How food aggregators have taken the food tech industry by storm


Reading Time: 4 minutes

Food aggregators, also referred to as food delivery apps have become common household names in India. The spread of the pandemic and the need to stay indoors as a precautionary measure has resulted in the rapid rise of online food ordering and home delivery. India’s foodtech market is estimated to grow at a steep CAGR of 39% from INR 289.36 Bn in 2019 to cross INR 1,868.19 Bn by 2025. Within the foodtech sector, out of the dual categories comprising online food delivery and online grocery, the former dominated the market, commanding a 67.13% share in 2020. The online food delivery segment in India is expected to continue its forward trajectory at a CAGR of 30.55% (as per revenue) and 10.19% (as per user base) during 2020-24, to realize a revenue potential of INR 1334.99Bn and establish a user community of 300.57Mn by 2024.


Simpl’s alliance with leading food delivery apps

Simpl partners with leading food delivery platforms to offer Buy-Now-Pay-Later options towards strengthening their bonds of trust with their exclusive consumer network and tangibly grow their brand power. Simpl is a quick payment option at the time of checkout and enables the customer to complete the online food order in a few seconds. 

 

 A booming industry with active investor funding

With restaurants operating at lower than full capacity due to the second COVID wave, there is a growing trend of consumers ordering food from outside, given the taste preferences, convenience, affordability and speed of home delivery. This was prevalent during the first pandemic wave as well.

The heightened investor interest is evident from the funding received with Indian food-tech aggregators having raked in $193.55 million, US-based players raising  $466.66 million and global player raised $1.47Bn in FY20-21, according to Tracxn.  Additionally funding towards the foodtech space is estimated to have jumped by 35x in the last 5 years.

 

Global trends:

Globally too, the food delivery business is on an upward trajectory. A Statista analysis mentions that the first online order was introduced by Pizza Hut in 1994. Since then, the platform-to-consumer delivery model has enjoyed much success, backed by wide network, efficient logistics channel, low-cost infrastructure model and offering attractive commissions to restaurants. No wonder, the restaurant to consumer delivery commands the largest market volume and is projected to cross $5,960Mn in 2021. There is also intense competition growing between in-house delivery options and third-party delivery modes. Other key findings include:

  • Revenue derived from the online food delivery space is expected to cross $11,666Mn in 2021
  • Global revenue is projected to grow at a CAGR of 7.94% between 2021-2024

The table below depicts the gradual expansion in values terms in the global food delivery market 

Source: CB Insights, Statista, Research & Markets

 

Key drivers

It is estimated that in the past 3 years, the food delivery segment has witnessed 12% annual growth, making up 29% of the eateries revenues and servicing an estimated 182 Mn consumers in India.

The key drivers of the outside food option are the elimination of advance bookings, absence of the need to wait in queues to have one’s favorite meal or snack, the burgeoning digital payments space that enables prompt food orders, the availability of wide menu option across cuisines, restaurants and locations at prices suited to diverse budgets. 

 

Retail and institutional customers driving volumes 

Another key factor is the emergence of cloud kitchens that operate on a delivery-only restaurant model. Cloud kitchens rely heavily on delivery platforms to receive food orders and resultant revenues. The cloud kitchen segment is estimated to touch a market size of $1 billion by 2023. 

It is estimated that India’s young demographic profile and proliferation of urban regions is contributing to this development, with millennials comprising 63% of users ordering online food through delivery apps.

 

Internet penetration and Digital India

A BCG-Google study predicts that India’s food tech industry would grow at a steep CAGR of 25-30% from USD 4Bn in 2020 to USD 8Bn in 2022, driven by easy access to the internet, ownership of smartphones with apps, higher order frequency and rising disposable income. Smartphone usage is estimated to jump to over 800Mn by 2022 as per IBEF.

 

Balancing order frequency vs Order value

Food delivery platforms, estimated to have a presence in 500+ Indian cities, too, have constantly expanded their reach to smaller towns, Tier2 and Tier 3 cities by 6x times between 2017 to 2019, while simultaneously widening the restaurant networks. 

The key focus would be to convert occasional order consumers into regular order customers. Initially, while the order value might be relatively lower (5-10%) given the economic uncertainty aggravated by the pandemic, the order frequency is estimated to grow by 18-20% according to a BCG study. 

The findings reveal that consumers are increasingly more favourably inclined to spend time online, reading reviews and exploring food options, a jump from 32 minutes per month in 2017 to 72 minutes per month in 2019. The factors that influenced consumer buying decisions were peer recommendation (52%) and advertisements (19%) by food delivery apps. Other factors included discounts, offers or combos, menu varieties and convenience in terms of payment options, order at any time and any location and delivery time.

While many Indian consumers have given their stamp of approval to the food delivery apps, it would be prudent for apps to focus on maintenance of stringent hygiene standards, ensure superior food quality and retention of freshness upon packaging and end-delivery. Another approach to win consumer wallet share would be enhanced personalization and a superior app interface. 

 

Digital payments enable prompt food orders

With online spending in India predicted to grow at a steep 25 percent in the coming five years to exceed $130 billion, experts believe that there is considerable scope to widen the consumer reach, enhance engagement with consumers through regular communication and drive user frequency of the apps. 

Further, adoption of digital payment modes would go a long way in enabling customers to place prompt food orders, delivery apps to take prompt food orders at scale and ensure swift food deliveries.

Simpl provides food delivery apps with an opportunity to provide their customers with a prompt payment experience, as part of an overall delightful food ordering experience. 


Leave a Reply

Your email address will not be published.