Online delivery service Swiggy has sold its Cloud Kitchen segment for an undisclosed sum to Kitchens@, a significant rival in the quickly growing cloud kitchen market, as the growth rate for food delivery slows down. Swiggy’s Access, an online food aggregator, will purchase a share in Kitchens@ through an all-equity acquisition.
Why did Swiggy sell its cloud kitchen business?
In 2017, Swiggy Access was released, making it the first business to employ the Cloud Kitchen methodology. The Swiggy Access project gives restaurant partners the opportunity to build cooking facilities in locations where they do not already have operations, enhancing choice and expediting delivery for clients.
The addition of Swiggy’s Access kitchens, which span 52 locations and more than 700 kitchens across four cities, will expand Kitchens@’s operations and expand its reach while providing customers with more practical and efficient meal delivery options, as per Junaiz Kizhakkayil, CEO of Kitchens@.
According to Kitchens@, Swiggy will be able to increase its culinary choices and meet the wants of customers in certain regions thanks to its analysis of regional demand and selection of top-performing partners. In order to solve the lack of diversity, high quality, and convenient meals, Swiggy Access’ founders decided to fill in any hyperlocal supply gaps in the restaurant industry. Rahul Bothra, Swiggy’s CFO, said that Access has, since its inception, assisted a number of restaurant partners in expanding and reaching out to new customers economically.
The recent transaction allows Kitchens@ to have a yearly GMV of ₹520 crores. For the next six months, the business hopes to generate $100 million in sales, and it has already obtained letters of intent from over 40 international and national businesses to work together under a master franchise system.
Swiggy announced in January that it would be firing 380 workers in order to reduce costs. “The growth rate of food delivery has drastically decreased when compared to our predictions. To achieve our profitability goals, this meant that we had to review all of our indirect costs” Co-founder and CEO Sriharsha Majety stated in an email to staff.
The business also announced that it would soon be closing its meat marketplace because, after numerous iterations, it was unable to find a product-market match. In comparison to the previous fiscal year, losses at the online food delivery service more than doubled to ₹3,629 crores in the financial year 2022.
According to its fiscal year report filed with the Registrar of Companies, total expenses increased 13% to ₹9,574.5 million in the financial year 2022.
