PremiumBENGALURU: Food delivery platform Swiggy services around 1.5 million orders a month from over *500* cloud kitchens in 14 cities through ‘Swiggy Access’ that allows restaurants to host delivery-only kitchens in new geographies where they don’t operate.
Swiggy Access, launched in November 2017, looks at creating new avenues of supply—restaurants, cuisines, and kitchens—in hyperlocal zones within a city where demand outpaces existing supply of restaurants. According to Vishal Bhatia, CEO, New Supply, Swiggy, the startup has already invested around ₹175 crore into the business since its launch and plans to invest another ₹75 crore by March 2020.
Bhatia told Mint that Swiggy Access will enter 12 new cities by next year, and has created 8,000 new in-house jobs under its cloud kitchen product. The startup expects to create another new 7,000 jobs across the new cities it is looking at next year.
At a city level, the Access kitchen focuses on 4 kilometer zones, and expands new kitchens within these zones. As of now 15-20% of overall order volumes in these zones come from Access kitchens, according to Bhatia. “We look at areas where there is a lot of demand, but supply isn’t matching … and this is where we use our data sciences. The ethos of Swiggy Access is to enable restaurant partners to go into new geographies, getting them new suppliers, and also providing infrastructure (kitchens) along with it," added Bhatia in an interview.
Swiggy’s new milestone comes just a few days after the startup’s chief executive Sriharsha Majety spoke about the company making significant investments in “pods" to solve for the supply gaps in the country. Majety also spoke about how Swiggy will scale up these pods to be within a 10-minute reach of 99% of its consumers. He also added that around 75% of future demand on the platform is expected to come from supply that doesn’t exist today.
The delivery platforms claims to house more than 250 unique restaurant brands on its Access kitchens currently, and Bhatia believes there is space for more. Swiggy has already leased out more than a million square feet in property space to house Access kitchens.
While some established restaurant brands such as Paradise Biriyani, and Meghana Foods reap the benefits of delivery-only kitchens by expanding into new geographies, emerging restaurants and quick service restaurant (QSR) chains, however, have their reservations about ‘cloud kitchens’. Mint reported in August 2019 that restaurant brand currently pay anywhere between 10-30% in commissions per order to food aggregators including Swiggy and Zomato.
Swiggy’s closest competitor Zomato is also stepping up cloud kitchens model mostly in smaller cities. Besides, media reports suggest that Uber co-founder Travis Kalanick is expected to launch a new cloud kitchen startup, which will mainly focus on India.
Currently, over 90% of India’s organized food services market is dine-in with delivery now at 8% (estimated sales of ₹12,140 crore), according to a 2019 report compiled by the National Restaurant Association of India (NRAI). With food aggregators stepping up investments into cloud kitchens, restaurants are expected to give up more of its business to the delivery-only model.
Even big QSR chains are getting affected. Pratik Pota, chief executive of Jubilant FoodWorks Ltd which operates the Domino’s franchise in India told investors during a recent earnings call that as aggregators turn focus to delivery-only models, consumer behavior is also changing. He added that this has resulted in an “added pressure" on the dine-in business.
