As India’s consumer spending is set to jump from USD 1.5 trillion in 2019 to USD 6 trillion by 2030, food startups such as Rebel Foods, Swiggy, Zomato, among others are betting on the large population of millennials and Gen Z in the country to keep on ordering and buying packaged food.
Riding on such market sentiments, many food startups have managed to continue to raise institutional money, even though they get buried under heavy losses, and in a few cases increasing protest from restaurateurs. According to an estimate by data tracking platform Tracxn Technologies, investments in Indian food startups have doubled in the first 10 months of 2019, compared to the whole of last year.
The break-up of the figures show that food startups have raised USD 511.79 million across 20 deals in the January to October time period this year, compared to USD 248.57 million investment across 24 deals in 2018.
Rebel Foods that runs multi-brand cloud-kitchens—delivery-only kitchens—has raised multiple rounds of funding this year, latest being USD 125 million in August from New York-based hedge fund Coatue Management.
The Indian online food ordering market that is racing to reach USD 17.02 billion by 2023 is attracting a lot of Asian funds in the country. Indian food delivery major Swiggy is reportedly in talks with Korean funds to raise up to USD 500 million.
Although, the investment in this space has peaked, it doesn’t guarantee creation of multiple billion-dollar worth food startups.
“Most food brands will not be unicorns because it’s about valuation. Food companies get a valuation that’s three to four times the sales. To hit a unicorn status, one needs to be very big. For us, creating USD 42 million revenue brands is a reasonable proposition. There are several options available to exit such investments and investors are seeing high value in acquiring such businesses,” Anup Jain, managing partner, Orios Venture Partners told local newspaper Mint.
It’s not just food delivery companies that are seeing investor’s interest. Increasing number of companies making healthy and packaged food for health-conscious consumers are also seeing good demand from users as well as investors.
Two-year-old Fireside Ventures that has invested in Yoga Bar, Samosa Singh, Vahdam Teas, and Tangy Turmeric (Tasty Tales)—all processed foods, lifestyle, and home products—told Mint it will create 20-25 more consumer brands.
With food-delivery companies leading the investors’ interest in this space, they are now getting into machine language and artificial intelligence to smoothen the business, as they handle over a million orders a day across more than 300 cities.
Every customer’s next order is largely based on his or her previous history of order preferences. “We are processing around 40 billion messages per day, and we will probably touch 100 billion messages within a year,” Dale Vaz, head of Swiggy’s engineering and data sciences department told Mint.
Swiggy has 130,000 restaurant partners on its rolls, while Zomato has declared that it has added around 150,000 restaurants.