Cloud Kitchen Market Insights: Trends, Risks & Opportunities

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Contents
Scope of the Report
Executive Summary
Indian Startup Landscape
Consumer Services: Sector Overview
Cloud Kitchen Market in India: An Overview
Trends
Associated Risks
Porter Five Forces: Cloud Kitchen Market in India
Investor Participation
Glossary
Bibliography
Methodology
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From a consumer’s perspective,there’s nothing more convenient than having the restaurant come to them.
Bringing this convenience to the customer’s doorstep has become a norm in the foodtech business.
Although the culture of organised food delivery in India was introduced by the advent of US fast-food chains
such as Pizza Hut,McDonalds,Domino’s and others,today Indian entrepreneurs are not hesitating to bank on
the booming food delivery market in India.Between 2014 and the first half of 2019,a total of $2.93 Bn was
invested in startups operating in the ‘food’ domain which is dominated by delivery companies.
With time,the sector began evolving further and saw the rise of new business models and the existing models
innovated further to suit the consumer demands and thus the foodtech sector has grown to become a sector
which has numerous sub-sectors within it.
One of the most interesting business models witnessing a rise is cloud kitchen — a concept where food
businesses run a delivery-only kitchen at minimal cost by leveraging technology and aggregators.
Cloud kitchens have managed to mitigate the most significant financial overhead for restaurants i.e.fixed
operational cost from real estate and the variable maintenance cost for upkeep.Restaurants also have to deal
with food wastage and procurement losses if seasonal trends shift,whereas cloud kitchens can be more agile
in response.This means cloud kitchens usually enjoy higher margins per dish,and have lower per-unit loss,low
wastage and streamlined inventory.The usage of technology platforms by the cloud kitchen has also become
a trend with the emergence of players offering solutions which help them streamline all operations under one
funnel.
This report by DataLabs by Inc42 provides an overview and insights about the emerging cloud kitchen industry
in India,along with an analysis of how sustainable this segment is as a business opportunity.
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Summary
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Rebel Foods
The largest cloud kitchen company in India
Zomato & Swiggy
Make up 63% of the total market share in food
delivery as per app installs
Higher Dependency
On online food delivery platform a potential risk for
cloud kitchens in long run
11
Mega funding rounds ($50 Mn+) recorded in foodtech
startups
2.65%
Diminishing rate of unique investor participation count in
foodtech funding (2015-2018)
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(2014 TO H1 2019)
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1.21 Bn 59
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354
282
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288
198
148
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3.55 Bn
5.74 Bn
3.32 Bn
2.45 Bn
6.89 Bn
6.45 Bn
5.01 Bn
6.85 Bn
5.85 Bn
Figure 1
In the last five and a half years,the Indian startup ecosystem has grown at a tremendous rate.Not just in terms
of the number of startups in the country,but also for the funding inflow and the high-value exits to the rising
number of unicorns.The traditional industries have been transformed,and new sectors have emerged thanks to
the merger of tech,innovation and business.
As of September 2018,India had witnessed the launch of over 49K startups that have created economic value
of $130 Bn.Between 2014 and the first half of 2019,the total capital inflow into Indian startups stood at $51 Bn
raised across 4,554 investment deals.
While,consumer-facing sectors such as ecommerce,consumer services are some of the investor favourites in
terms of high-value deals,in the context of the number of funding deals,the enterprise tech sector emerged as
the top startup sector with the highest deal count — 737 deals.
Half Yearly Startup Funding Trends
Between 2014 to H1 2019 a total of 1,945 seed stage startups have been funded
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Market Overview
8

$5.24 Bn
Total funding secured by Indian consumer services startups
314
Total number of consumer services startups in India
56%
The contribution of foodtech funding in the consumer services sector
565
Funding deals observed in consumer services space
Sequoia Capital
Emerged as the most active VC firm in consumer services space
Funding data for 2014-HI, 2019
9

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In India
$2.93 Bn
Raw Pressery
-14%
20%
Total funding raised by foodtech startups
The beverages startup that secured most number of deals
CAGR of funding deal count (2015-2018)
The proportion of startups that accounted for 53% of
the total funding deals in foodtech
Funding data for 2014-HI, 2019
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An Overview
19

222
15
Number of Cloud Kitchens:
Cities Served:
400+
10
Number of Cloud Kitchens Enabled:
Cities Served:
36
4
Cities Served:
100+
4
Cities Served:
20

Contact us: contact@inresto.com | www.inresto.com
Our PartnersAlmost Omnipresent
10000+Restaurants
20MN+Orders Processed
(Per Month)
Your 360 Degree Restaurant Management Solution
Tech Is Served
26

