Bengaluru-based ride-hailing unicorn Ola has continued to traverse into newer verticals as well as countries. One of the common attempts by Ola at expanding vertically has been food and the latest update from the company comes along the same lines.
Ola has officially launched its cloud kitchen services, beginning with Khichdi Experiment in Bengaluru. Khichdi Experiment will offer a carefully curated assortment of Khichdi in as many as 16 unique flavours. Khichdi Experiment is now available for delivery in five cities viz Bengaluru, Hyderabad, Mumbai, Pune and Chennai.
Inc42 source close to the development said that Ola’s food business is now focussed on building a portfolio of own food brands and curated food offerings through cloud kitchens.
Ola has a network of 50 kitchens in Bengaluru, Hyderabad, Mumbai, Pune, Delhi NCR and Chennai, the source added.
The company is looking to expand to more than 80 cities over the next year. It is also looking to open Khichdi bars at convenient locations and office campuses in the city for people who’d like to pop in for a quick meal.
Ola’s Tryst With Food: Cafe, Foodpanda And Cloud Kitchens
Ola’s interest in food delivery space began with its first attempt ‘Ola Cafe’, which was shut down in March 2016. The company then acquired Foodpanda India business in December 2017 for $31.7 Mn (reportedly) to venture into the food delivery business.
This year, Foodpanda has been under fire with its decreasing orders and increasing cash burn. In January, Foodpanda cut marketing and customer acquisition cost by two-thirds in keeping with Ola’s de-prioritisation plan for the business. The company expected orders to fall by 60% but the business to grow more efficiently.
It is to be further noted that Foodpanda hit its peak in August 2018, when supported by deep discounts and cashbacks, it got 200K orders per day. Since then, reports have been saying that Ola has decided to scale down the operations and focus on cloud kitchens.
In May, reports surfaced that Ola has been shifting its focus on in-house brands and cloud kitchens— The Khichdi Experiment, FLRT and Grandma’s Kitchen. The company has continued to say that it will invest in expanding its facilities and kitchens, as well as its portfolio of food offerings for customers.
Why Cloud Kitchens Are The New Cool?
As a business model, cloud kitchens don’t require many upfront costs when compared to classic dine-in or takeaway restaurants. This can be leveraged by budding restaurateurs as an opportunity to test out their brand and customer base before opening a premise in a low-risk environment.
As per DataLabs by Inc42 estimates, the projected market size of cloud kitchens is expected to reach $1.05 Bn by 2023. DataLabs noted that the low setup cost, lower operational expenditure and rising appeal for home delivery have made the Indian cloud kitchen market very crowded indeed. Customer acquisitions are driven by discounting and offer largely, which means there’s a high acquisition cost.
However, amid challenges such as lack of branding and customer loyalty, this model of driving sales through discounts is expected to eventually bite into profitability in the longer run.
Inc42 recently reported that proponents of cloud kitchens say that convenience will overcome all other considerations such as long-term profitability — the constant bugbear for all foodtech startups.
From foodtech giants such as Swiggy and Zomato to new entrants such as Amazon, the foodtech segment is now seeing increasing competition in the cloud kitchen landscape. Riding on the increased purchase power and high demand, the Indian online food delivery market (aggregators and cloud kitchen) is expected to be an over $5 Bn opportunity by the end of the year 2023.