When Food and Tech collide - ii

When I first started jotting down my thoughts around the current “Food + Tech” environment, I had no idea that I would be writing an update soon. To be quite honest, I wasn’t even sure that there would be one at all. But each passing day brings new excitement with the current players reinventing themselves, voluntarily or otherwise, and new players bringing in disruptive business models. Hence, the urge to share the happenings in this space the way I see them unfold. 

• What’s happening around the world

Seamless was founded in 1999, and GrubHub was founded in the US in 2004. In late 2013, the companies merged, and today serve diners and corporate businesses from approximately 35,000 local takeout restaurants in more than 900 U.S. cities and London. It’s portfolio of brands includes GrubHub, Seamless, MenuPages, Allmenus, Restaurants on the Run and DiningIn. That’s a massive growth story by any standards.

Other players like UberEATs, Caviar, Postmates and DoorDash are today providing delivery services to customers from restaurants. The trend today seems to be moving from the typical pizza, sushi and Chinese food to include higher quality and more upmarket food options as well.

Sprig, launched in 2013, delivers on-demand freshly-cooked food. Currently, the company’s kitchen is headed by former Google head chef Nate Keller and it offers three meal options daily to customers from Chicago to San Francisco Bay Area.

Amazon Fresh, a subsidiary unit of Amazon Group, delivers groceries and meals from the neighbourhood in the US. The firm has recently leased a few warehouses in the UK, a move widely interpreted to signal the launch of service in the country.

For years now, drive-thrus have dished out everything from fast food to pharmacies. According to some rumours, Amazon is planning to revolutionize this format by adding groceries to the list of offerings. Customers will be able to order grocery online and then schedule a pickup at a dedicated drive-thru facility.

In the US, the gap between meal orders placed on the phone and those placed online has already narrowed down to a hair’s breadth and the latter will surpass the former any day now. According to market research firm NPD, by May 2015, online orders had increased to about 904 Mn. as compared to 1.39 Bn. phone orders. According to Flurry, the Yahoo-owned leader in mobile analytics, two-thirds of the users in the US in 2014 preferred the online shopping experience. Of the two-third, 63% shop through apps.

According to estimates by Euromonitor, food takeaway and delivery market in Europe will reach $94.1 Bn. in 2015.

An interesting trend is also being witnessed in 11 countries across the African continent. According to a recent data shared by Hellofood (hellofood and its affiliated brand foodpanda are a part of the Global Online Takeaway Group backed by incubated by Rocket Internet), percentage of consumers ordering through mobile versus computers are split 50-50 (would you believe that!).

• Online food discovery and delivery

Zomato, the category leader, continues to create its presence in everything connected with food. The company now has 43 offices spread across 22 countries. With restaurant listings in 10,000 cities, it caters to nearly 90 Mn. visitors per month. It had introduced in-app advertising a while back and the company claims that these ads will be contextual to search and location.

After a test phase, it has launched Zomato Order, its online ordering and delivery service, across 14 cities in partnership with a whopping 10,000 plus restaurants. While customers can place their orders through the existing Zomato app / website, a separate Zomato Order app is also available. The new app is packed with features like address book, order status tracking, order history, etc. In a recent company blog, Deepinder Goyal, its co-founder and CEO, confirmed the roll-out of Zomato Book (table reservations) and Zomato Base (point-of-sale product for businesses) over the next few months.

Zomato has also introduced “Zomato Foodie Index”, a location-based system that rates specific localities in a city based on the quality of dining experiences that can be enjoyed there. Tapping into the large partner information base that Zomato has created over the years, this feature is being made available to partners like real estate or travel sites via an API. It will allow these partners to help potential customers identify delicious neighbourhoods while planning to buy houses or the next holiday destination.

“There are no boundaries anymore” says, Deepinder, in a recent interview.

Strong competitors include Yelp, DeliveryHero, Foodpanda and JustEat in the same bracket. It will be interesting to see who amongst these will be able to break out from the pack and race ahead.

It is rumoured that Foodpanda is close to picking up a stake in Mumbai-based food ordering app TinyOwl. Is this a sign of impending consolidation in this space? That is anybody’s guess.

