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Swiggy, the Indian online food delivery platform, has sold its Cloud Kitchen business to Kitchens@, a major player in the rapidly growing cloud kitchen industry, for an undisclosed amount. As the growth rate for food delivery slows down, Swiggy will become a stakeholder in Kitchens@ through the all-equity transaction of Swiggy’s Access. Swiggy Access, which was launched in 2017, pioneered the Cloud Kitchen model. The programme enables restaurant partners to establish kitchen spaces in neighbourhoods where they do not currently operate, with the aim of offering more variety and shortening delivery times for consumers. 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. “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,” said Junaiz Kizhakkayil, CEO of Kitchens@.
Swiggy’s decision to sell its Cloud Kitchen business to Kitchens@ is aimed at cutting costs, as the Indian company tries to reach profitability. Swiggy has faced challenges as the growth rate for food delivery has slowed down versus projections. To hit profitability goals, the company needed to revisit its overall indirect costs. In January, Swiggy laid off 380 employees. The company’s losses doubled to INR 3,629 crore in FY22 compared to INR 1,617 crore in the last fiscal year. Total expenses went up 131 per cent to INR 9,574.5 crore in FY22, according to its annual financial statement with the Registrar of Companies (RoC). The company is also shutting down its meat marketplace as it has not been able to achieve product-market fit despite iterations.
Kitchens@, on the other hand, is aiming to expand its operations and reach $100 million in revenue within the next six months. The company has already secured Letters of Intent with over 40 national and international brands to partner with it using a Master Franchise Model. The acquisition of Swiggy’s Access kitchens enables a combined annual GMV of $65 million (INR 520 crore) for Kitchens@, providing more convenient and efficient food delivery options for customers.