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NRAI sees dark clouds over Swiggy’s kitchen hubs



Mumbai: A restaurant owners’ body has sought a meeting with online food delivery companies to discuss the issue of commissions and private brand cloud kitchens, in a move that has the potential to hurt food delivery platform Swiggy.

The National Restaurant Association of India (NRAI) conveyed this in a letter earlier this week, and comes after it clashed with rival food delivery app Zomato over its discount and membership programmes, causing several restaurants under its fold and others to launch a #logout campaign against the platform.

The Bengaluru-based Swiggy has quietly launched two private kitchens — Goodness Kitchen and Breakfast Express — over the last two months. This came two years after it launched its first cloud kitchen project — Bowl Company in the city, which is a single serve option that it now plans to take across the country.

The company currently has more than 600 kitchens, both private brand as well as access kitchens, according to sources in Swiggy.

An access kitchen is an infrastructure service where Swiggy handles fixed costs such as rent, electricity and maintenance for a restaurant, in exchange for a larger share of commissions.

“In a situation such as access kitchen, the fixed costs for restaurants are almost zero, so the only thing they spend on is the salaries for the chef and raw material,” said a top Swiggy executive. It ensures higher margins for both players. “In this case, we get to command a higher commission because the restaurant will make a profit,” the executive added.

The NRAI, however, is not targeting its access kitchens, but has only pushed back against cloud kitchens.

“I think it is in bad faith that aggregators are starting to open competitors to its own vendors,” said Thomas Fenn, a member of the managing committee at NRAI, and founder of a Delhi-based restaurant. Swiggy has an incentive to bump up its own brand compared to others, he said.

Swiggy, however, said it was just expanding the market.

“With private brands, we aim to meet hitherto unmet consumer needs,” said a Swiggy spokesperson in an email. “For example, over two years ago, we saw that single-use ordering was a gap in the market and created The Bowl Company. While we have grown the brand based on need gaps, we are happy that this has led to numerous partner restaurants (pan-India) following the trend, ultimately meeting the same objective of giving more choice to consumers.”

Swiggy is currently piloting a breakfast project, tentatively caller Droppt, said three people with knowledge of its operations. The pilot, in which Swiggy prepares a multi-option breakfast for select condos on a subscription model, is being tested in a few select neighborhoods in Bengaluru.

It is part of a strategy to introduce Swiggy Daily, a product that delivers lunch and dinner just like the dabbawallahs in Mumbai. This increases usage and the company gets to acquire a customer without spending on discounts. Though it is not part of Swiggy’s cloud kitchen yet, the project gives Swiggy a way to expand its cloud kitchen cover.

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