Vivek Kapoor
Co-Founder, Dineout
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The food service industry has witnessed exponential growth in the last three years and is projected to grow from $44 Bn in
2016 to $86 Bn by 2023. While different formats are evolving in both dining-out and dining-in categories,demand for home-
cooked home-delivered food is driving the emergence of the cloud kitchens.
The organised cloud kitchen market in India is worth $1 Bn and is growing exponentially.Also known as dark kitchens or ghost
kitchens,cloud kitchens are virtual restaurants that typically operates minus the dine-in seating and only accept food delivery
orders from various online aggregators and through own website or mobile app.This helps a restaurant save the growing rental
costs and operational cost vis-a-vis a dine-in restaurants.
With just food delivery to cater to,operations at a cloud kitchen may sound simplified but that is far from the truth.Cloud
kitchens face challenges at the micro level as they accept online orders from multiple platforms and dashboards while relying on
different technology systems at every stage from accepting an order,assigning it to the relevant kitchen,monitoring the flow of
order to invoicing of the order.At any given point,a cloud kitchen uses at least five to six varied tech products including point of
sale systems (PoS),supply chain management,CRM,loyalty programmes,promotions and campaigns and more.
Now let’s understand the cloud kitchen’s plight – a customer orders regularly,however,the restaurant has no history of billing,
order channel,dining pattern,order preferences,etc.because somewhere the system falls short and it becomes virtually
impossible to keep track of every order manually.It requires a single technology mechanism to help streamline each order and
amalgamate it with the existing system.The inherent problem is that the different platforms they use do provide data but they
are not interlinked.Having a seamless integrated technology to address each of these touch points from order flow to final
delivery is imperative for cloud kitchens.
Instead of dealing with multiple software vendors,cloud kitchens can use consolidated solutions that enables restaurants to
funnel all frontend and backend operations such as managing online orders from different aggregators,enabling menu changes,
customised pricing,assigning delivery executives,raw material requirement assessment,data analysis,and more.
Single-window management allows kitchens to focus on the core business without worrying about the technology stack that
manages this.For instance,Dineout’s inResto provides a plug-and-play solution to help restaurants manage their operations in a
streamlined manner.Such a SaaS solution enables restaurant to manage feedback,campaigns,loyalty programmes,white label
food products,food supply chain and connect to third-party aggregators,payment providers.
Inventory management is one of the biggest and most common challenges faced by cloud kitchens.Space being a limitation,
cloud kitchens typically store stock for two to three days worth of orders.This makes it imperative to have optimum inventory
visibility to avoid negative impact in terms of customer orders and food wastage.
With the help of software solutions like inResto,cloud kitchens can analyse sales trends from the previous months and forecast
inventory with a data-led approach to reduce losses.Using such a solution allowed health food brand Eat.fit to save 9% in costs
and reduce workload by 120 man hours enabled through enhanced reporting and analytics along with increased sales control.
Restaurant tech is not just about helping customers order food,but about enabling restaurants to conduct business in an
efficient and transparent way,as it is being done globally!
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Driving The Cloud Kitchen
Market In India
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A study by Mckinsey concluded that companies that offer consistent best in class customer experience tend to
grow faster and be more profitable in comparison to the companies which lack this characteristic.
Now when it comes to customer experience,multiple research papers have also concluded that a direct channel
for customer interaction is much more beneficial for a business rather than an indirect mechanism,as is the case
with a majority of the leading cloud kitchens in India.
The high dependence of cloud kitchen on platforms such as Zomato,Swiggy,etc.in the context of food deliveries
makes this segment more vulnerable to lower customer satisfaction due to delayed deliveries or damaged food in
transit — in which cloud kitchens themselves have no say.
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Lack Of Direct Customer Interaction
-;A:A
Lack Of Direct
Customer Interaction
Lack Of Brand
Visibility
SkewedAdoption
DeliveryStartups
TurnCloudKitchens
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VC: Venture Capital
YoY: Year-on-Year
TAM: Total Addressable Market
$XXK: XX Thousand USD
$XX Mn: XX Million USD
$XX Bn: XX Billion USD
$XK: X Thousand USD
CAGR: Compounded Annual Growth Rate
GMV: Gross Merchandise Value
TAM: Total Addressable Market
Growth Stage: Series A and Series B
Late Stage: Series B and above
Seed Stage: Upto Seed Round
GNI (PPP): GNI per capita based on purchasing power parity (PPP).PPP GNI is gross national income
(GNI) converted to international dollars using purchasing power parity rates
Separated (Marital Status): Divorced and Widowed combined
43

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DataLabs Internal Database
The World Bank
Indian Census 2011
KalaGato
Individual Foodtech Companies (Indian)
Telecom Regulatory Authority Of India (TRAI)
Inc42 Media Platform
44

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The startup funding data used in this report are primarily from DataLabs’ Internal database.The base year
used in the CAGR is 2015,unless mentioned otherwise.The funding amount and deal count included in
this report are only those which were recorded by DataLabs research over a given period of time.
The market size estimation is done using the total addressable market theory.The addressable audience
size for the cloud kitchen market is taken from subset of total urban internet subscribers. Whereas
the average ticket size is calculated by taking the third quartile of the month on month average ticket
size(2018) of food orders placed on top cloud kitchen operating in India.Setup cost of cloud kitchen and
other comparable entity is inclusive of the first years annual operational cost.
Tools And Technologies Used
World Bank data
International Labour Organisation data
Economic Survey of India 2017-2018
Heritage.org data
Entrepreneurship index
Global Innovation index
Commercial reports
Niti Aayog reports
Government of India data
Machine learning algorithms
Word processors
Visualisation tools
45

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W W W . I N C 4 2 . C O M
Credits
DESIGNER
Ashish Vasdev
Manash Pratim
Sandeep Singh
Naga Jayadeep Akula
Ankan Das
Nikhil Subramanium
EDITED &
COMPILED BY

The data provided in this report has been obtained from
public and private sources. We have made every attempt
to ensure that the information presented in this report is
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Pvt Ltd, the parent company of Inc42 Media and Inc42
DataLabs, is not responsible for any inaccuracy in the
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