Swiggy sells its cloud kitchen business to rationalise costs

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

According to him, the company is closely examining some of its business verticals and has decided to discontinue its meat vertical.

“…While we had already initiated actions on other indirect costs like infrastructure, office/facilities, etc, we needed to right-size our overall personnel costs also in line with the projections for the future,” Majety wrote.

Swiggy Access was launched in 2017 as a program that facilitated the expansion of eateries by allowing restaurant partners to open kitchen spaces in locations where they were not previously present or operational.

This programme functioned as delivery-only spots, which not only helped in increasing the reach of these restaurants but also helped in reducing delivery time.

Between 2017 and 2019, Swiggy invested Rs 175 crore in the segment and even decided to infuse an additional 75 crore by March 2020. Further, it invested in over 1 million square feet of real estate spanning 14 cities. But the pandemic derailed expansion plans.

The Swiggy Access business scaled down to only four cities before the deal was signed on Thursday.

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

He added that they already had letters of intent from over 40 national and international brands that wanted a partnership, with a master franchise model.