Jan 9, 2020
Government is all planned to investigate all cloud kitchens and private label brands which has been started by food-ordering platforms. This check is be set forth to see whether these businesses are following the set rules and regulations and not violating FDI rules governing the ecommerce.
Coming into quick action, the government is expected to elucidate whether cloud kitchens and private label brands started by food-ordering platforms Swiggy, Uber Eats and Zomato are following the set rules and regulations and not violating Foreign Direct Investment (FDI) rules governing ecommerce.
Not providing Dine-Out option, on rental basis Cloud kitchens lend kitchen spaces to businesses which chiefly sell through delivery apps or directly to consumers online.
The Department for Promotion of Industry and Internal Trade (DPIIT) soon will share their annotation with comments on the said issue, after it was decided at a meeting of all stakeholders at the meeting. A the meeting the following representatives from online food ordering firms Swiggy, Uber Eats and Zomato, National Restaurant Association of India (NRAI), Ministry of Commerce and Industry, Ministry of Consumer Affairs and the Ministry of Law were present.
A senior government official who was present at the meeting stated, “If you go by the definition of marketplace in Press Note 2, these (online food ordering) platforms are transgressing the rules. It needs to be decided whether to change the FDI norms to accommodate cloud kitchens or that it is not going to be allowed at all.”
The NRAI, has complained of these platforms violating FDI norms by starting their own private label restaurants and demanding exclusivity from restaurants for using their cloud kitchen infrastructure.
The ecommerce marketplaces are not permitted to control the inventory of goods sold on their platform or to engage in individual deals with dealers as per Press Note 2, which was published in December 2018.
The FDI norms also does not permit online marketplaces from offering privileged treatment to vendors. Both, Swiggy as well as Zomato claim exclusivity from restaurants using their cloud kitchen infrastructure.
“We continue to make disproportionate investments towards creating a win-win cloud kitchen model… Swiggy has made it possible to run a high-volume delivery restaurant that lets even the smallest restaurant partners take advantage of the massive food delivery market with minimum investment in infrastructure,” said a Swiggy spokesperson.
Swiggy already runs four private brands: Breakfast Express, Homely, The Bowl Company and Goodness Kitchen, which contest with third party restaurants on its platform. Justifying its stand on private labels, Swiggy said its purpose was to fulfill unmet consumer requirements. “While we have grown (our) brand based on need gaps, we are happy that this has led to numerous partner restaurants (pan-India) following the trend,” it said.
Zomato denies having any private brands, instead runs facilities for other businesses to operate from.
Uber Eats entered into a strategic partnership with Café Coffee Day in 2018 to launch a network of cybernetic restaurants across multiple brands that will be available for delivery exclusively on Uber Eats. The scale of these operations is ambiguous. Uber Eats declined to comment on further probe. Along with existing big players for online food delivery space, Amazon is also looking at its prospects to enter the online food ordering space and eyeing its share of clouds in cloud kitchens.