Food aggregators pivot to cloud kitchens as online orders surge

Many restaurants are also exploring expansion through cloud kitchens with the dine-in business capped at 50% seating capacity leading to expectations of a surge in online orders as consumers remain wary of stepping out.

The cloud kitchen business was deeply impacted by the lockdown, resulting in a sharp dip in order volumes.

Zomato witnessed only 50% of its restaurant partners starting to deliver food on its platform compared to pre-covid levels, while rival Swiggy saw 25-40%, with more restaurants being operational in tier-1 cities. These food-tech unicorns are now working with restaurants to help them resume operations by offering their cloud kitchen facilities.

“As the economy opens up and restaurants resolve teething issues around manpower, we expect the majority of our restaurant partners to be live on the platform. Some of them are even looking to expand and take up more kitchens. We are focusing on helping them resume operations and making sure that our kitchens are fully equipped and follow all safety and hygiene protocol," said a Zomato spokesperson.

The food delivery aggregator said that it is also evaluating targeted investments around kitchen space in areas of supply gaps, while aiming to optimize its current kitchen footprint to suit evolving customer demands.

Swiggy, which has shut and relocated many of its non-profitable cloud kitchens in May, is also re-looking at its cloud kitchen strategy to solve supply gaps in its operations. “Though dine-in operations are set to resume, it is likely to take some time for consumers to get comfortable with the notion of dining at restaurants. Our strategic investments in cloud kitchens are proving to be crucial in assisting restaurant partners to get their businesses rolling and adapt to the evolving landscape," said a Swiggy spokesperson.

In February, Swiggy had launched BrandWorks to co-create delivery-only brands with restaurant partners by leveraging existing kitchen space at their dine-in facilities.

It is now leveraging the BrandWorks platform to work with restaurants and create other delivery-only brands and menus, which is tailor-made to the food demand in a specific geography. BrandWorks will also continue to assist restaurant partners in maximizing profitability at their dine-in units. Swiggy has also invested ₹250 crore into Swiggy Access, its cloud kitchen brand.

“This is the darkest hour for the restaurant and cloud kitchen industry. There is a huge demand compression as offices aren’t operating and condos have put lots of restrictions on home ordering," said Rajesh Sawhney, founder GSF Accelerator and Healthie.

Nandita Mathur contributed to this story.

tarush.b@livemint.com