Corporate cafeterias were readying to take off, when it caught the ‘chills’

Digitising canteens is a lucrative business, provided the start-ups survive lockdown jitters 

Published 4 years ago on Jul 04, 2020 7 minutes Read

If you leave out the oddballs who have latched on to intermittent fasting, the average employee eats about four meals a day. Let’s suppose that your job spares you enough time to grab breakfast and dinner at home. That still leaves two meals, lunch and an evening snack, that you would eat at your workplace.

You might order dinner through Swiggy but maybe not lunch. That’s because many offices have a cafeteria that provides subsidised food, whereas the average order on Swiggy will cost you about Rs.200. Sandipan Mitra, founder, HungerBox, says, “People working in companies prefer company cafeterias as their primary food option. Institutional food (offices, malls, educational institutions) is what you and I consume two-thirds of the time.”

Looking at the appetite for corporate catering (See: What's on the menu?), start-ups such as HungerBox, Food@Work and Elior are digitising canteens, to make them more efficient and appetising.

Order! Order!

HungerBox is not Mitra’s first entrepreneurial venture. That was JustEat, founded in 2009 and acquired by Foodpanda in 2015. In May 2016, he co-founded HungerBox with Uttam Kumar, his colleague at Foodpanda. The start-up provides a technology platform for cafeteria digitisation, and charges a per-transaction fee of 8-10% from food partners and a cafeteria management fee from corporates.

It began when a company asked Mitra and Kumar, if they could help digitise their cafeteria. The cafeteria is an important part of the office experience but a lot of wastage and pilferage can also happen. According to Manjunath Ramakrishnan of Food@Work, theft leaks 8-10% of a cafeteria’s revenue. So, any solution that helps in their efficient management is welcome. Mitra and Kumar came up with a platform through which people could see the menu, know its nutritional content, place their order, make their payment, track it and even give feedback to the vendor.

Their earliest client was FirstSource, a business process outsourcing company, whose cafeteria was completely digitised. “HungerBox’s first mover advantage in the corporate food-tech space is their biggest asset,” says K Ganesh, co-founder, GrowthStory, adding that his decision to invest in Hungerbox was driven by its “asset-light model which gives scalability and global applicability”. Mitra believes that their edge over competition is the client contracts, which are of three to four years on average. HungerBox, which has raised $22 million so far, serves 126 corporates through 550 cafeterias.

In comparison, Food@Work, which is food-delivery app Zomato’s corporate catering business, is a much smaller operation. The restaurant aggregator got into this game in 2018, when it acquired TongueStun started by Manjunath Ramakrishnan for $18 million. Today, Food@Work manages the cafeterias of 70 companies, such as WeWork, Accenture, Cognizant, EY, Sony, Genpact, 3M, Mindtree and Deloitte, across seven cities in India.

When newbies are crashing the scene, tier-I caterers such as Sodexo, Elior and Compass aren’t standing by, watching. They are upping their game, too. Leading the pack is Elior, a brand that caters to companies such as Microsoft, McKinsey, Capgemini, Amazon, Qualcomm, Genpact, Target India, Google India, Cerner and LinkedIn, to name a few. Elior, among the top five caterers in the world, has been in this business for long. Founded in 1991, the French company’s claim to fame was buying out High Table, the caterer to the London Stock Exchange. It entered the Indian market in 2017 and, in 2019, launched its ‘El Chef’ app which allows employees to place orders from their office cafeteria. It presently claims to serve 200,000 meals a day across 88 kitchens in the country.

Unlike HungerBox and Food@Work, which only serve or deliver food made by others, Elior is a full-stack corporate caterer. It does everything from grocery shopping, cooking and running the kitchen, to delivering, processing payments and taking feedback. It also has menu management software which is integrated into its ERP to keep recipes consistent. Therefore, if you like their palak paneer or chia-seed smoothie once, you can expect the same flavour and texture, the next time too.

A similar, but much more asset-light operation is run by Rebel Foods. They act as vendors to canteens, listing their restaurants on platforms such as HungerBox and Food@Work for a 10% commission, or they offer to run their kiosks in office premises. In the on-site model, they take pre-cooked ingredients to the client’s cafeteria and cater to orders placed. In January 2019, they launched The Work Cafe, a website targeted at small companies, which do not have their own cafeteria.

