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Not so easy! Zomato's real world problems with 10-minute delivery, intercity service

Not so easy! Zomato's real world problems with 10-minute delivery, intercity service

Zomato's ambitious new projects such as 10-minute food delivery and intercity food delivery services are well-aligned to its established goal of being a food-first company. However, these projects are incredibly complex and difficult to pull off.

Can Zomato find a wide range of legendary food products that would pass the filters of packaging, storage and safety for travel to make it a large enough vertical?  (Photo: Reuters) Can Zomato find a wide range of legendary food products that would pass the filters of packaging, storage and safety for travel to make it a large enough vertical?  (Photo: Reuters)

Food-delivery platform Zomato took another step towards its exclusive focus of being a food services company with the launch of an intercity food delivery service named 'Intercity Legends'. The new business vertical allows users to order specific food items from different cities in India. The company is currently piloting the new feature in Gurgaon and South Delhi.

“With ‘Intercity Legends’, no matter where you are, you can order and relish legendary dishes like baked rosogollas from Kolkata, biryani from Hyderabad, mysore pak from Bengaluru, kebabs from Lucknow, butter chicken from Old Delhi, or pyaaz kachori from Jaipur,” Zomato’s co-founder and CEO Deepinder Goyal wrote in a blog post.

While Goyal said all types of dishes have undergone lab testing to ensure that the aroma, texture, and taste remain of high quality, food and beverages industry veteran K S Narayanan believes it is an uphill task.

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“As a concept it looks very sound. However, food coming from restaurants, freshly prepared and to be freshly consumed, has a limited self-life. Even in the case of delivery within city, restaurant food is delivered in 30-60 minutes and is prepared to be consumed within a couple of hours. If restaurants give food to Zomato in a hot form, which the company is then chilling, moving it to a new location, distributing chilled and asking the consumer to reheat it, can it offer the same taste and experience as it is consumed at the place of cooking? If not, it wouldn’t evoke the nostalgia it is associated with,” Narayanan said.

Leveraging its network of restaurant partners and delivery partners, Zomato said the food items will be delivered to customers within next day of order placement.

“Food is freshly prepared by the restaurant and packed in reusable and tamper-proof containers to keep it safe during air transit. State-of-the-art mobile refrigeration technology preserves the food without the need to freeze it or add any kind of preservatives. Once you receive your order, you can microwave, air-fry, or pan-fry the food, just like any other dish out of the refrigerator,” Goyal wrote. 

He did not divulge further details on the technology being used and how they package it to keep the food safe and preserve its pure taste. An advisor to many food and beverage companies and brands, Narayanan said the packaging has to be robust to provide the original taste and experience of the main product along with all the accompaniments as Indian food typically contains many liquid accompaniments like chutney and raita.

“They need to figure out the design for the product for travel including the packaging and intercity cold-chain logistics infrastructure. Only when you build tested and proven solutions for these challenges, customers in another city will be able to enjoy the food delivered in its purest form,” he added. 

The range of products feasible for this model and the total available market may not be quite as large as it appears.

Can Zomato find a wide range of legendary food products that would pass the filters of packaging, storage and safety for travel to make it a large enough vertical?
 
“You are looking at limited market, with very limited merchant supply. Even within that, getting food blast frozen and transported to another city at -18ºC, takes away the flavour and texture of your 'supposedly favourite food item from another city'. They aren't serious about scaling it ever,” a food entrepreneur said on condition of anonymity. 

Many of the legendary dishes will get eliminated and, in all likelihood, it will remain a niche market with hardly any scope for scale. Besides, in this era of cloud kitchens and food brand aggregators, successful brands are fast expanding to other cities. Many authentic, local cuisines and brands have already established presence in urban cities where Zomato would be aiming to roll out this service. 

The cost could act as another dampener for this service. Average food delivery order value in India is about five times lower than that of peers in US and Europe. Even with one of the highest commission rates in the world, Indian food delivery firms end up losing money on a majority of orders due to high delivery costs and discounts. If users are required to pay a hefty delivery fee, the service is unlikely to fly regardless of Zomato’s ambitions. 

The model works for packaged food products or snacks with long shelf life, which are legends in their own cities. However, a good number of locally successful snack brands have already made it to large supermarkets and instant delivery platforms pan-India, and therefore, the opportunities for scale as a delivery vertical is limited there too.

It would be months or years before the company iron out issues related to market size, packaging and food safety to be able to take a firm view on the size of the opportunity and decide to invest on expanding to a meaningful level. 

The other big project – ‘Zomato Instant' or the 10-minut delivery service – announced about six months back, is yet to make any significant progress. As per a recent media report, the project is in an ‘extended pilot phase’ where the company is taking time to ensure the sustainability and profitability of the project.
 

"Nobody in the world has so far delivered hot and fresh food in under 10 minutes at scale, and we were eager to be the first to create this category, globally!" Goyal wrote at the time of the announcement. 

The company said it was setting up a network of ‘finishing stations' or mini-kitchens in close proximity to high-demand customer neighbourhoods. These finishing stations will house bestseller items (about 20-30 dishes) from various restaurants based on demand predictability and hyperlocal preferences.

"If Zomato Instant works as envisioned, it will create significant impact on affordability (at least 50 per cent reduction in cost to the end customer), accessibility (reduction of delivery time from 30 minutes average to under 10 minutes), and quality (with influence over the supply chain, we will be able to ensure highest grade ingredients and hygiene practices across the supply chain)," Goyal said at the time. 

However, the company has not made any further announcement on the growth of this project.

The model is a complex combination of food preparation and hyperlocal delivery, which the company seems to have not cracked in its trials. About four months after the big-bang announcement, Goyal said to CNBC-TV18 that the 10-minute food delivery service will continue to remain in the pilot phase until it makes business sense. 

“There again, it will be a same challenge. After using placing an order, it has to be captured at the backend, converted into a kitchen order, cook, package and deliver within 10 minutes. When the promise is 10-minutes, you will need to prepare the food in 1-2 minutes, leaving 7-8 minutes for delivery. There could only be a limited number of items which can be done fresh and served under in 10 minutes. It is not just getting something chilled or frozen and then you micro wave it and give to your customers, such a product may or may not fly,” K S Narayanan said. 

A query sent to Zomato seeking details on these projects did not elicit a response till the time of publishing this report. 

Also read: Zomato user in Gurugram ordered biryani from Hyderabad using intercity feature, got only salan delivered