After the launch of its food delivery feature called “Ola Café”, Ola has now launched a hyperlocal grocery delivery service called “Ola Store” in Bangalore. Unlike its previous offerings, this standalone app comes with “Deliver Now” or “Deliver Later” options.

Paytm, the new kid on the mCommerce block, has also participated in the fund-raising for a mobile-only marketplace called Little. It has been launched by the founders of Zovi, an online clothing and fashion accessories platform. The app aims to be a discovery platform for consumer lifestyle deals as well as a sales channel for merchants, including restaurants.

Local search engine JustDial has also made its intentions of entering this segment clear by making a soft entry. Currently limited to Andheri in Mumbai, it has tied up with grocers and restaurants for home delivery.

Inspired by the success of New York-based Blue Apron, companies like Chefkraft, Cookboxes, Chefs basket and Cookfresh are offering services in the “cook-it-yourself segment”, appealing to customers wanting to cook at home but are short of time for going to the market to pick up all the necessary ingredients. These companies are experimenting with technologies like high-pressure pasteurization for improving the shelf life of the products without adding any preservatives.

A new app called AirGrub attempts to make eating at the airport much more pleasurable. It lets airlines travelers, invariably short of time, access menus and order food even before arriving at the airport.  Type in your flight information and the app will guide you with the food options available in the terminal where you are arriving. Place your order and pay through the app, and your food will be ready by the time you arrive. Currently, the service is available only for three restaurants at the San Francisco International Airport.

In case you thought that celebrity chefs were out of reach, think again. Hopping Chef, which provides dining experiences at home, has 15 renowned chefs on board, including Michael Swamy, Aditi Keni, Ajay Thakur and Shantanu Gupte. These chefs, who can conjure up magic with food ingredients, do come at a price however. A meal for two could cost you anywhere between Rs. 2500 to Rs. 10,000 per head.

Bengaluru-based start-up, Delight Foods, has launched an online platform that brings together some of India’s iconic food brands from all over the country. The portal follows an asset-light zero-inventory model and features over 60 brands like Ace Iyengar, Ambika Appalam, Bedekar, Chaina Ram, Chitale Bandhu, Frontier Biscuits, G Pulla Reddy, Hameedi, Karachi Bakery, Maganlal Chikki, Nirapara, Panchhi Sweets, Popular, etc.

Hyderabad-based fast food chain Hello Curry has acquired technology start-up Fire42, a company that offers complete mobile and cloud-based restaurant management systems.

Dazo (earlier called Tapcibo) is an app that allows the customers to order food, but with a difference. The menu on offer is curated as opposed to a plain listing for various restaurants.

Other recent start-ups include Bite Club, YuMist, Zaza Box and SnackExperts.

According to Tracxn, this year $91 Mn. has been raised by companies in this space so far this year. 

• Online Grocery

According to Technopak’s 2013 report, food and grocery constitutes 69 percent of the $490 Bn. Indian retail industry. Top six players in this segment are BigBasket, Localbanya, ZopNow, Meragrocer, Grofers and PepperTap.

There are two different business models being adopted by the online grocers:

• Inventory based: Players like BigBasket have built up an inventory-led business model to cater to their customers. The company uses a hub-and-spoke model for the metros, and is now trying to expand the same to cover the smaller cities as well. It has also recently acquired Delyver, one of the earliest hyper-local companies, to bolster its current model and offer time-based deliveries using two-wheelers.
• Delivery based: Companies like Grofers, PepperTap, ZopNow, Localbanya, iOrderFresh, etc. are tying up with large format stores, wholesalers and local retailers to deliver orders to the customers.

While the current model centers around discounts and speedy delivery, these companies are also looking at ways of shoring up their margins. Localbanya plans to start stocking exotic vegetables. BigBasket has added cut vegetables and baked food to its offerings. It also sells organic fruits and vegetables under the private label “Fresho”. The company sends a “fresh-o-meter” with each pack of mango, the sticker guiding the buyer on the freshness and ripeness quotients of the king of fruits.

These companies are also adding international brands to their portfolio. Cheeses, herbs, spices and condiments make up a majority in this category. Specifically, Thai and Italian food ingredients have become quite popular due to the increased exposure of consumers to these cuisines and the presence of a vibrant expatriate community in India.

