Subscription users of cloud kitchen apps show stronger platform loyalty (vs on-demand users) even when preferred dishes are unavailable

Published on: Oct 2019

• When preferred dishes are unavailable, subscribers of on-demand cloud kitchen apps are much more likely to still buy something else on the platform
• In comparison, non-subscribers/on-demand users are highly likely to switch to a different platform in a similar situation, indicating lower loyalty

Foodtech in India- Average AOVs falling for aggregators driven by single-serve affordable meals

Published on: Sep 2019

• This shift is driven by flat priced meals and affordable single-serve meals (priced INR 80-150), as their business contribution is increasing

Restaurants have witnessed 30% growth in business along with other benefits after partnering with online aggregators 

Published on: Aug 2019

• Online partnerships have enabled restaurants to increase overall top line by 30% via a large consumer base and strong brand impact
• With improved kitchen utilization, online partnerships have also enabled restaurants to improve their bottom-line

Subscribers of foodtech cloud kitchens report significantly higher satisfaction vs on-demand users 

Published on: Jul 2019

Consumers who are subscribed to cloud kitchens subscription packs are highly satisfied on most metrics (compared to non-subscribers/on-demand consumers). Indicating how platforms that increase overall user satisfaction by increasing the share of subscription buyers.

Food-tech daily volumes become 1.4X of cab-hailing in May 2019 (from similar volumes 5 months back)

Published on: Jul 2019

The contrasting fortunes of the cab hailing and foodtech sectors is indicated by the graph below, clearly showing how foodtech has rapidly zoomed ahead in recent quarters- owing to factors like ease of aggregating supply, higher take-up in non-metros and others.

Given this growth trajectory, cab hailing players have aggressively diversified and entered other areas like bike-sharing, rentals and electric vehicles which should be the future growth engines for them.

Non-metros rapidly acquiring a taste for food tech

Published on: Jun 2019

IPL Helps Sustain the Customer Acquisition Drive of FoodTech Players

Published on: Apr 2019

The ‘Indian Premier League’ is one of the most awaited annual cricket tournaments with a fan following across the length and breadth of the country. The ~50-day long league hosts matches every day with two or more matches over the weekends. Other than the overcrowded cricket stadiums, fans come together in their living rooms to cheer for their favorite teams. This has helped create several consumption occasions for FoodTech players.

Our research shows that IPL increasingly features hefty discounts from online delivery players. These discounts could go up as high as 60% this year. As online food delivery platforms have been spreading their footprints in 100+ cities (more so since December 2018), Redseer believes the IPL season is the opportune time to stoke the latent demand and acquire new customers in these new cities (and also drive wallet share increases for existing customers).

Given the above discounting, we estimate the FoodTech industry to reach 2.6 Mn Daily Industry Average Order Volumes during the IPL season. This is ably helped by 50,000+ restaurant partners who have curated their menu for India’s biggest cricket league.

FoodTech cloud kitchen platforms are driving growth by plugging into the foundational ‘pipelines’ built by large aggregators

Published on: Apr 2019

Over the last few years, FoodTech aggregators like Swiggy, Zomato and others have raised billions of dollars in funding and ploughed that back into creating a large market for FoodTech consumption, This has been created majorly in the below three ways (non-exhaustive)-

• Investing in marketing campaigns and offers to build pipelines to consumer’s minds and wallets
• Investing in marketing campaigns and specific programs to build pipelines to restaurants (thus driving their participating in FoodTech and also creating high awareness and willingness to participate)
• Investing in the delivery infrastructure or the ‘pipelines’ that reaches the doorstep of the consumer in 100+ cities

As the chart below shows, the market is now ripe for cloud kitchens to leverage the above pipelines and reach to the consumer rapidly. Many brands have actively been able to do that for e.g. Curefit, Box8, Faasos etc. Over time they can leverage their traction to build strong, independent brands of their own and then other opportunities become possible for e.g. global expansion via the same brand to other similar markets.

Growth of these cloud kitchens also offers investor a chance to participate in this FoodTech growth story at more affordable valuations. Even the aggregators themselves benefit from this cloud kitchen growth, as they may themselves not be able to scale their own private labels very rapidly given the potential risk that it would upset other partner restaurants. Thus, this trend offers a win-win opportunity for all stakeholders in the ecosystem.

Online food delivery use cases widen out; lower AOV more than offset by the increased revenue base

Published on: Mar 2019

Increasing customer frequency has been the key lever in food-tech sector’s growth in the last 2-3 years apart from the ever growing base. Customers typically start with online food ordering for occasional dinners when they don’t feel like dining out. And then, they go ahead with other use cases of lunches and further ahead to breakfasts and snacks. In India, we can see that the share of dinner meals ordered has come down from 55% to 45% in last year which is expected to only decrease further. The players have been able to drive this habit formation through various efforts like single-serve fixed price meals, delivery capabilities beyond 12 hours and so on.

As the use cases evolve beyond dinners, average order values go down consequently. It has already reduced by ~25% in the last year and is expected to go down further to INR 250 in the next 5 years. However, on a net basis, the business builds greater customer engagement and hence much larger market.

Foodtech: Focusing on strong cooperation with restaurant partners for continued relationship stability

Published on: Feb 2019

Foodtech is one of the categories which is yet to reach Stage 2 i.e. the stage of the tumultuous relationship as defined by us. Driven by high growth in online orders, restaurants have largely enjoyed a cordial and successful relationship with the platforms thus far.

