The rise of digital technology, with greater internet penetration and smartphone usage, is driving major changes in the online delivery market in India, allowing online food delivery platforms to conquer market by offering a wide range of food products, according to the report.
The online food delivery market is segmented into two business models with different delivery methods: meals ordered online through a restaurant website and delivered directly by the restaurant and online meal ordering and delivery, all two made by a platform such as Zomato or Swiggy.
“A restaurant, unless they are a large, organized chain, can never set up their delivery and be profitable. The hassle is too huge and even if they set it up, the number of orders they will get aggregators won’t be as high,” said Sriram Nair, founder of Terra Foods-backed Agility Ventures. “Zomato and Swiggy have built all the delivery infrastructure and awareness, so it’s not possible to replicate the same thing by yourself.”
The platform-to-consumer delivery segment showed the strongest growth between the two delivery business models, posting a CAGR of 100% between fiscal 2016 and fiscal 2020, a trend that is expected to continue at a CAGR of 15.1% to reach $9.7 billion by FY25 from $4.8 billion in FY2020.
“The behavior of the customer has been permanently changed which has established the need for the services. However, to survive in the long term, they must be very reasonable with the prices and additional charges that the consumer has to pay for the convenience of ordering through these apps,” said Dhianu Das, co-founder of Agility Ventures. “So it’s mostly the balance between price and convenience. Passengers need to be taken care of by these service providers, because if they don’t make money, this business model will not be successful in the long term.”
QSR is the fastest growing industry in India compared to other segments of the food service industry. The QSR channel leads the industry in terms of number of outlets in 2020, with an outlet number of 1,995,104. The total number of outlets in the channel increased by a CAGR of 2%. between 2015 and 2020, the highest among all catering channels, the Sharekhan report added.
“While there is tremendous excitement for the huge opportunity ahead, QSR business owners face a variety of challenges ranging from low awareness of new food concepts, technology adoption, brand visibility and access to capital,” said Bhavik Vasa, co-founder and CEO of GetVantage. “We are working closely with many of QSR’s founders to accelerate access to growth capital and other tools, so they can invest in areas such as upgrading technology and equipment, increased inventory, and marketing. This helps optimize business operations, streamline cash flow, and expand reach to delight more customers with innovative dining experiences.”
After two years of underperformance caused by COVID-related uncertainties, QSR companies prepared to post strong recovery-based performance in FY23 and FY24. Most companies saw a strong recovery in the first quarter of fiscal year 2023, with average daily sales (ADS) of all covered businesses improving ahead of pre-COVID sales. This is explained by a strong recovery in catering activity with an upturn in footfall, a sustained frequency of orders via digital platforms and a significant shift to branded products. The industry expects the strong momentum to continue over the next few quarters, with a marked improvement in same-store sales for the most part.