In India, the police or ambulance may not reach you in 30 minutes in an emergency, but a pizza most definitely will.’ The SMS joke sums up the story of India’s home-delivery segment, which is growing three times faster than the rest of the food industry. The trend is compelling established F&B players to rethink their growth plans and creating new food brands that operate only in the delivery space.
In the last quarter, Delhi-based Azure Hospitality, which runs and operates the Mamagoto chain of restaurants, has rolled out two home-delivery brands Speedy Chow and Rollmaal. They offer very different cuisines but both target the same ‘price-sensitive’ consumer.
With home (and, increasingly, office) delivery accounting for at least 15 per cent of their revenue, big international food chains too have ramped up their services. Dominos Pizza, the brand that started the Indian home delivery party in 1996 and still controls over 70 per cent of the pizza delivery segment, launched a mobile ordering application in July last year. McDonalds, which invested Rs 3 crore in 2007 in strengthening its home delivery business, launched a web delivery service late last year, while Pizza Hut is working on ramping up its 100-strong Pizza Hut Delivery (PHD) outlets, which offer no in-house dining and cater solely to the delivery market.
Time shortage, increasing disposable incomes and—most importantly—the convenience of online ordering has changed the face of India’s Rs 2,47,680-crore (organized and unorganized) food service industry. According to the latest report of the National Restaurant Association of India, the home delivery segment of the organized food services market is currently growing at 30-40 per cent. Compare this with the 11 per cent growth of the food service industry and 15 per cent of organized food chains market. Mumbai, where 79 per cent of restaurants undertake home deliveries, is clearly the king of the segment, followed by Delhi, at 65 per cent. Chennai and Bangalore are still growing with 51 and 50 per cent restaurants (respectively) sending food home.
Indian consumers like home-delivery for its convenience and affordability; unlike Western markets, where players charge a service fee, in India, it’s mostly free. “On our home delivery orders, there is no service charge so it’s a good option for price-sensitive consumers,” says Kabir Suri, co-founder and CEO of Azure Hospitality. “There are commercial hubs where delivery and take-away formats are more popular than dine-in options,” says Virag Joshi, president of Devyani International Limited. The company runs Pizza Hut, KFC and Costa Coffee in India, along with homegrown South Indian fast food brand Vaango. One-third of Devyani’s revenues come from the home-delivery segment. “Our PHD format is growing fast and we have started testing home delivery in a few markets for Vaango,” adds Joshi.
The fact that home delivery saves costs (without compromising on revenue) is what attracts the companies too. “Home-delivery helps brands in penetrating the market,” adds Suri. Monish Gujral, who owns the legendary tandoori restaurant chain Moti Mahal, says home deliveries help garner sales in the lean season when footfalls are low. “During exams or IPL season, people don’t want to go out. Home deliveries help in maintaining sales during that period,” he explains. He should know. His chain has over 100 restaurants doing home-deliveries and 35 takeway counters.
“We see the trend growing. For us, the segment is growing at 30 per cent. That’s why we are investing in technology and infrastructure for home delivery,” says Vikram Bakshi, MD, McDonalds India (North & East).
Half of Dominos’ Rs 1,407.31-crore net sales in fiscal 2013 came from the delivery segment. “With the segment finding greater acceptance, even mom and pop shops are getting into this space. E-commerce and m-commerce are fuelling the growth,” says Harneet Singh Rajpal, VP-marketing, Dominos Pizza India. “We are the only e-commerce brand in the country that can actually deliver within 30 minutes,” he adds. In the quarter ending March 31st, online orders accounted for 17 per cent of Dominos’ sales, indicating how technology is a key catalyst in the segment’s growth.
The food portals can take some credit for the phenomenon. “Just like online travel agents helped expand the base for airlines and hotels, we are fuelling the trend of home delivery,” says Amit Kohli, MD & Founder, Foodpanda, which calls itself “the most powerful online tool for food delivery in the universe”. The site gets 20,000-25,000 visitors across six cities per day and recently secured $20 million (about Rs 108 crore) in funding. Websites like FoodPanda and JustEat give customers options of restaurants in their area, offer discounts and help with online orders. Their reward comes in the shape of commissions from the restaurants.
Chennai-based Dindigul Thalappakatti, which has no in-house online ordering platform, says its listing on Zomato—which offers user menus, pictures, maps, reviews, ratings and contacts—helps it make deliveries from its 15 restaurants in Tamil Nadu.
It’s not just the fast food guys who are riding the wave. Even ice-cream players have got into the delivery mode. Cream Bell, which has a pan-India presence, has just kick-started delivery of ice-creams in the NCR region and plans to expand it to other geographies. “Home delivery gives us a chance to acquire new customers and make our brand available to a larger audience. Even though delivering an ice-cream is a more cumbersome process than, say, pizza, the response is overwhelming,” says CEO Nitin Arora.