A recent report by Google and Bain & Co. suggests that online sales in the Fast Moving Consumer Goods (FMCG) industry will reach $5 Bn. by 2020. Data analysis by internet-based payment service provider PayU India indicates that, within a year, online grocery shopping is expected to become the second largest segment after mobile recharge.

Looking at the success of these companies, the large traditional brick-and-mortar business houses are planning their own ventures.

Globally, buying groceries online has not really taken off, except in the UK. But Indian consumers have always been at the mercy of the neighbourhood stores as corporate grocery retailing did not bloom due to expensive real estate and restrictions on Foreign Direct Investment (FDI). The growth in eCommerce is also expected to come at the cost of modern trade, suggests “Think India, Think Retail”, a report published by Knight Frank India Pvt. Ltd. and Retailers Association of India.

The Tata Group has launched an online grocery platform called my247market.com. The portal will be owned and managed by Fiora Hypermart, a subsidiary of Trent Ltd., which owns and runs Star Bazaar stores in states like Gujarat and Tamil Nadu. Star Bazaar, a joint venture between Tata and Tesco, will be the supply chain partner for the venture. Initially, the portal will deliver in Mumbai and later extend its reach to other cities. The Tata Group is also looking at rolling-out a comprehensive eCommerce marketplace-like venture which will feature top brands, including in-house ones. It will have on omni-channel facility where customers can either pick up the products from the nearby stored or get them delivered at their doorstep.

Foodhall, the Future Group’s premium food chain, has also forayed into this space and Reliance Fresh, the small-format grocery chain of Reliance Industries, is said to be conducting pilots through www.reliancefreshdirect.com.

Mahindra Group plans to start selling its own-branded cereals and edible oil through a new brand called NuPro. It already sells select fruits today under the brand name Saboro.

Hindustan Unilever, the FMCG giant, stared piloting Humashop.com in March this year, connecting consumers with local retailers.

NDTV Group is also reportedly in talks to raise funds for its food website, SmartCooky, which will focus on health and nutrition. This will be built on an existing section on the NDTV website called NDTV Food, which currently boasts of about three million page views monthly.

However, selling groceries online comes with its share of challenges. The biggest one for these companies will be the need for a separate supply chain. Supplying from existing stores is difficult as it involves deciding which store to service from and whether that store has enough stock.

The online grocery space seems to be heating up a little too fast and already looks overcrowded. New entrants include Myonsto (Ahmedabad-based), Opinio (Bengaluru-based), iOrderFresh (NCR-based), eSadar (NCR-based), RainCan (Pune-based), Satvacart, VeggyKart and Lazylad (all three Gurgaon-based), etc.

Paytm had recently launched “Paytm Zip”, a brand new e-grocery app. Customers in Bangalore can now order groceries from their favorite stores and add orders on the fly. Paytm Zip manages the delivery & payment on their behalf with the store. However, some recent reports also suggest that the app has been taken off Google Play Store since it was currently in beta and would be officially launched later.

Early signs of consolidation are already visible here with Askme (owned by Getit Infoservices Private Limited) acquiring Delhi based Bestatlowest Online Services Pvt. Ltd. The company has now started offering online grocery services in NCR. Grofers has acquired Delhi based Mygreenbox. Godrej Nature’s Basket bought over the online grocer EkStop in an effort to create a hybrid model. 

A recent Morgan Stanley report suggests that the Indian Internet market will grow from $11 bn. in 2013 to $137 Bn. by 2020. Within this industry, eCommerce is expected to grow from $2.9 Bn. in 2013 to $102 Bn. by 2020. A similar report by Associated Chambers of Commerce in India (ASSOCHAM) in association with Deloitte expects the Indian eCommerce market to cross the $16 Bn. mark in 2015 and the $100 Bn. milestone by 2020.

Market reports also suggest that currently only 1% of the total retail sales in India happen through eCommerce. According to data from financial research firm VCCEdge, venture capital investors have already pumped in $2.46 Bn. into Indian start-ups till June this year, as compared to $2.34 Bn. in the whole of 2014. In a report published by UBS Securities earlier this year, it expects Indian eCommerce sector to turn profitable at an operating level by around 2020. “Investor concerns about e-commerce being a bubble in India are misplaced, in our view”, it said. 

Tell you what, I am actually already looking forward to taking out the next post.