ITC plans to scale up the cloud kitchen business it has been piloting in Bengaluru. The conglomerate, renowned for offering North Indian lunch and dinner as well as bakery products via food delivery apps, has now introduced this service in Chennai. Furthermore, there are intentions to expand into Mumbai, Delhi, and Kolkata. Executive Director Hemant Malik mentioned that the company is also considering the inclusion of breakfast and oriental cuisines.
The company refers to this business as food-tech, identifying it as one of the emerging vectors of growth. Currently, it operates three brands: ITC Aashirvaad Soul Creations for North Indian daily or comfort food, ITC Master Chef Creations for North Indian gourmet cuisines, and ITC Sunfeast Baked Creations for bakery products. In Bengaluru, there are 19 cloud kitchens, and in Chennai, there are four. Notably, these kitchens have already reached the break-even point.
“We have a winning formula, which includes having established brands that come with certain credibility, cuisine supported by ITC Hotels’ chefs, and capabilities of the packaged foods business,” said Malik.
ITC’s Operational Model: Central and Satellite Kitchens
“The tech-learning needed for the business comes from our focus on digitalisation. The model involves setting up of central kitchen and satellite kitchens in cities where we operate. We are already the market leader in Bengaluru in the premium space within two years of operation and will now scale up in other cities,” said Malik.
The model incorporates a central kitchen and several satellite kitchens, as per the preference of Swiggy and Zomato for kitchens every 2.5-3 km. ITC’s food tech central kitchen in Bengaluru has the capability to serve both Chennai and Hyderabad.
“Our strategy is to add new cuisines and meals apart from expansion into the metros,” said Malik.
The average order value for ITC’s cloud kitchens is INR 900, twice the industry average. A key distinction from ITC Hotels’ kitchens is the 5% Goods and Services Tax (GST) applied in this business, compared to the 18% GST for hotel restaurants. Additionally, these kitchens operate as quick-service establishments. ITC has successfully fulfilled over one million orders.
In a recent investor presentation, ITC highlighted the institutional synergies between its cloud kitchen business and various aspects of ITC, including the food business adhering to FSSAI regulations, packaging solutions for fresh food delivery, a digital-first approach to gather consumer feedback for upcoming FMCG products, the culinary expertise from the hotels business, and the production of industrial-ready-to-eat and frozen food products.
Approximately 90% of orders on food delivery platforms originate from dine-in restaurants, with the remaining 10% coming from cloud kitchens. The company, as mentioned in the presentation, pointed out that the scalability of North Indian cuisine poses a challenge due to its reliance on chef skills and the absence of standardization.
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