According to a report by consulting firm Wazir Advisors, by 2026, the Indian cloud kitchen market is anticipated to grow at a compound annual growth rate (CAGR) of 24 percent to reach USD 1.9 billion. It was projected at $800 million in FY22.
Yet, the market saw a slowdown during the pandemic, but now there are various factors leading to its growth, which include the rising smartphone and internet penetration, increasing disposable income, and growing demand for ordering in and home delivery post the pandemic. Owing to the growing demand for online delivery of food and grocery (F&G), the food tech industry, in the past 5-7 years, has witnessed a surge in the number of start-ups in the cloud kitchen space, as well as investors backing up many such start-ups through multiple rounds of funding.
Also, the food technology industry is transforming by reducing delivery times through quick commerce, in a race to provide better customer service. According to the report, in terms of investment and operations, opening and operating a cloud kitchen is emerging as a more appealing option than opening a dine-in restaurant, owing to the lower initial investment and set-up cost, lower day-to-day operating costs such as salaries and electricity, and higher expansion opportunities.
However, cloud kitchens have certain shortcomings, such as a high reliance on aggregators, a lack of direct customer interaction, a high expenditure on visibility, and a high cost of customer acquisition. Trends in the cloud kitchen industry include various specialized service providers disrupting the market by providing various infrastructures, support, and even outsourcing services, resulting in newer business models in the cloud kitchen industry. There are multiple trends that are reshaping the cloud kitchen industry.
One of the important trends is the increased use of technology and automation in kitchen operations. As per the report, cloud kitchens are aiming to gain an extra edge by standardizing the quality and taste of food while minimizing time and making use of kitchen automation tools led by artificial intelligence and machine learning.
Another growing trend in this industry is the emerging model of ‘House of Brands’, wherein key multi-brand cloud kitchen players are combining and consolidating their brand portfolios into a single D2C-led website or app, offering multiple cuisines, heavy discounts, and even subscription-based plans to consumers. In the past few years, the industry has also witnessed considerable funding activity from investors with some fairly large deal values.
In addition to these trends, the cloud kitchen businesses are seeing the growth of alternate ordering and delivery platforms, increasing demand from tier 2, 3, and 4 cities, and QSRs expanding to cloud kitchens. The report also showed that the global cloud kitchen market is expected to grow at a compound annual growth rate (CAGR) of about 14 percent to reach USD 90 billion by FY26, which was estimated at USD 54 billion in FY22.