Kitchen in a cloud means ordering food from a website or an app without ever seeing the facility physically, which essentially means carrying forward the same trend of e-commerce cloud retail into food. No more high footfall locations to generate demand because kitchen in a cloud eliminates 1P (place) from the 4Ps of marketing. So, there is less dependence on the accuracy of P (place) in the physical world and it doesn’t matter whether the cloud kitchen is located on the ground floor or in the main market.
A majority of the Indian population today are millennial who are Internet savvy and are helping to make the economy mature for internet commerce. Today, the Internet economy is bringing so much convenience in our lives that consumers don’t want to spend time on daily chores and activities like grocery shopping, cooking, cleaning, etc. But convenience comes with a price even though Internet consumers in India believe that convenience should be cost free.
This expectation that convenience should not entail any cost requires disruption in the existing business models where one can be offered more convenience without adding to the price factor. Cloud kitchen is one such disruption that offers more convenience to consumers without charging any premium for the service. As a result, consumers who love food but not so much cooking are ordering in from cloud kitchens to avoid the daily hassle of kitchen procurement, maid moods and other pieces of kitchen management. Cloud kitchens have taken the expectation level of the consumers to the next degree where convenience and experience are of utmost importance as is the taste of food itself.
But a cloud kitchen lacks the avenues to improve the customer experience as there is no physical contact. So, packaging, web ordering convenience and delivery time become the important parameters to build customer experience. Aggregators like Swiggy and Zomato are giving an immense amount of business to cloud kitchens run on algorithms, which are built on a few parameters like kitchen efficiency and customer experience. If food is liked by customers and the average preparation time is less than 10 minutes for each order, the platform automatically gets more visibility in the app, which results in more orders landing in the kitchen. So demand is alsoa direct function of operational efficiency in cloud kitchen apart from the taste and experience of food. It’s difficult for a restaurant to adjust to this mindset because of the need for high infra deployment and different service level expectations from the dine-in customers.
According to the demand anticipated by Zomato and Swiggy, there is a need for 2 lakh more cloud kitchens pan-India to cope up with the growing demand for food orders. Tier II cities like Amritsar and Indore are generating 20-30,000 orders per day, which are roughly around 2-3% of the orders generated every day nation-wide. The numbers speak for itself about the massive rise in food ordering consumers. This demand can only be solved with a cloud kitchen model, as opening cloud kitchen outlets is fast, lean and democratized to all foodpreneurs. Every Indian has a dream of opening a food startup deep inside their minds, and cloud kitchen is a way to live that dream.
The cloud kitchen space is majorly a mass-market play because it is adding to the convenience of easy lunches at office or dinner at homes. So, majorly it is replacing home cooking or casual eating and therefore price consciousness is pretty high in consumers. Hence the demand is majorly discount-driven at the moment. Eating out was 2-4 times occasion a month but ordering in is roughly 15 times a month, resulting in higher demand for food delivery in terms of number of orders, number of brands, and variety in food. This varied high demand under a comfortable budget cannot be fulfilled by traditional restaurants; cloud kitchen is the only way to cater to this demand because of its no-frills attached economic structure.
The beauty of cloud kitchen is that it is also a proven model of multi-brand operating from the same kitchen. Opening online brands is much faster and easier as compared to physical location brands. So, creating more digital assets in the form of brands and generating demand for each brand is natural to cloud kitchen operators. Each brand shares the common resource of the cloud kitchen, resulting in better unit economics for each brand. The same kitchen can serve multi-cuisine and multi-consumer segment with multiple identities.
With the burst in demand, supply grows abruptly and competition grows to saturate the market. This is a typical maturity curve in any industry with a disruption. Cloud kitchen is in the starting phase of this curve where the abrupt supply of cloud kitchens has started to grow very fast. This will saturate, especially in Tier 1 cities soon as high competition and stricter regulations come into the picture. Food in India requires a lot of hygiene control, which is being overlooked at the moment to cope with the high demand of online ordering. But with maturity, only scalable organized identity will be able to get the pie of ordering in and unorganized players will be limited to a small percentage of the market. The value of running cloud kitchens professionally with hygiene at multi places will be the key to emerge as a long-term winner at the end.