After 10-minute grocery deliveries, it is the turn of quick food deliveries now. While the food delivery bellwethers — Zomato and Swiggy — have been making serious moves in the past few months, new startups are coming up in the space.
With quick-delivery apps like Swish, Zing, Bistro and Snacc running hot, the phrase fast food is gaining an all-new taste. The question is: Will the funders bite into the business?
After 10-minute grocery deliveries, it is the turn of quick food deliveries now. While the food delivery bellwethers — Zomato and Swiggy — have been making serious moves in the past few months, new startups are coming up in the space.
For example, Bengaluru-based Swish has raised $2 million in a seed funding round led by venture capital (VC) firm Accel. In Gurugram, Zing is promising 10-minute food delivery using AI-driven demand forecasting. It has been started by Tarun Arora, former COO of news startup Inshorts, and backed by Azhar Iqubal, founder of Inshorts and a judge on Shark Tank India.
Does this mean the funding floodgates are about to open in the quick food delivery space to newbies like Swish and Zing?
Not necessarily, says Pranav Pai, Founding Partner and Chief Investment Officer, 3one4 Capital. The reason: Doubts over the scalability of the model as compared to the larger, normal-time food delivery business. "In the context of quick commerce, the 10-minute segment is much smaller than the overall food delivery market," he says.
But that's not slowing anyone down. On the last count, "there were at least a dozen ventures booting up to hit the market with their promises of express food delivery," says Pai.
Amidst worries over scaling and size, founders and funders alike have figured out one thing for sure: The typical quick-delivery customer wants his food delivered in a jiffy, never mind the choice. In other words, short menus are just fine if the wait period isn't long. To cater to this crave for instant gratification, start-ups are setting up their own dark kitchens and partnering with restaurants, ready to offer a limited menu for express delivery. These production bases are supported by a number of fleet-footed delivery crews, dedicated to different neighbourhoods.
In all the excitement over speed, the obvious must not be overlooked: It is infinitely harder to deliver food than groceries in 10 minutes. This is because of the complexities inherent to the business. Unlike grocery, each item of food needs to be cooked—mostly on order—and carefully packed before being handed to delivery partners, breathing down the necks of kitchen/restaurant staff at bustling takeaway counters. With so many moving parts, the likelihood of mishaps rises significantly as delivery times shrink.
For the quick-food delivery model to succeed, the technology needs to work with clockwork precision, backed by a high degree of predictability with regard to location, logistics, order volumes, delivery capacity and other variables. Cloud kitchens, for example, need to be strategically located near demand hubs to achieve the 10-minute promise, and this requires meticulous planning.
Even companies with a head-start in the 10-minute space like Zepto have confined themselves to fewer cities and smaller SKUs. “The model is much more challenging than people assume. I think the founders are very aware of that,” adds Pai.
Investors point out that established players like Swiggy and Zomato hold all the aces because as pioneers, these two companies faced no competition when they were spreading their wings in a segment, which they created. Things are vastly different for debutants now, as they must jostle for market space in the face of these two dominant players, backed by massive war-chests of investible cash. Says Pai: "These two companies fulfil millions of deliveries daily, making it extremely challenging for any new entrant to compete in any segment of the food delivery market."
Agrees Sanjay Mehta, founder and partner at 100X.VC: "The pole positions belong to Zepto, Blinkit, and Swiggy. For us, it doesn’t make sense to invest now because the leaders are established and this is not a new concept anymore.”
Over years Swiggy and Zomato have built formidable assets that cannot be easily matched. “They have capital, a sticky customer base, and, most importantly, granular data on customer demand. They have also built strong last-mile logistics capabilities, bolstered by their quick commerce operations,” says Asish Sharma, Managing Partner at InnoVen Capital India, which invested in Swiggy in 2017, and later exited with a handsome gain.
In January this year, Swiggy launched Snacc, an app to deliver snacks, meals, and tiffin in 10-15 minutes. Zomato-owned Blinkit followed suit with Bistro, an app that does the same across Gurgaon. Also, in the fray is Zepto’s Café, which, according to its CEO, Aadit Palicha, logged 50,000 orders within weeks of its launch. “If the 10-minute delivery companies show a profitable trajectory and achieve a product-market fit, they will likely attract significant investments,” observes Pai.
Innoven’s Sharma says that his firm does not have immediate plans to invest in this space, but is open to reviewing opportunities as they arise. According to Redseer Strategy Consultants, the Indian food services market is expected to reach $144-152 Billion by 2030. Quick commerce as a whole has been growing at a comparable pace and currently commands a $2.8 billion market, according to Redseer.
Clearly, a fast-growing number of urban customers in India are feasting on doorstep-delivered food like never before—the faster the better. Even so, it may be premature to open the bottles for the Bistros, Snaccs, Cafes and Zings of the world, given the logistic and other hoops they still need to jump through. Also, with some discomfiting quality-related questions beginning to be asked, many funders, in particular, may choose to hedge their bets for now. But regardless of how the quick delivery story unfolds, there is no doubt that the need for speed will continue to shape the future of the food industry.