As restaurants start shuttering, some entrepreneurs are trying to reinvent their business
Dineout and Zomato have begun conversations with restaurants to adopt contactless dining products. This can raise costs by at least 4%-5%. And stricter social distancing norms may see dine-out occupancy fall by 20% at least.
Bengaluru: Four out of every 10 restaurants will likely be permanently shuttered in the absence of a government bailout and the broader impact will be even more severe in an industry that, pre-lockdown, had a turnover of Rs 4 lakh crore and provided direct employment to over 7 million.
Adding to these grim estimates from the National Restaurant Association of India is the nearly 70% fall in food delivery business. And, still worse, dining out or ordering in will take very long to recover post-lockdown, analysts say, as consumer discretionary spending will be low amidst salary and job cuts.
Cloud-kitchens too are feeling the pain, with the likes of Mukesh Bansal-founded Eat Fit scouting for buyers as it puts as many as 18 of its facilities up for sale in cities like Chandigarh, Jaipur, Ahmedabad, and Vadodara, expecting orders over the year to significantly decline, according to documents seen by ET. Swiggy is closing a few of its private brand kitchens as well, the company confirmed earlier this month. Cloud kitchens are restaurants which only operates through online ordering.
RedSeer Consulting estimates food delivery alone will take at least a year to come back to pre-lockdown levels, and even longer in smaller towns and cities. A survey conducted by the firm showed that wallet share for dine-in restaurants will decrease sharply, as per 68% of respondents.
But as stories of restaurateurs shutting outlets pile up, at least some entrepreneurs are trying to reinvent—launching packaged foods, delivering DIY (Do it yourself) meal kits, re-engineering menus, and even delivering groceries.
Take the example of the ThickShake Factory, a Hyderabad-based business that scaled up to 120 outlets on the back of selling milkshakes in less than three years. Then Covid-19 hit. “Few weeks later the govt of Telangana banned aggregators (Swiggy and Zomato). Since then we are shut,” Yeshwanth Mocherla told ET. Founders Yeshwanth and Ashwin Mocherla, after seeing their business model and outlets gutted overnight in March, are now pivoting to a multi-brand, delivery-only model, branching out to food and new beverages. “We are targeting to opening 50 cloud kitchens in the next few months.. so we will be relying only on takeaways/online deliveries,” Yeshwanth said.
He said the company expects no footfalls for the next five months till Covid-19 situation subsides.
Bigger brands are also looking for solutions to tackle the drop in order volume. Rebel Foods, which operates Faasos and Behrouz Biryani, and Impresario’s Smoke House Deli have introduced DIY meals targeting consumers who are cautious about ordering cooked food. Jaydeep Barman, CEO of Rebel Foods, says his outfit’s “culinary skills and a national supply chain” make DIY meal kits a viable option. The chain, which is also India’s largest cloud kitchen network, will be launching a new line of “ready to cook” options from marinated foods to pre-seasoned items, Barman confirmed.
DIY meal kits have been a success in the US, with one business, Blue Apron, now a listed company. A kit typically consists of all ingredients needed to cook a dish, measured out in exact proportion, and comes with cooking instructions. Impresario CEO Riyaz Amlani says DIY kits can catch up because families have been reacquainted with the idea of cooking a meal together. Social, a restaurant chain owned by Amlani’s Impresario, has started home delivering pre-made non-alcoholic drink mixers that go into their signature cocktails.
The lockdown has also brought many high-end outfits down to the business of food delivery—fine-dining brands like Masque and Bombay Canteen, and hotel chains like Accor, Hilton, and Conrad, and Sheraton have started home delivery. Even mass-market brands like Wow Momos and Domino’s have introduced grocery delivery.
Post lockdown era
Life won’t be easy post-lockdown also because safety rules will both remain and will raise costs, businesses say. Dineout and Zomato have begun conversations with restaurants to adopt contactless dining products. This can raise costs by at least 4%-5%. And stricter social distancing norms may see dine-out occupancy fall by 20% at least.
“Restaurant industry is one of those industries that will show no optimism for next 8-12 months…The loss of business for high street restaurants will be gain for food delivery players and a new segment of “DIY” meals will see the rise,” said Karan Tanna, Founder, Ghost Kitchens.
But safety will trump all other considerations.
Over the last few weeks, food delivery players such as Rebel Foods, Swiggy, and Zomato have upped their communication on safety and hygiene standards. “Over time we are going to add sources of raw material, a promise that none of our food has any artificial colour or flavour, the water we use, the safety precautions we are taking… As a full-stack player, we have full control over the value chain and this is the time to talk about it,” Rebel’s Barman said.