A year (well almost) after the hoopla surrounding Food-Tech, the shutters are down for a few, many more to come. Things have started to clear out for many ever since.
Sitting in our living room cum office, we now have a realization. The fundamental understanding of Food-Tech in and around the entrepreneur and VC circle has been all wrong. Getting a website up and an App launched on App store won’t make it Food-Tech. it only qualifies one to be called Food-app or Food-web at best.
All the funded startups used the raised money to spend lavishly on free meals, marketing and so on to gain numbers. And I am very sure all of them had the same intention: to serve the best possible food at most affordable prices, at lightning-fast speed with the best possible customer service experience. But then, what went wrong?
To understand that, first of all let’s just have a look at what’s happening in and around the market. So there are three types of players in the so-called food-tech sector:
1. The Marketers - Whether it’s Foodpanda or Tinyowl, all of these just enable ordering a particular kind of food, no matter home-made or from professional kitchens. So let’s just not call them Food-Tech. I mean where’s the tech? Let’s just call them Food-ordering (given they hardly have any technology related to food).
2. The Aggregators: Holachef, Swiggy, etc., will qualify for this category. They do have an efficient network of delivery people and some innovation out there. But then, again, are we not just talking about logistics? How does that become food-tech? Where is the food? The person or company preparing it can still spoil the entire experience by spoiling the food.
3. The Cooks: These are the startups who are actually preparing their food, and also have their own app and website and also their own logistics (or some arrangement for the same). So they are better suited to have end-to-end control on each aspect. But with the headway of the first two categories, it has become too easy for anyone (even the “Shama Biryani Corner” near my house) to put up a site and have tie-up for delivery. So eventually they will all qualify to be counted in this category. The tech, where’s it?
The Problem: Honestly, after one full year into this, we have come to realize that the margins are squeezing in food. To summarize it all, here is the top 3 problems in present food-tech:
- Air-thin Margins: Everybody is saying the margins in food are wafer-thin. Well, good morning! The margins are air-thin. You serve food that is either sub-standard or expensive. The only way to look after your customers is by having very strong tech-enabled operations and inventory management, or you pack up and go home.
- The Delivery Charges: While most of us undermine these charges, even at its peak efficiency, deliveries cost you almost 25-30% of your cost. Free delivery is poison.
- The real food-tech: The crux of this whole thing is, there has been no innovation whatsoever in the kitchen. Food going stale even before it reaches the customer is something quite usual now. Second challenge is to be able to serve new dishes everyday without affecting your operations and inventory management. So all in all, we need innovation in the kitchen.