When Food and Tech collide

These are exciting times. Physical seems to be giving way to digital. The collision of food and technology has thrown up a plethora of interesting and vibrant business models. The F&B industry traditionally has not been a frontrunner as far as technology adoption is concerned. However, what has been underway for quite some time is nothing short of a revolution that will completely redefine and reshape the way this industry has worked so far.

Here’s a snapshot of some of the areas where the impact of technology has been the most visible:

• Local businesses go global in a flash

Most food retailing businesses had for long relied only on local advertising and word-of-mouth publicity to flourish. Online listings and advertising changed all that forever. It gave these businesses visibility on a scale unimaginable till a few years back.

Yelp sparked off the trend in the US. In India, there were early movers like Burrp! and DineOut but they ended up being acquired by larger business houses like TV18 and Times Group.

Zomato has clearly been the category leader in this space by a considerable margin so far. What started off as a restaurant listing site has today blossomed into a powerhouse offering innumerable services from listings to reservations and order delivery. Organic growth as well as global acquisitions all over the world map have ensured that the company has grown at a scorching pace. The recent buyout of Urbanspoon has catapulted Zomato into the global arena as one of the strongest players. “We want to own the communication layer between restaurant businesses and customers”, said Pankaj Chaddah, co-founder and chief operating officer at Zomato. The statement is not just reflective of Zomato’s ambition, it also underscores the immense opportunities inherent in this space. Zomato Book (table booking), Zomato Order (food delivery), Zomato Cashless (cashless payments), Zomato Base (a cloud-based point-of-sale product for restaurants) and Zomato for Business (an app for restaurant owners) are clearly steps in the right direction.

• Last mile delivery gets the much-needed attention

Although India boasts of a large and evolved restaurant sector, the delivery chain has been the weak link. It has traditionally been quite a task to get hold of the contact details of one’s preferred restaurant and then getting access to it for ordering food.

Foodpanda hopes to solve this problem by becoming the platform of choice that enables the customers to place orders online with ease, with access to all the relevant information such as menus, prices and timings. What’s more, it also offers a pay-on-delivery option. For customers who are starved for time or are simply too tired or lazy to go out to dine, this surely appears to be what they have been praying for.

For now, Foodpanda has emerged as the category leader as far as online food ordering and delivery segment in India is concerned. It has also been busy acquiring competitors like JustEat and TastyKhana in order to further consolidate its position in the market. Globally, Foodpanda was incubated by Berlin-headquartered Rocket Internet, an online venture builder and accelerator. It seems to display a similar appetite for gobbling up key competitors worldwide where it is now present across 40 countries and has created a new Global Online Takeaway Group.

TinyOwl, another food ordering service, has chosen the mobile-first route to go to the market. The app detects the location of the customers and suggests restaurants nearby.

Faaso’s, a Pune based online food service company, competes with these companies and delivers wraps and rice items in a few cities.

Other startups such as Swiggy, DeliveryChef, Titbit, SpoonJoy, FreshMenu, FRSH, Brekkie and iTiffin (the list is virtually endless) seem to have sensed the opportunity in what is almost a Rs. 1000 crore food delivery market today and are ramping up at a fast pace.

Another way to do business is to send trained cooks along with groceries to prepare meals at homes, something that CookAss will be launching.

The local cab and auto rickshaw aggregator, Ola, has recently launched a food delivery feature in its app called “Ola Café” in select areas. It has followed in the footsteps of rival Uber, which runs Uber Fresh in some other parts of the world.

Not to be left behind, traditional brick-and-mortar businesses like Domino’s Pizza have started scaling up their online presence significantly. Currently, about 30% of its business comes from online, up from 16% last year. It is expected to launch a Facebook Store shortly which will allow its customers to order food directly from Facebook itself. India is now the second largest market for Facebook, with 112 Mn. active users.

Kishore Biyani’s Future Group has launched a service called Big Bazaar Direct that allows customers to place orders directly to its appointed franchisees through tablets loaded with the product catalogues.

The group has also recently formed a strategic alliance with Amazon to sell its products on the marketplace. Although this partnership will initially focus only on the fashion brands, it is expected to cover all other categories in the time to come.

• Essentials at your finger tips

Hyper-local delivery startups such as Grofers are tapping the local kirana stores and other vendors to bridge the gap between them and the consumers. They aim to strengthen the last mile connectivity between these two points and deliver groceries and other necessities at the doorstep.

PepperTap, Localbanya, BigBasket, Grocermax and Meragrocer are the other startups competing in this segment.

Amazon India has also launched its Kirana Now solution in some parts of Bangalore where it uses the local stores to service the customers.

Snapdeal has already tied up with Godrej Nature’s Basket early this year to sell its products online.

Flipkart is expected to start the sales of groceries on its website soon.

• Niche segments get created

Some players have decided to go a step further and are attempting to carve up the market into finer niche segments.

Companies which are able to combine travel with food are being looked at with a lot of interest. If you are travelling and craving for home-cooked delicacies, MealTango is here to help. Having started off an in-home dining platform for people who love home-cooked food, it today introduces travelers to different dining experiences with local populace in villages and homes. It plans to start offering such meals as takeaways shortly. Detours India is organizing food tours and offering customized experiences. Bad food experience on a train travel is set to be a thing of the past with companies like RailYatri and TravelKhana set to bring your favourite dishes right up to the platform.

