation has been rife about how India's second-highest valued startup might be acquiring foodtech startup FreshMenu. Despite OYO’s official statement categorically saying its supposed interest in acquiring FreshMenu was pure speculation, the launch of OYO's Biryani set the rumour mills abuzz again. OYO has once again denied that this is part of a larger plans to enter the food business. An OYO spokesperson told YourStory,
“This is baseless speculation and we have clarified the same. As the largest hotel chain in India, operating franchised and lease assets, we do have an active play in the F&B business, with an average of about 25 percent of our revenue coming through the kitchens we operate in some of our hotels. Hence culinary design and good food experience are valuable to us. We have nothing further to announce at the moment.”
Other sources close to the matter told YourStory that OYO's Biryani is a pilot focussed on utilising its existing kitchen space. “The idea is to make use of the existing staff and space, and just experiment. We are currently just piloting the service in a few places. It is for delivery only on the menu that we already have and make at our hotels. These are kitchens that are fully operated by us.”
The source stated that since it is an experiment, the hospitality sector 'unicorn' wants to understand customer behaviour and demand. “You might not even see the same listings in a while,” said the source. The team believes that while they serve up the food, distribution can be handled by existing players like Zomato.
Getting close to your customer
In the past couple of years, foodtech players have taken to setting up 'cloud' kitchens to meet rising demands. A 'cloud' kitchen is a shared kitchen where multiple restaurant brands can cook meals exclusively for delivery. They can choose to offer up the entire menu or just a part of it. This way, a restaurant with a physical presence only in one or two areas of a city can deliver its food to other areas with a 'cloud' kitchen those neighbourhoods.
Swiggy and Zomato both have cloud kitchens. Swiggy Access, launched in 2017, is spread across 3,200 sq ft. It comes fully-equipped with kitchen spaces and gives restaurant partners access to the Bengaluru-based food delivery startup’s delivery fleet.
Making better use of existing space
OYO's experiment, however, looks more like the October 2018 partnership between Uber Eats and Cafe Coffee Day to launch a first-of-its kind 'virtual restaurant' - a tie-up between a restaurant that has a storefront and a delivery partner, where the existing kitchen space is being used to create multiple food brands, primarily for delivery.
Zomato's Co-founder and CEO Deepinder Goyal told YourStory late last year that the biggest problem facing that the foodtech sector faces today is efficiency.
India is a low-ticket size, low-margin canvas for the foodtech sector to operate in. If 90 percent of the restaurants out there are losing money, it becomes very hard for foodtech companies to charge an adequate amount of money from the user/restaurant in order to make the unit economics work. This means, only companies that are able to drive frugal innovation in India, while creating value for consumers as well as restaurant owners, will thrive/survive,” he said.
“It is no doubt that the market is big in India. But it is also a tough one to crack. While people in India eat out 2-3 times in a week, in Thailand, the number stands at 8-9 times. But now, the dynamics are changing. People tend to order in more often,” an investor told YourStory on condition of anonymity.
Explaining the need for a 'virtual' or 'cloud' kitchen, Venu Madhav, CEO, Cafe Coffee Day said:
“Today’s generation needs a mix of physical and digital presence, and phygital is the way to go, and this partnership (with Uber Eats) helps us leverage that. The idea is to create a differentiated experience of virtual restaurants that cater to multiple needs of consumers with various brands.”
Foodtech today, therefore, is about the optimal utilisation of existing space like in the case of OYO and Cafe Coffee Day, and creating more supply like what Zomato and Swiggy are attempting to do. While Swiggy has its in-house restaurant brands to ensure increased supply, it is also looking at providing space. Zomato is currently focussing on providing space and sourcing raw materials to restaurant partners with Hyperpure.
Now, with OYO possibly entering the dynamics, it will be interesting to see if cloud-kitchen spaces will bridge the gap.