Even as publicly-listed Zomato is growing its portfolio to include intercity deliveries, home-style meals, and even plumbers and electricians, its still-private rival appears to be shrinking its own footprint.
Swiggy has sold off its cloud kitchen arm Access Kitchen to cloud kitchen company Kitchens@. Swiggy’s Access kitchens allowed both offline and online restaurants to open kitchen spaces in areas that they did not operate to ensure faster delivery. This business has now been sold off to a dedicated cloud-kitchen provider in exchange for shares.
“Swiggy Access was started with the aim to bridge hyperlocal gaps in restaurant supply and solve for variety, quality, and convenience of food,” said Swiggy CFO Rahul Bothra. “Since its inception, Access has enabled several restaurant partners to innovate and expand their reach to new customers in a cost-effective manner. We are confident that Kitchens@ is fully equipped to nurture this ecosystem by innovating and building more supply. Swiggy continues to believe in the potential of this space and remains invested as a stakeholder in Kitchens@,” he added.
“The addition of Swiggy’s Access kitchens will bolster the reach and operations of Kitchens@’s in four cities across 52 locations and 700+ kitchens, providing customers with more convenient and efficient food delivery options,” said Kitchens@ CEO Junaiz Kizhakkayil,
Kitchens@ was founded in 2018 by Junaiz Kizhakkayil, and runs cloud kitchens across India. It allows brands to quickly set up their cloud kitchens, and provides equipment, such as stoves, an induction cooker, utensils and maintenance and backup services. The company also provides a tech stack for these cloud kitchens to begin accepting orders, and also supplies raw ingredients to these kitchens. After acquiring Swiggy’s cloud kitchen ops, its overall gross merchandize value would be $65 million (Rs. 520 crore).
But while Kitchens@ has clearly managed to build a substantial business for itself, Swiggy appears to have bowed out of the space. There could’ve been several advantages for Swiggy to run its own cloud kitchen operations — Swiggy has data of which dishes are popular, and could’ve used it to optimize the locations and menus of kitchens, and its ordering system could’ve been directly integrated with the tech stack of these online kitchens.
Swiggy, though, has now exited this business. This appears to be a part of a larger cost-cutting trend at the company — Swiggy had earlier laid off 350 employees in January. It had also announced that it would be shutting down its meal delivery vertical. The cloud kitchens space, too, hasn’t had the best time of late — Uber founder Travis Kalanick’s new cloud kitchens company, named Cloud Kitchens, recently shut down its India operations and fired its entire staff.
But Swiggy’s cost cutting measures are in direct contrast to how arch-rival Zomato is currently looking to enter new verticals. Over the last few quarters, Zomato has acquired a grocery delivery company, launched an inter-city delivery service, looked to foray into home-style meals, and if reports are to be believed, is also looking to provide at-home services including plumbers and electricians. The contrasting approaches are perhaps explained by their differing incentives — Zomato is publicly listed, and must continue to rapidly grow its topline to justify its losses. Swiggy, on the other hand, had been last been valued at $10 billion, while Zomato is currently worth only $5.5 billion on the stock markets. As such, Swiggy might need to shed some fat before it can raise its next round of funding at a similar valuation. Swiggy and Zomato might be neck-and-neck in the food delivery space, but seem to be adopting diametrically different strategies as they look to navigate these challenging times in India’s tech space.