Boring out, convenience in

Given the variety of restaurants listed, people have less chance of experiencing ‘food fatigue’ – the fancy term for eating the same stuff over and over again. Besides the many options they provide, these caterer-aggregators also do pop-up stalls at a much subsidised rate than their online prices.

At HungerBox, vendors get rotated to optimise revenue. For example, if an office has a vendor supplying donne biryani, HungerBox takes the supplier to another office on, say, a Friday. Weekly food festivals are also part of the HungerBox offering, at no extra charge to the corporates. These festivals bring in 20-30% more revenue.

Ankur Pahwa, partner and national leader – e-commerce and consumer internet at EY India, says, “Along with reducing wait time for employees, technology and data analytics has helped in creating a feedback loop from employees which allows corporates to gauge vendor performance.”

Besides variety and better quality service, these food-tech companies also facilitate eat now-pay later. Ramakrishnan says their platform also offers credit. For instance, ePayLater allows a 15-day credit cycle. This feature has increased off-take. “At one of our clients, the average amount spent was Rs.400-450 per week. That amount got bumped up to Rs.800 when ePayLater was introduced,” says Food@Work’s Ramakrishnan.

The platforms have increased cafeteria sales and reduced costs. For example, since all the ordering is done on the app, there is no need for extra manpower. Since there’s visibility on every order, the ordering platforms even help the caterers zero down on menu items that are most in demand. “This way, the partners get to see item-wise analytics, which item sells most, which doesn’t sell, they can see weekly trends, and even plan their inventory accordingly,” says Ramakrishnan. At HungerBox, the cut in manpower, pilferage and inventory, amounts to savings in working capital of 25-30% for the vendor. Mitra says they even help the vendor with his/her cash flow, by helping them get working-capital loans at lower interest rates through a non-banking financial institution.

Food@Work and HungerBox also help with regulatory compliance. Managing FSSAI’s compliance requirements for catering isn’t easy for vendors, especially smaller players. Therefore, the food-tech companies help with the auditing process for quality-control of the food and kitchens. Food@Work maintains an internal HSEQ (Health, safety, environment and quality) team which audits all the food counters every month and points out changes that are required. HungerBox, too, has 24 ISO-22000 certified auditors in the food safety and compliance team. The vendors that don’t comply are notified, and if they don’t make amends, are weeded out. Audits by Food@Work and HungerBox are part of the vendor onboarding process.

Covid shock

Despite every precaution, no one can prevent unexpected shocks like the one dealt by the current pandemic. The start-ups are putting in place additional safeguards to tide through this. It has meant costs increasing by 25%, on average, of which clients companies have absorbed 10-15%.

HungerBox has identified four areas of vulnerability – crowding while placing orders, exchange of currency, contamination of food, and safety of personnel. To solve the first, they have come up with a ‘safe-café system’ that uses Bluetooth and cameras to sound alerts when safe-distance is breached. For the second, they are making transactions cashless, and have covered 90 of their 550 canteens so far. For the third, food is put through a UV-sterilisation scan before handed over and, for the fourth, personnel are strictly asked to follow safety procedures of sanitisation and wearing protective gear.

These measures aside, Elior India CEO Sanjay Kumar says that there is no escaping the damage the pandemic has inflicted on the players. Overall sales have fallen 25% and he does not expect a recovery for the next 24 months. According to him, costs will go up and smaller players won’t be able to bear the burden, so the sector will see consolidation. In many cases, the food-tech companies, due to the nature of their supply-chain, are not able to avail of input tax credit (ITC). The supply chain is largely unorganised, making it difficult to get the receipts to claim ITC. So, they pay a higher tax rate while procuring but cannot claim any tax benefit. The pandemic, which will cause further disintegration of the supply chain, will only worsen this situation. “Some of the scars that this pandemic leaves will permanently change the way the industry functions,” says Kumar.

Many in this fledgling business that provides convenience at lower cost may find survival impossible. The ones with cash and patient investors could wait it out; others can only hope that they are worthy acquisition targets.