Why food tech in India is more than just a bubble

Disclosure: The author is the CEO of Foodpanda India and chief business officer of global operations.

Photo credit: Miss India

Food tech in India moving towards profitability

The food tech industry has seen a rapid transition from being perceived as technology focused on preservation, processing and manufacturing of food to now being all about food delivery and business aggregation online.

People would search for the best places to eat by reading restaurant reviews in food guides and magazines. But now, online platforms and the boom in ecommerce has made everything readily available anywhere at anytime. The trend of online shopping that we earlier saw for books, fashion, furniture and electronics has now caught up with food delivery and business aggregation.

But first we need to understand the food tech industry of today, which is a mix of food aggregators, restaurant listing, delivery-only players, proprietary meal sellers and cloud kitchens.

Broadly speaking, the sector now runs on the basis of three main business models.

The first comprises of ventures which provide software-only marketplaces that act as selling points for restaurants. The second group brings the traffic and manage the logistics. Finally, there are full-stack food businesses.

The online food tech segment has seen a boom in last few years, with many online players coming up with fresh business ideas and technologies in food listing, aggregation and delivery. There are more than 150 food tech startups based in India, out of which some are strong international players, while a few are operating only at a local level.

While the industry has questioned the future of food tech in India and called it a bubble that is about to burst, I personally feel otherwise.

According to a Bloomberg report, more than 400 food delivery apps cropped up in India in the past three years, raising approximately $120 billion. Many companies simultaneously mushroomed and introduced innovative services and processes to bring restaurant discovery and delivery online.

The industry has seen it all; from players big and small competing and eating into each other’s share of the pie, launching new innovative services for consumers, to funds drying out, devaluation and companies scaling and shutting down operations.

It is evident that the recent past has been quite challenging for the food tech segment.

The 4 initial phases of new industries

Food delivery business is still at a nascent stage and is riddled with many unique operational challenges. As with every industry with its fair share of challenges, food tech is no exception.

Every new industry/ segment goes through four initial phases.

The first of which is torch bearing, where one company leads and paves the way for other companies in the industry. In India, Foodpanda explored the food delivery business and created opportunities for other to follow. The second phase is of mushrooming, where the players spring up in a short span of time with their new innovative concepts.

In my view, this is not a bad thing.

The future looks promising: consolidation and innovation key drivers