ETtech Explainer: What are cloud kitchens?

The number of cloud kitchens in India has shot up since the pandemic. A Redseer report estimated the size of the market would touch $3 billion by 2024, from just $400 million in 2019.

The number of cloud kitchens operating on Swiggy trebled between FY19 and F21 and doubled on Zomato from January 2020,
we reported in November 2021.

The industry also attracted a record amount in venture money in 2021, with cloud kitchen startup Rebel Foods, the owner of Faasos, Behrouz Biryani and OverStory, becoming a unicorn.

But what are cloud kitchens, and what are their benefits, and which are the big players in India? Let’s take a look.


What are cloud kitchens?

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Also called ghost kitchens, cloud kitchens are cooking facilities dedicated to food delivery. They don’t offer dining services, unlike traditional brick and mortar restaurants, and can thus be set up at a minimal cost.

What are the benefits of operating a cloud kitchen?

Lower costs: Leasing a kitchen from a cloud kitchen provider reduces startup and overhead costs because companies don’t have the added hassle that comes with buying or leasing real estate in the traditional way. And unlike restaurants, cloud kitchens don’t need to be located in high-rent areas.

Quick setup: Setting up a cloud kitchen relatively quick since businesses don’t have to build up a whole new place.


Easy scalability: Unlike opening a traditional restaurant, creating a cloud kitchen does not cost a fortune. Cloud kitchen businesses don’t need to rent or buy a lot of space when they grow, so scaling up is possible with low investment.

Increased reach: Cloud kitchens allow brands to expand their focus on food delivery and thus reach a larger audience. Delivery-optimised restaurants advertise their business through delivery apps and social media rather than traditional marketing channels.

What about the downsides?


Low connection with customers: Cloud kitchens do not offer an opportunity for brands to build a community since there are no interactions with customers or regular staff.

High commissions: Since delivery is the only service cloud kitchens provide, these kitchens rely on third-party delivery applications such as Swiggy and Zomato, which charge high commissions.

Dependence on technology: While the growth in cloud kitchens is largely down to advances in technology, there are downsides too. A computer glitch or power failure can cause problems in the functioning of the kitchen, from taking orders to accepting payments.


Which are the major cloud kitchen firms in India?

Rebel Foods, which started in 2011, is India’s oldest cloud kitchen brand. It operates over 11 brands, including Faasos, Behrouz Biryani and Oven Story, across 10 countries. The company is also the first Indian cloud kitchen brand to become a unicorn
after raising $175 million from Qatar Investment Authority and others at a $1.4 billion valuation in 2021.

Curefoods, founded by ex Flipkart executive Ankit Nagori is the other major company in the space, running popular brands such as House of Biryani, Masala Box, and EatFit. So far, the company has raised about $120 million from global investors.

Online food delivery platform, Swiggy also entered the space back in 2017 with its cloud kitchen business Swiggy Access. Online-only brands that operate out of cloud kitchens also grew during the pandemic.


Why are cloud kitchens mushrooming in India?


The growing internet penetration and rise of food delivery companies such as Swiggy and Zomato has led to a surge in demand for online food services – and thus loud kitchens – in India.

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They have also emerged as a cost-efficient way to maintain business continuity and expand customer reach in an industry that was decimated by Covid-19.

And, although businesses are reopening as the pandemic eases its grip, delivery-only brands ensure a solid revenue stream, catering to people who would rather order in than eat out.