In a strategic move to shift its focus towards private label entities in southern India, the renowned online food delivery platform, Swiggy, has made the decision to discontinue its cloud kitchen operations in the Delhi National Capital Region (NCR), including The Bowl Company [^1^]. This decision marks a significant shift in Swiggy’s approach to its cloud kitchen business model.
The End of an Experiment
Swiggy confirmed the closure of The Bowl Company, which had multiple locations across Delhi and Noida. The Bowl Company was initially launched as an “experiment” and continued to operate until the first week of November this year. Additionally, other Swiggy cloud kitchens in the Delhi-NCR region, including Breakfast Express and Goodness Kitchen, have also closed their doors.
According to a spokesperson from Swiggy, “Bringing new dining experiences to users was the driving force behind our decision to expand The Bowl Company into Delhi and the National Capital Region. While we remain committed to achieving operational excellence for the brand, this experiment has provided us with valuable insights. We will continue to expand and develop The Bowl Company in cities like Bangalore, Chennai, and Hyderabad.”
Shifting Focus to South India
Swiggy is now considering concentrating its cloud kitchen operations in southern Indian cities like Bengaluru and Chennai, where this business model has proven to be more successful than in northern cities. The company is also introducing several new private labels in these regions, including Soul Rasa and Stuffed in Bengaluru and Chennai.
Cloud kitchens, popularized by food delivery platforms, operate professional kitchens solely for meal preparation for delivery or takeout and do not offer dine-in services. This model allows for higher-profit margins compared to traditional restaurants featured on delivery platforms.
While cloud kitchens initially thrived in India, the onset of the COVID-19 pandemic saw a saturation of this market as almost all restaurants adopted a cloud kitchen model. Swiggy’s decision to close down some of its cloud kitchens is not unprecedented; in 2020, during the height of the pandemic, the company laid off over a thousand employees and shuttered several cloud kitchens [^2^].
Responding to Market Dynamics
In explaining the decision, Swiggy co-founder and CEO Sriharsha Majety stated, “We have chosen to scale back our involvement in related businesses that are likely to experience high volatility or reduced importance over the next 18 months. The most significant impact will be on our cloud kitchens business, which faces considerable uncertainty regarding volumes.”
According to Swiggy’s regulatory filings, food sales from Swiggy’s proprietary brands saw a decline of over 60 percent during FY21, totaling Rs. 83.3 crores, compared to Rs. 237.1 crores in FY20.
Majety also highlighted the impact of the pandemic on Swiggy’s cloud kitchen operations, stating, “We had just completed the rollout of our 120th kitchen when the pandemic hit. These ventures require significant capital expenditure, and suddenly, we found ourselves in the midst of the COVID crisis. It seemed like a grave misstep in terms of investment.”
In conclusion, Swiggy’s decision to shutter its cloud kitchens in the Delhi-NCR region reflects the evolving dynamics of the food delivery industry. The company’s strategic shift towards southern India and the development of private labels in these regions signal its commitment to adapt and thrive in a rapidly changing market.
FAQs
1. Why did Swiggy close its cloud kitchens in Delhi-NCR?
Swiggy decided to close its cloud kitchens in Delhi-NCR as part of a strategic shift towards focusing on southern Indian cities where the cloud kitchen model has been more successful.
2. What other cloud kitchens were affected by this decision?
Along with The Bowl Company, Swiggy also closed other cloud kitchens in the Delhi-NCR region, including Breakfast Express and Goodness Kitchen.
3. What is the reason behind Swiggy’s focus on southern India?
Swiggy aims to concentrate its cloud kitchen operations in southern Indian cities like Bengaluru and Chennai, where the market for such services has been more robust than in northern cities.
4. How has the COVID-19 pandemic impacted Swiggy’s cloud kitchen business?
The pandemic led to a saturation of the cloud kitchen market in India, affecting Swiggy’s cloud kitchen operations and prompting the company to make strategic changes.
5. What are Swiggy’s plans for its cloud kitchen business going forward?
Swiggy plans to continue expanding and developing its cloud kitchen business in cities like Bangalore, Chennai, and Hyderabad while introducing new private labels in these regions.
Conclusion
Swiggy’s decision to refocus its cloud kitchen business underscores the need for adaptability in the ever-changing food delivery industry. As it sets its sights on southern India and private label offerings, Swiggy is positioning itself for continued growth and success in this dynamic market.