However, in one of our earlier newsletter stories, we mentioned about FoodTech player’s attempts to grow their private label shares (see below). This along with other factors has caused some degree of concern for a few restaurant partners (per media reports).

We fundamentally believe that Foodtech will likely have a much smaller Stage 2/Turbulent Stage compared to other sectors, owing to intrinsically long tail and hyperlocal play which demands very strong support from restaurant partners thus players can ill-afford to alienate/risk losing them. Thus, players are actively rolling out programs that enable further cooperation with restaurant partners.

In this context we had the opportunity to speak with Head of Swiggy’s New Supply Initiatives Mr Vishal Bhatia. He shared insights on Swiggy’s Access program, excerpts of which are shared below-

RedSeer– What problem is Swiggy Access trying to solve?

Vishal- Swiggy Access is fundamentally aimed at closing the demand gaps in the market. The challenge today is twofold- not deep supply in existing localities to cater to all needs of diner, and in new localities which are continually coming up there is not even basic supply for the residents. Restaurants take a long time to expand to new localities and the high street rentals have reached upto 10-15% of the P&Ls.

RedSeer– Where does Swiggy Access come in and what has been the adoption?

Vishal- Swiggy Access is a clear solution for the above challenges, meant for a world where dine-ins are continually shrinking and online is growing rapidly. Using our vast data, we understand cuisine mismatch in each area, invite current restaurant partners to expand to these new areas via our cloud kitchens. Where we provide the basic infra to accelerate the very long process of new restaurant setup. The restaurant player brings their own equipment and are charged on a per order basis. It’s a very affordable model for them as they end up paying 3-8% of the P&L compared to almost double thus for own restaurant setup.

The model has seen strong traction. Almost 70% restaurants are discussing setting up a second location with Swiggy Access, seeing strong confidence in the model. Many of these are restaurants who have never expanded before to other locations. We already have 130+ kitchens across the country and likely to treble this figure going forward, where this play should drive 25-30% of our orders.

RedSeer– What are some of the challenges with expanding this model?

Vishal-One of the big challenges is on the infra creation side. Setting up the cloud kitchens involves significant investment and effort. Second the need to build the right capabilities and mindset in the restaurant partners is also a big challenge, as many of them are not used to rapid or any kind of expansion at all. Third challenge is ensuring Swiggy’s high standards are met consistently for example on hygiene.

Foodtech Leadership Index

What does the Foodtech Leadership Index (FLI) measure? 

Published on: Jan 2019

Our FLI was released last week. Here we attempt to bring out the index findings is a more detailed view of the player performance (as shown in below chart)-

Figure 1- RedSeer OND’18 FLI detailed scores. Weights for each parameter mentioned in brackets

Below observations quickly emerge from the above analysis-

• Swiggy is the industry leader on all parameters, except for ‘Price Competitiveness’ – It has an especially strong edge over competitors is higher in core parameters of delivery experience and web/app experience. Additionally, despite being the least aggressive on pricing, it stands above other players in overall index, breaking the myth that pricing is most crucial for succeeding with Indian consumers

• Swiggy leads by a large margin on ‘Preferred Brand’ and ‘Overall NPS’ – This brings out the key lever in Swiggy’s success i.e. performing better than competitors on all parameters, day in day out. This consistency across parameters, which enables delivering a reliable overall experience, is what drives strong customer love for the brand
• UberEats and FoodPanda fight, UberEats emerges as winner in NPS – This is despite Foodpanda performing marginally better across the four experience parameters, indicating how perception of overall brand experience/consistency is significantly important. These challengers from cabs sectors should aim to move towards hygiene on the core parameters of customer experience e.g. web/app and delivery. While at the same time building a solid differentiator for e.g. on restaurant listings.

What does RedSeer’s FLI really mean?

We often get asked the above question- ultimately what is the significance of the FLI? Why is it important to know and track this index?

To answer this, it is instructive to look at the below chart which uses the example of RedSeer’s ELI (E-tailing Leadership Index) to bring out the utility of RedSeer’s sector indices.

The interesting things about this chart are- 

• Player ELI scores and the relative gaps in them is also broadly indicative of GMV market shares of these platforms– Market share numbers have indicated that Flipkart and Amazon are significantly ahead of the rest of the field in market shares, just as they are in ELI scores. Pointing to the fact that ELI scores are strongly indicative of future market share performance

• ELI scores of the four e-tailers resemble the current FLI scores of the four FoodTech players as well- With Swiggy and Zomato acting as parallels of Amazon and Flipkart while Foodpanda and UberEats are parallels of Snapdeal and Paytm story

Taking this e-tailing vs FoodTech comparison a bit further, it would be fair to say that that today’s FLI leaders would be the FoodTech market share leaders of tomorrow. As FLI scores directly correlate with customer experience and trust and likelihood of future transactions on these platforms. Analysts interested in FoodTech’s evolution would be well advised to keep a close eye on future FLI releases!

What does the Foodtech Leadership Index (FLI) measure? 

Published on: Jan 2019

FLI is a comprehensive assessment of overall performance of the various online food delivery services in customers’ mind. It is based on the three pillars, which are: