Food services to essentials market space: The branch off

With the growing demand for online grocery delivery, here's how this space has attracted players from the food industry—F&B

Food services to essentials market space: The branch off

There was a time when very few restaurants used to provide delivery services to their customers. For many, this was an expensive affair as they had to invest in resources, set up the logistic infrastructure and the demand wasn’t enough to cover these expenses. The entry of food tech companies like Swiggy and Zomato, providing endless options for its consumers in the comfort of their home, has revolutionized the way Indians eat now.

Over the last few years, the food-tech industry has seen tremendous growth and is expected to grow from $4 Billion in 2019 to $8 Billion by 2022. With the rise in internet penetration in the country, these aggregators have expanded their reach to 500+ cities. For restaurateurs, partnering with food aggregators has helped them in widening the reach to their customers, which has resulted in growth in their sales.

A Critical Phase in Evolution

In recent times (the lock-down period), there has been a surge in the demand for essentials like groceries and medicines. While the existing players in the grocery delivery space like BigBasket and Grofers have seen a 2x jump in their order volume and 15-20 percent increase in the basket value, the modern trade retail giants like Spencer’s Retail, Metro Cash & Carry and Future group have upped their efforts to cater to the online demands of their customers.

Following the demand, the food-tech giants (Swiggy & Zomato) have ventured into the space of grocery delivery. Although Swiggy launched its service as Swiggy Stores in Feb 2019, it was limited to catering to customers in Bengaluru and Gurugram. They have now expanded their Swiggy Store operations by on-boarding over 5000 stores in 125 locations across the country, having tied up with brands like P&G, HUL, Godrej etc. Whereas Zomato launched Zomato Market in 80 cities.

To support these aggregators, and as a survival strategy when the order volumes have hit the ground, many restaurants have doubled as virtual grocery stores to cater to the demand. Restaurant chains like Wow! Momo, that has 274 kiosks and stores across 13 cities, have started selling essentials through the Swiggy Store from 60 of its stores and is expecting to increase the servicing store count to 100.

Other F&B brands like Box8 and Domino’s have leveraged on their existing logistic capabilities to venture into the delivery of essentials. Domino’s introduced Domino’s essentials, in collaboration with ITC Foods to provide grocery delivery to their customers in some cities.

What the future holds

Looking at the current scenario, does it mean the delivery of essentials like groceries would be the next big thing for these companies to target?

For Swiggy and Zomato, this has been an apt time to set their foot in the hyper-local grocery delivery space. As the online grocery market is seeing 106 percent year on year growth and is expected to touch $10.5 Billion by 2023, these food tech giants have a huge potential to make a mark in the industry by leveraging their existing customer base and logistic expertise.

With the growth and rise in demand, this space has caught the eye of many players—will there be enough of the pie for them to share and co-exist? Only time will tell.