You can order food online, check a restaurant’s menu to ensure it fits your pocket, order groceries home instead of scanning an aisle at the mall and even order ingredients home and play chef.
Food apps took over everyone’s Play and App store over six months ago, when I was taking up my new role at Burrp. Almost every report in a publication, on TV or a blog talking about the start-up ecosystem, was inundated with multimillion dollar deals and billion dollar valuations entering the food-tech sector. It’s safe to say that every VC and angel investor had or wanted to have a food start-up on their portfolio.
Presently the situation has turned grim. Companies that were the talk of every report are now in the news for all the wrong reasons and people are left wondering if layoffs and shuttering operations are a sign of an impending tsunami.
Act 1: Boom – The Opportunity – is part one of a three-part series. Recent reports have been calling this the apocalypse of food-tech and in some acute cases, the beginning of the end of the start-up ecosystem; so let’s break down the food-tech sector to see what’s really going on.
Act 1: The Boom – The Opportunity
India’s food services market is vibrant and worth $48 billion; of which the organised food services market is valued at $14 Billion and this is growing at over 25 per cent. Most of the food services market in India continues to be unorganised with Quick Service Restaurants (QSRs) and chain restaurants eating up a very small portion of this pie.
Why wouldn’t an investor see an opportunity? Well, the growth pace did attract investors to pump money into the food-tech businesses that have been around for less than a year. Growth of e-commerce, e-payments and the Internet penetration has given food-tech companies an advantage that lets them attract investment in excess of $200 MN in 2015. Food-tech is easily a favourite pick among venture capitalists. And let me add this boldly here: This is not the end.
Considerable money will still come in and serenade this sector over the next few years. Whether it will yield returns or go down the drain – only time can tell.
Are you still wondering what’s fuelling the food tech revolution? Take a look...
Roti, Kapda aur Makaan
Food makes-up for over half of the expenditure of a regular urban household; and it will be a major item in the consumption basket over next few decades. Everyone eats out and the frequency is only going to increase.
Increased urbanisation, consumerism, young population, double income households and greater spending capacity are amplifying the behaviour of eating out or ordering-in.
Changing consumer tastes and preferences
You’d earlier drive straight home to find food, now a platter of choices await – from QSRs to pre-fixed-menu formats. The consumer has taken a fancy to international cuisines, which has created an opportunity for many entrepreneurs. The changing lifestyle and lack of time has made eating-out a simpler choice.
Digital existence in the physical world
The ecommerce revolution has made you and me more comfortable with swapping from physically shopping to now hunting for the right fit of shoes online; and has led to the collapse of the physical and the digital divide.
The Food and Beverage (F&B) industry has always been an unorganised and fragmented market. Any large unorganised market witnesses entrants trying to solve different problems with different approaches. While the F&B space witnessed the entrance of global brands like Mc Donald’s and home-grown brands such as Cafe Coffee Day; the online space was successfully cracked first by Burrp in 2006 that aimed to replicate the model of Yelp in India.
So, what does food-tech really mean? Simply put, food-tech is any tech company that is trying to address the problems of the F&B industry. Let’s divide the food-tech space...
Food Discovery – Solving the problem of finding great food around you
You could be stuck with where to find the best cheeseburger in your city, or have to hunt down a bar that has enough space to fit your 20 friends, but also has the right volume of music or maybe even the perfect lighting for a date. This segment irons out these issues and helps you find the right place, with the kind of ambience and food you want. However, it commonly boils down to Restaurant Discovery and Dish Discovery. Restaurant Discovery answers the question: Where, and Dish Discovery – which is only a logical extension of restaurant discovery –answers the question: What. The two go hand-in-hand to give users a great experience, while ambience, pricing and service come a close second.
Food Ordering – Connecting the consumer with the restaurant to place an order
This could be either ordering in a restaurant or through a restaurant aggregator. Every conversation between the consumer and the restaurant is vital. Most of these conversations happen today over a phone call. Can technology enable people to connect by giving the user additional information while ordering a dish? For many who have questions with respect to the ingredients, taste and how the dish looks, technology could be a big enabler.
Table Booking – Connecting the consumer with the restaurant for reservation
Again, a lot of these conversations are offline today. To reserve a table at a restaurant, you have to either call the restaurant or turn up there. Technology can enhance the experience of a consumer when it comes to tackling these problems.
Cloud kitchen and online-first restaurants
Simply put, cloud kitchens could be home-cooks operating online, and websites or apps that deliver ingredients to you to cook at home. Cloud kitchens do not have a physical store and deliver food to the consumer using either its own or third-party infrastructure. Currently, this is a sector that is witnessing significant investment activity. There are no seat constraints in this format. There is lower dependency on quality real estate, hence lower costs.
Enterprise Solution – Enabling the restaurant owner with tools to manage the establishment efficiently
Payments in restaurant, splitting bills, customer feedback, customer relationship management and many such solutions are all part of the tool-kit every restaurateur needs. Presently, this segment has been completely ignored by a lot of entrepreneurs/investors. For a tech solution to function well, every stakeholder in the value chain needs to be in sync with each other. Currently, every player is trying to have their own platform, which is impossible.
Hybrid and Niche Models
Many start-ups are trying to find a niche by combining more than one of the above segments, like having a chef over at your venue to cook or order-in a home-cooked or a chef-cooked meal.
For now, there’s a market that food-tech can add value to, but it’s important to have a more holistic view and look at it as an ecosystem enabler instead of looking at each of the segments separately. Do you still believe it may be the end of the era of the food-tech sector?
(The author of this article is Pradeep Prabhu – Co business head, BURRP. The views expressed here are solely those of the author and do not in any way represent the views of the publication)