Food delivery boom: Cloud kitchens to drive multi-brand success in India’s $80 billion market, reveals Redseer

The Indian food services market, valued at $80 billion in 2024, is expected to grow, with projections indicating a compound annual growth rate (CAGR) of 10-11% through 2030, as per Redseer Strategy Consultants' latest report 'The Big Bite: Scaling Success in India’s Food Services'.

"The consumers are demanding more variety across cuisines and have become experimental in nature. As cloud kitchens have a cost-efficient, scalable, plug-and-play model, it allows them to launch specific brands that cater to the shifting consumer tastes and preferences and scale them faster than traditional dine-in setups. Several cloud kitchens also leverage acquisitions as a key growth strategy, fostering mutual growth for them and the acquired brand, at typically lower costs. Both of these strategies are expected to play out further in the near future for cloud kitchens," Rohan Agarwal, Partner at Redseer Strategy Consultants said.

The online food services market has grown at the CAGR of 24% from 2019 to 2024 and is expected to grow at CAGR 17-22% by 2030 to reach $23-30 billion. On the other hand, offline organized food services market experienced a growth of CAGR 12% from 2019 to 2024 and is further expected to grow a CAGR of 13-17% to reach $60-74 billion. Furthermore, the report highlighted that only 1-2% of companies in India have scaled beyond Rs 500 crore, with most of this success driven by the multi-brand approach. However, even for these companies, rapidly expanding the number of stores alone to drive scale can lead to diminishing returns, especially as the market diversifies with new cuisines and service models.

Cloud kitchen on rise!

According to the report, the cloud-kitchen model among multi-brand companies tends to drive faster growth trajectory. The younger demographic, particularly in metro and tier 1 cities, have witnessed a shift in their taste preferences for niche and diverse cuisines through the influence of social media, travel, and pop-culture. Cloud kitchens have capitalized this trend by launching and acquiring new brands to offer diverse cuisines.

Among multi-brand companies, the cloud kitchen model is giving a tough competition to dine-in setups resulting in higher revenue per kitchen, optimizing shared resources, and enabling brands to scale 2-3 times faster than traditional restaurant models. "The plug-and-play model of cloud kitchens facilitates scalability, with new brands reaching Rs 100 crore revenue in as little as 2-3 years, significantly faster than the 6-10 years typically taken by dine-in-focused brands,” Agarwal said.

What's the trend in metro cities?

Moreover, consumers in metro and tier-1 cities are increasingly opting for ordering in and dining out, driven by convenience and a desire for a break from routine. As per the report, metro and tier-1 consumers are increasingly dining-out or ordering-in with monthly spends upwards of Rs 2000. "Across sectors, we have seen tier-2+ cities increasingly have similar aspirations as that of consumers in M/T1 cities, driven by social media influence and increased exposure to global cultures. We see similar trends in food delivery as well, however the consumption is more impacted by local availability of supply in sectors such as food which are local in nature, as compared to sectors like e-commerce where products are shipped across the country," Agarwal noted.

Additionally, outside meals are increasingly viewed as a social activity, offering opportunities to spend quality time with loved ones and to celebrate all occasions. Social media, pop culture, and the demand for variety have fueled the rise of niche cuisines, contributing to the rising frequency.