Inside Zomato’s 10-minute delivery gamble: A value proposition and risk

The joke in food delivery platform Zomato is that teams sometimes come to know of new plans and strategies after Zomato founder Deepinder Goyal announces them on social media.

While his latest project – food delivery in 10 minutes – didn’t come out of the blue, stakeholders were still said to have been taken aback when he went ahead and announced it before tying up loose ends.

“The discussions were on for the last two months, but the feedback that Zomato got from cloud kitchen owners was for a 20-minute delivery,” a person familiar with the development said. “The 10-minute announcement took many by surprise. They (Zomato) are at least 30-40 days away from execution.”

The person said the initial discussions on speedy food delivery centered on using bain-marie counters with a range of combo meals close to delivery locations. A bain-marie is a hot water vessel in which a container of food is placed for slow cooking and keeping warm over some time.

“You will need seven minutes of preparation time and a delivery radius of 1 km,” the person said, asking not to be identified because the discussions are confidential. “Think hot rice bowls that can be quickly assembled and lunch combos. This will need 20 minutes to deliver overall. Ten minutes is possible for bakery items and frozen foods, the type you get at airport counters or in stores abroad. But delivering egg puffs and banana cakes in 10 minutes isn’t food tech; it’s something you can Dunzo from your local bakery.”

The plan that Goyal tweeted to the world was very different.

Goyal hopes to compress the 30-minute delivery schedule by shrinking kitchen preparation time to 2-4 minutes using limited, fast-selling menus and predictable demand to deliver food within 1-2 km, which will take 3-6 minutes to cover. Goyal believes it is possible to provide biryani, momos, bread omelet, poha, coffee, tea, and even instant noodles in 10 minutes.

Zomato’s plan to disrupt online food delivery and steal a march over rivals such as Swiggy has worried restaurateurs, angered gig worker unions, and outraged social media users, who believe the company is putting the lives of delivery partners at risk.

“10 min mein Fresh bana kar deliver ho jayega? Why put risk to the life of the delivery boy? Pro 30 min delivery itself was ok, 20 min bacha kar jyadatar log Whatsapp, FB/Twitter par hi to spend karenge? (Will you be able to make fresh food and deliver it in 10 minutes? 30 mins were OK, the 20 minutes that people save will be spent on social media),” a Twitter user wrote after the Zomato founder unveiled the plan to deliver food in 10 minutes on March 21.

Another user wrote: “To cover 5km stretch, it takes more than 50mins, and I live in NCR. The roads were all dug up for the upcoming expressway. I neither need this quick delivery nor prefer to order every day.”

Goyal’s Twitter timeline has been flooded with messages questioning the strategy and intent behind Zomato Instant, the recently listed company’s new offering through which it wants to deliver food in 10 minutes. A pilot is planned with four finishing stations in Gurugram next month.

Moneycontrol spoke to cloud kitchen owners, supply chain vendors, and others tracking the market to assess if Zomato’s plan is feasible.

“Why even announce this first, without starting the pilot?” a cloud kitchen owner asked, raising doubts of whether the announcement was a gimmick and a way to justify its recent investment and the planned acquisition of Blinkit. This startup promises grocery delivery in 10 minutes.

The move comes when 10-minute grocery delivery has seen heightened activity. Blinkit rebranded itself from Grofers in December but has struggled, prompting its backer Zomato to extend a $150 million credit line with a merger plan.

Quality worry

Executives insist that Blinkit’s backend or 10-minute delivery infrastructure will not be used for Zomato Instant, implemented exclusively by Zomato.

Restaurant owners are already worried about the quality of food that can be prepared and delivered in 10 minutes.

“I just hope that the restaurants don’t have to pay the price,” said Riyaaz Amlani, a restaurateur and trustee of the National Restaurant Association of India. “Good food takes time to be prepared. With 10 minutes, they will have just five minutes for packaging and five minutes of delivery time… there could be some degree of automation with cooking food, but at the end of the day, you can’t get the entire process automated. Cooking will still be required to be done to some degree… nobody can cook and serve fresh food in 10 minutes.”

While quality is likely to dip, these businesses are choosing convenience over freshness, Amlani said.

Frozen food

Goyal, in his announcement, mentioned ‘finishing stations’ a few times. The plan is to set up a dark store-like structure containing instant food items from where delivery will start for Zomato Instant, said a person privy to the development.

“Most brands have centralized kitchens, and other outlets are used as a delivery hub, where last-minute finishing is done,” said an analyst tracking this market. While there is an appetite for 10-minute food delivery, execution is callous and will require a lot of learnings to make it feasible, the analyst said.

“Scalability of this is a question,” the analyst added.

Whether cloud kitchens or quick-service restaurants, 80-90 dishes are based on frozen food, making delivery more accessible; wraps, momos, pizzas, and burger patties are popular frozen food items.

“In Indian cuisine, the latest is biryani. Frozen biryani has seen strong growth in the past few months,” said a frozen food manufacturer who works with top cloud kitchens.

After the pandemic, growth in the frozen food business has been strong.

“Pre-pandemic, we could talk only to the organized cloud kitchens starting from scratch. But, now we have grown 16-times (in terms of order volume) in the last six months,” said the founder of a frozen food brand.

Automated preparation

Zomato’s business-to-business venture has focused intensely on frozen food supplies to partner restaurants and helped them with processes and other infrastructure. Zomato invested $5 million in food robotics company Mukunda Foods, which designs and manufactures intelligent robotic equipment to automate food preparation for restaurants.

“The food industry is moving towards standardization. Even if delivering such items in 10 minutes can be done, the burden will be on the smaller restaurants and kitchens, which do not have the capital to invest in automation or other machinery,” said a Bengaluru-based cloud kitchen owner.

Depending on the cuisine and the volume of orders, restaurants or QSRs generally invest Rs 30,000-Rs 3 lakh, says a founder from the robotics space.

“The 10-minute delivery will be for specific nearby locations, applicable to food items that are popular and standardized,” said Goyal.

“Based on predictive analytics, these businesses know exactly the type of cuisines and volumes likely to be ordered,” said a person who has worked at a food delivery platform. The person added that this play is a mix of semi-processed or semi-assembled food, analytics, and supply chain. The average delivery time for both Swiggy and Zomato is currently 20-25 minutes.

Not the first time

This is not the first time that food delivery platforms are trying to crunch delivery times. In 2015, Swiggy tied up with cloud kitchen operators such as Eatongo and Brekkie to deliver food in 15 minutes. But it faced challenges in unit economics and serving hot and fresh food and decided not to scale up the venture without all the answers.

Around the same time, Ola Cafe, the food delivery business of Ola, experimented with 10-minute delivery within a specified area.

“They had 2-3 partner restaurants, dedicated drivers, fixed time slots, and limited selection. For example, if I were in the Embassy Golf Links area, I would get chicken and rice for lunch in 10 minutes,” a former team member said.

But the offering didn’t scale up, and Ola Cafe shut down in a year.

“Ola was also in a bruising competition with Uber and saw this as a non-core business, which it exited,” the person said.

While many believe there is a value proposition in delivering food faster, execution and cost remain key.

“The delivery and supply ecosystem is much bigger now, which is an advantage. But there is also the risk of wastage and losing money,” an industry observer said.

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