Swiggy sells Cloud Kitchen biz to Kitchens@ as food delivery growth slows down

Online delivery platform Swiggy has sold its Cloud Kitchen business to Kitchens@, a leading player in the rapidly growing cloud kitchen industry, for an undisclosed sum, as the growth rate for food delivery slows down.

The online food aggregator will become a stakeholder in Kitchens@ through the all-equity transaction of Swiggy`s Access.

Swiggy pioneered the Cloud Kitchen model with the launch of Swiggy Access in 2017.

The Swiggy Access programme allows restaurant partners to establish kitchen spaces in neighbourhoods where they do not currently operate, with the goal of offering more variety and shortening delivery times for consumers.

"The addition of Swiggy`s Access kitchens will bolster the reach and operations of Kitchens@`s in four cities across 52 locations and more than 700 kitchens, providing customers with more convenient and efficient food delivery options," Junaiz Kizhakkayil, CEO of Kitchens@ said.

By leveraging Swiggy`s analysis of local demand and selection of high-performing partners, Kitchens@ said it can diversify food options and meet customers` needs in specific areas.

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"Swiggy Access was started with the aim to bridge hyperlocal gaps in restaurant supply and solve for variety, quality, and convenience of food. Since its inception, Access has enabled several restaurant partners to innovate and expand their reach to new customers in a cost-effective manner," said Rahul Bothra, CFO of Swiggy.

The current transaction enables a combined annual GMV of $65 million (Rs 520 crore) for Kitchens@. The company aims to reach $100 million in revenue within the next 6 months and has already secured Letters of Intent with over 40 national and international brands to partner with it using a Master Franchise Model.

To cut costs, Swiggy in January said it was laying off 380 employees.

"The growth rate for food delivery has slowed down versus our projections (along with many peer companies globally). This meant that we needed to revisit our overall indirect costs to hit our profitability goals," Sriharsha Majety, Co-founder and CEO, said in an email to employees.

The company also said that it will be shutting down its meat marketplace very soon as the company was not able to achieve product-market fit despite their iterations.

The online food delivery platform`s losses doubled to Rs 3,629 crore in FY22 compared to Rs 1,617 crore in the last fiscal year.

Total expenses went up 131 per cent to Rs 9,574.5 crore in FY22, according to its annual financial statement with the Registrar of Companies (RoC).

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