Sadananda Maiya of Maiya Beverages and Foods plans to launch a website for selling his dosa and idly mixes. He headed MTR Foods before selling it to Norwegian Orkla in 2007. His firm has tied up with Delhivery, an eCommerce logistics and enablement specialist, for taking care of the domestic logistics.

GourmetItUp (now called WowTables) has teamed up with top-notch restaurants to offer customized premium dining experiences, including table reservations.

Health food business has also witnessed its share of startups in the form of Eatlo and Snackosaur. Both the companies promise to deliver food high on quality and nutritional value.

• Big names jump in the fray

Rajesh Sawhney, former Reliance Entertainment president and GSF Accelerator founder, has launched Innerchef. The company is offering great recipes in a box, complete with all the necessary ingredients, for people to cook and eat fresh. Other co-founders include Di Ghent Café founder Bal and Chef Heena Karia Thakkar.

Vir Sanghvi, one of the most well-known food writers, has launched EasyDiner, an online platform that offers reviews, deals and table reservations. The site boasts of curated content as opposed to user generated content offered by other players. The advisory council member has some of the most eminent names of the industry: Vikram Oberoi, Dinesh Nair, Anjan Chatterjee, Zorawar Kalra, Marryam H Reshii, Rashmi Uday Singh, Dilip Puri, etc.

Celebrity Chef Sanjeev Kapoor is also expected to throw his hat in the ring by launching an online food discovery platform.

• Unique alliances

Some of the recent alliances should make you sit up and take notice in the way in which they seem to be connecting the dots across the value chain. Zomato has tied up with Uber to enable its users to book a ride to the restaurant on the Zomato app. Uber, Foodpanda and ZO Rooms have also formed a three way partnership for travelers to travel, eat and stay. The endeavour is to create a truly seamless experience for customers.

• And then…some more

Most of these companies are also sitting tons of data, both of the food establishments as well as of the customers. This is a virtual goldmine for analytics companies looking at crunching and milking this for valuable insights.

Delhi based Limetray helps restaurants run their daily business better by offering an online platform for ordering, online presence management and CRM.

In the US, Google recently added a feature that lets its customers order food directly from the mobile searches. It has tied up with delivery providers for fulfillment of these orders.

• It’s raining moolah

The sector has evinced keen interest from the investors who are now coming down in droves to grab a pie of this fast-transforming market. Zomato has raised more than $160 Mn. from marquee investors like Sequoia Capital whereas Foodpanda has seen investments of almost $300 Mn. globally from AB Kinnevik and Phenomen Ventures. Similarly, TinyOwl has received funding of almost $ 20 Mn. from Matrix Partners, Nexus Venture Partners and Sequoia Capital.

According to estimates by startup analytics firm Traxcn!, there has been a total investment of $167 Mn. from 2014 till date in the offline F&B space. The same period has seen a total investment of $92 Mn. in food tech companies. This is spread across angel funds, venture capitalists, private equity firms and others.

With consolidation well underway in eCommerce, it’s only a matter of time before it percolates other sectors as well. Some of these companies have common investors and therefore, there exists a strong possibility of that happening.

• Pockets of skepticism remain

While valid concerns exist regarding the sky-high valuations that some of these companies are attracting and their high cash burn rates & customer acquisition costs, the growth rates that these consumer-focussed internet companies are expected to clock in are equally crazy.

With its population of 1.2 billion people, of which more than half are below the age of 25, India has been seen as the land of opportunities for long.

While the food retailing market in India is estimated to be $ 300 billion, the restaurant market is pegged at $ 50 billion. The food delivery market is worth almost a billion dollars. The overall Food & Beverage sector is likely to become a Rs. 3.8 trillion industry by 2017, says a report by Grant Thornton and FICCI. These are mind boggling numbers by any standards and clearly reflect the embedded potential.

On the customer side, the country’s rapidly growing middle class and young professionals with high disposable incomes and an appetite for experimenting with new foods are a potent mix. Greater number of nuclear families and working women also are playing their part.

On the supply side, hordes of international chains are entering the playground. Casual dining joints are dishing out cuisines like Italian, American and Thai which were once considered to be the exclusive domain of the high-end restaurants and hotels. Tea and Coffee chains and microbreweries are taking beverages to newer heights in their own ways. All this has resulted in a customer who is highly pampered for choice.

Add to that the high number of internet users (over 300 Mn.), most of them mobile-first and mobile-only, and you see the pieces of the jigsaw starting to fit in together.

Mary Meeker’s latest report clearly illustrates what is called “leapfrogging” to describe the rapidly growing use of mobile internet in India. The country is the most “Mobilised” in the world (at 40% plus) as far as eCommerce is concerned.

I have managed to only scratch the tip of the iceberg. I am by no means an authority in this domain but the ring-side view, as I see it, convinces me that there exists an ocean of possibilities here waiting to be tapped.

With some of these companies fast encroaching into each other’s territories, the lines are blurring fast and we will surely be witness to no-holds-barred fistfights between them in their quest to dominate the market.

The F&B industry was ripe for disruption for quite some time now. These developments have completely changed the rules of the game. As they say with a chuckle nowadays, “abhi to party shuru hui hai”.