July 6, 2020
Takeaway meal options have been booming in India while the coronavirus lockdown has kept hotels, restaurants and café closed and diners at home. There are signs that the choice toward home-delivered food is taking to new heights which will be seen post-corona.
According to RedSeer Management Consulting, Cloud kitchens who have commercial cooking facilities but have no physical dining space and cater only to delivery orders placed online, are projected to become a $2 billion industry in India by 2024,. That’s up from $400 million in 2019. In a study report carried out by the company, 21% of the respondents said they were more likely to increase their online ordering of takeaway food after the lockdown, while just 9% said they were more likely to visit restaurants more often.
“An obligation to reduce non-essential outdoor activities, and an increased supply of cloud kitchens in both existing brands and new entrants will accelerate the pre-Covid trend of ordering in and takeaways, and become a permanent shift post-crisis,” said Joydeep Bhattacharya, head of Bain India’s Consumer Products and Retail practices.
Rachit Mathur, MD and partner at Boston Consulting Group, sees trends such as DIY food kits and shorter menus helping take-out businesses secure their foothold strongly in the market. “The online and takeaway share of most food-service businesses will increase and will also recover faster than dine-in,” he said.
Cloud kitchens are best made to suited the needs of distant-living customers than traditional dine-in restaurants. They’re also able to minimize some costs, such as rent, and without wait staff require fewer people on the payroll.
Meanwhile, with restaurant footfall at an all-time low and sales down as much as 90%, according to CRISIL Research, takeaway has become a vital source of revenue for many restaurants. CRISIL estimates that the recovery of the 1.5 trillion rupee ($20 billion) sector will take at least a year after lockdown is lifted.
“As people are only ordering online, it has worked in our favor because our entire cost structure is built on that — there’s no restaurant store front,” said Raghav Joshi, CEO, India Business Unit at Rebel Foods Pvt., which calls itself the World’s Largest Internet Restaurant Company. “So from a capital and operating expenditure perspective we are in a position to sustain and grow.”
To maintain with safety measures, Rebel monitors and take precautionary steps to check employees’ temperatures and holds weekly tele-health consultations, in which a doctor uses basic health questions to assess whether employees are fit to work. Joshi estimates average order value has increased by 50% to 60% since the announcement of the lockdown, as most customers order for their families too.
“The shift in the consumer behavior we’re seeing has given us a belief that in the coming two or three quarters we’ll be at a different level if we can capitalise on the change in consumer buying behaviour and an evolved market,” said Vikrant Shitole, CEO of home-cooked meals platform Homelynow. The Mumbai-based business has experienced that among all the people ordering during the lockdown, 90% of them have been new retail customers although corporate orders have taken a hit due to office closures across India. Applications to join Homelynow’s team of more than 48 cooks have risen too”, Shitole said, as people look for additional side incomes.
But takeaway options won’t entirely replace restaurants, argues Bain’s Bhattacharya. “Cloud kitchens going forward will be substitutes for more variety and convenience as opposed to cooking at home, but not a replacement for a social or celebratory occasion for eating out,” he said. “The drivers of economics are quite different for cloud kitchens compared with dine-out operations which entails location, kitchen size and utilization, multiple versus single cuisine configuration, order aggregation and delivery.”
Diners who feel the financial pinch and have limited means of income in crisis are likely to rely on home cooking rather than order expensive takeaway options. According to Redseer’s survey, 49% of respondents said they would be more likely to increase cooking at home using fresh ingredients after the lockdown.
“Demand for cloud kitchens will emanate from a fatigue with home-cooked food and the need to order once in a while, though frequency will reduce due to income effect,” said Rahul Prithiani, Director of CRISIL Research.