Inter-city food deliveries - beleaguered but not out

Imagine living in Bengaluru and ordering cakes and other confectioneries from Kolkata’s iconic Jewish bakery - Nahoum’s or being posted in Delhi and getting delivered the legendary Thoothukudi macaroons.

India’s cultural diversity has undoubtedly yielded a lot of business opportunities. Hyperlocal food preferences offer one such scope, fuelled by. the growing pan-India migration. Indian entrepreneurs woke up to the business model in 2016, delivering regional delicacies from iconic/heritage establishments across India to customers located elsewhere. But almost seven years later, even the early entrants are still struggling to break even. Yet, this has not dissuaded a larger player like Zomato to take the plunge in 2022.

Clearly, inter-city perishable food deliveries continue to hold a lot of promise. “It seems to be special to India. It’s not common. It doesn’t really happen in Europe or North America. For example…this food culture is limited in other countries,” attested Peter Backman, a global food service and supply chain consultant.

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Key drivers

Indians are increasingly on the move. The 2017 Economic Survey estimated that an average of 5–6 million Indians migrated annually between 2001 and 2011, leading to an inter-state migrant population of about 60 million and an inter-district migrant population as high as 80 million. While Indians jostle between pin codes to chase more lucrative opportunities, they remain steeped in their cultural roots and their food preferences thereof.

“The food orders are largely dependent on migration patterns. We receive orders from larger cities for food in small towns of the country,” said Samiran Sengupta, Chief Executive Officer and Co-Founder, JustMyRoots.

“India has a number of cuisine clusters with each city having its speciality in terms of food, hence there will always be a market for intercity food delivery,” reasoned Anand Ramanathan, a food delivery and logistics expert from Deloitte.

This learning is not new. Historically, unorganised players have capitalised on the idea, expanding to nearby interstate markets for select items. But organised players are relatively new to the scene with just a few such as - Justmyroots, Tastes2plate and more recently, Zomato - taking on the task.

The challenge

While Zomato (which entered the fray only last year) did not respond to queries made by DH, the other two early players have admitted that they are yet to break even. “Remote connectivity, infrastructure development and advanced technologies are the pillars on which this industry can thrive and currently we are not there yet,” reasoned Himanshu Singhal, who heads business development, marketing and sales at CABT Logistics.

With preserving the freshness of the food delivered taking precedence, any player would first have to invest heavily in delivery systems with proper temperature control. The premium these costs build up on the product pricing makes for a limited target market focussed on the migrant population with high disposable income.

“Affluent households (with annual income over $35,000) are one of the major customers of intercity food delivery, due to high price points,” said Ramanathan.

“Inter-city orders are usually somewhere in the ballpark of Rs 600-950 which is more than two times the intra-city order value,” Singhal explained. As a result, service providers have set in place minimum order requirements as a pre-condition for intercity deliveries, compelled by the need for scales to justify their costs.

Bottlenecks in infra and logistics

In effect, the slow growth of the market, encumbered by high pricing can be tied to the lack of infrastructure and a largely fragmented logistics sector.

The high costs are pinned on the dependency on air freight (given the time constraints) and the last-mile delivery by road, Ramanathan pointed out. Though this cost could have been tempered using trains, the limited refrigerated bogies of Indian Railways have ruled that out, he added.

“Opportunity is not scalable and it is a difficult proposition because of the state of infrastructure in India,” Ramanathan underscored. “India’s logistics and infrastructure is not ready to cater to such a demand - cold chain supplies and warehouses are insufficient,” seconded Ashutosh Kharangate, MD, Marcglocal, a consulting firm.

Technology to the rescue

Use of the right technology to automate most of the processes is key to this business, insisted Rahul Mehra, co-founder of logistics automation platform, Roadcast. Organised players are heavily invested in developing indigenous technology including patent packaging to retain food freshness for up to 72 hours and platforms to streamline and automate their operations including live tracking of orders. There are start-ups today offering temperature-controlled boxes off the shelf that could be bought, but that option too is very expensive.

“We use maximum technology to minimise human interference. Right now we are delivering at the rate of Rs 110- 120 per kilogram from one city to another city , with only 1-2% difference in order price of the same food for hyperlocal delivery and this would have been impossible to achieve without the use of technology,” said Gyan Srivastava, Chief Executive Officer, Tastes2Plate.

Consumer mindset

For all the efforts to deliver fresh food intact, these players find themselves up against a consumer attitude that is suspicious of the proposition, preferring to stick with freshly prepared meals, say market observers.

The outlook

The slow growth has not dented the optimism of some players. “Affluent households are expected to grow 5 times by 2030 which will generate good demand for intercity food delivery,” Ramanathan cheered. Of course, how this opportunity is capitalised depends on how India readies its logistics and infrastructure to cater to the market.