When industry veterans in the year 2015 debated on whether ‘hyperlocal’ will be able to replace ‘ecommerce’ in India, one segment that grabbed maximum investor attention was the FoodTech. The reasons were simple – touted to reach $78 Bn by 2018, growing at 16% YoY, it was creating high demand, looked promising for higher returns and obviously showed an option for a profitable exit.
But, as they say – all that shines is not glitter. Soon, the sector became overflowed with ‘me-too’ startups lacking both – differentiation and innovation. The results were obvious. To date, out of the 105 FoodTech startups launched in India, only 58 are active. In past few months, there has been over 37 shutdowns while 9 went off the picture consolidation via M&A route.
Where on one side startups like iTiffin, Eazymeals, Zeppery, Zupermeal, Dazo, SpoonJoy, have to shutdown operations, on the other side, Tinyowl and TastyKhana grew well initially but got acquired much earlier than expected. The entry and exit of UK based JustEat was faster than one would order something online. Even among the biggies, Zomato was forced to shed its workforce and roll back international expansions, while Rocket Internet backed Foodpanda has still not found a buyer even with a rock bottom price tag of $10-15 Mn.
So what happened in past one year that slammed this sector, forcing investors to pull their legs up and stop the lavish lunches? Was it the business model execution failure or the timing is not right or it’s the tightening of investor’s purse strings that drowned the companies amidst cash crunch? Let’s have a closer look into the market.
Evolution Of FoodTech Market In India
A few years earlier, the biggest problem was “discovery” of restaurants. People faced problem in figuring out restaurants that were available nearby and how good they were? Companies like Zomato absorbed this pain by building a simple platform to address the problem of the Indian foodies.