India’s online food services have plenty of room to grow – The Economic Times

Clipped from: https://economictimes.indiatimes.com/tech/startups/indias-online-food-services-have-plenty-of-room-to-grow/articleshow/86842016.cmsSynopsis

The post-pandemic revival in India’s online food services industry has made Zomato a listed firm, drawn millions for Swiggy, and turned Rebel Foods into a unicorn. Their future only looks brighter, according to a recent report.

Mumbai: The post-pandemic revival in India’s online food services industry has given the country its first listed food delivery company and now minted a cloud kitchen unicorn.

And the future only looks brighter, according to a recent report.

The online penetration of food services in India is set to double by 2025 — clocking a gross merchandise value of nearly $13 billion, management consultancy RedSeer Consulting said in a report dated August 30. GMV is the total value of goods sold over a given period of time before deduction of fees or expenses. It is a key performance metric for online businesses.

“Although market was hit by the pandemic, it has also accelerated the pace of online adoption,” RedSeer’s Rohan Agarwal and Abhijeet Routray said in the report. “Similar to many other markets, this market is also seeing a rising online growth, especially post pandemic, and it is gaining prominence in the overall share of the market.”

Redseer-1

(Graphics: Rahul Awasthi/ETtech)
On Thursday, Rebel Foodsbecame the first cloud kitchen to enter India’s unicorn club after raising $175 million in a funding round led by Qatar Investment Authority (QIA) along with the participation of existing investors Coatue and Evolvence India. The operator of Faasos and Behrouz Biryani food brands said it is setting a course for an initial public offering in the next 18-24 months.

Nearly three months ago,ZomatoNSE 1.59 % Ltd. listed on the Indian stock exchanges at more than 50% premium to its issue price, a week after its IPO was subscribed more than 35 times. In response, chief rival Swiggyraised $1.25 billion from Japan’s SoftBank Group Corp. and others at a $5 billion valuation. It is now in talks to raise $500-600 million in a funding round that would double its valuation to $10 billion, ET reported on Sept. 28.

Still, while million-dollar fundraisings, unicorns and initial public offerings are welcome, India’s online food industry has a long way to go, as the market remains severely underpenetrated, when compared to the US and China. In 2019, Indians spent $7.01 billion on online food services and $90.29 billion on home cooked meals, RedSeer’s report showed. The comparison wasn’t as stark in the case of US and China, as the graphic below shows. That leaves a lot of room for online food services to grow.

Redseer-2

Within the food delivery space, it is the standalone restaurants that dominate the market. This also represents a significant opportunity for online food delivery platforms to aggregate supply on their platforms, similar to what happened in China.

Redseer-3

“India is expected to be the third largest consumer market by 2030, which will be a major boost for the overall consumer economy,” according to the RedSeer report. The adoption of digital services by smaller cities and branded food services ecosystem will further the growth of online food delivery, it added.

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