Zepto Cafe halts operations at 200 stores amid muted demand, workforce redeployed to dark stores

Zepto Cafe, the quick-service food arm of IPO-bound Zepto, has temporarily shuttered operations for about 200 of its Zepto Cafe stores on account of muted demand for the cafe offering in those areas, sources familiar with the development told YourStory.

Operating across over 600 stores, Zepto Cafe has decided to reprioritise Cafe resources from about 200 Zepto Cafes to its quick commerce vertical or other Cafe stores as it looks to improve efficiency. The company is planning to utilise its Zepto Cafe fleet (about two to three operators per Cafe) for dark store operations, especially for picker and packer roles in surrounding stores.

The move was undertaken amid volatile demand for the Cafe offering in certain pincodes as well as a surge in demand for quick commerce workforce.

"Currently, the cafes that do not have that great of a demand are being put on hold. They will figure out how to pivot, maybe not this Cafe but with another Cafe, or they might look at a different region in that area," a source aware of the company's understanding told YourStory.

The Aadit Palicha-led company had undertaken a similar exercise in June earlier this year, after halting about 44 stores in smaller north Indian cities. About 80% of these have resumed operations.

These developments come amid leadership churn at Zepto, with senior executives across divisions departing the IPO-bound player. Just weeks before, Shashank Shekhar Sharma, CXO at Zepto Cafe, departed the company to join gourmet retail chain FoodStories as CEO.

On his heels, Chandan Rungta, chief executive for its private label meat business, Relish, left the company.

Sharma, who was elevated to the role in December last year, was responsible for overseeing Cafe operations, its footprint expansion, equipment procurement, and quality control, along with the end-to-end customer experience of Zepto Cafe. The segment is currently being led by the President at Zepto, Vinay Dhanani.

The quick food delivery space has seen an uptick in competition with larger players like Bistro by Blinkit and Snacc by Swiggy, to underdogs like Accel-backed Swish expanding across pincodes and assortment.

The company's course correction with its Cafe offerings comes on the heels of its $450 million fundraise led by US-based pension fund California Public Employees' Retirement System (CalPERS). The round, which was closed at a valuation of $7 billion, took the company's cash balance to $900 million.

The fundraise has also prompted fresh cash burn in customer acquisition. Under its new campaign called the “All New Zepto Experience”, it allows customers to pay zero handling, rain, and surge fees on all orders. It also made delivery free for orders above Rs 99, while there will be a Rs 30 delivery fee on orders below Rs 99.