India’s FoodTech future: What can create a win-win?
12 Nov 2019

India’s food aggregator market reached US$ 4.1B in 2019, with Dark Kitchens to be a US$ 357M opportunity

The journey for food aggregators in India has taken many interesting turns in the past decade. From offering food choices to connecting to the customer through giant delivery fleets, space has witnessed many interesting developments. The latest one being an interest safeguarding debate between aggregators and restaurants. With a lot trending on the subject across mediums, what remains is how can the conditions be turned favorable, ushering in a new trend in the sector, which creates a win-win for both parties.

Almost two months after the National Restaurant Association of India-NRAI emulated food aggregators with the #Logout campaign, it has now come together with the Federation of Hotel and Restaurant Associations of India-FHRAI in this effort. On receiving backing from FHRAI along with few restaurant associations, the message they are trying to convey is, all food aggregators must consult restaurants before planning any new discount offers to ascertain that customers get the benefit, without having the restaurants run into losses.

What’s causing the stir?

It can be assumed that all food aggregators plan programs to make it profitable for everyone; them, the dining partners as well as the customers. For example, the Gold program by Zomato was initially intended to accommodate a beneficial revenue plan for both, the brand and their respective restaurant partners. Through this plan, diners were able to achieve improved visibility and earn some regular customers and gain significant reviews due to the free perks. And the food aggregator, on the other hand, could use the collections to improve its consumer base.

Though the plan kicked off well, hurdles came up when the program which was planned for a few subscribers, was opted by masses including the burgeoning working population. The restaurants were not prepared for this outcome. On the other hand, to survive in the market, restaurants often promote deep discounts offline as well, to remain competitive amongst each other. Some prefer to offer a discount of up to 50 percent, whereas many 1+1 on food or drinks, whichever they find suitable. This comes in direct competition with similar offerings from food aggregators and FoodTech companies. Such discontent is higher in locally recognized restaurants as compared to newer ones where these platforms act as enablers. Recognized restaurants also feel that Zomato Gold like programs and online discounting is not increasing their customer base but just converting regular customers into users of such programs.

How can we calm the storm?

To address this situation, proper scrutiny of all the existing schemes, along with suggestions from several restaurant partners can be welcomed. With expansion on the cards to penetrate Tier II and III cities and towns, all e-kitchens, dark kitchens, and FoodTech players can meet both ends of the demands to keep running and onboarding. This can also be considered as a wake-up call for all the food aggregators as well as the restaurant players, to come to the ground. Here they need to do 100x more for each other than they have been doing so far.

In the meantime, eateries who fear the risk of being outnumbered if not given proper discounts can propose clear terms of the agreement, where no one will be trying to grab the position of the other. More accurately recognize the importance of peaceful co-existence and engagement, where not one monopolizes the rule, but conduct the business in a more constructive and valuable method.

Authored by (at the time of writing):

Madhur Singhal, Leader, Technology and Internet Practice

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