Food delivery aggregator Swiggy has sold its cloud kitchen business to Beenext-backed Loyal Hospitality Pvt. Ltd, which operates cloud kitchen operator Kitchens@, for an undisclosed sum in an all-equity transaction.
Kitchens@ is the same firm which had acquired Swiggy's key rival Zomato's beleaguered cloud kitchen arm Zomato Infrastructure Services (ZIS) in 2018 after the foodtech giant failed to expand the business even a year after its launch. Post-acquisition, Zomato had become a shareholder in Kitchens@, but later marked its exit from the company in 2020. SoftBank-backed Swiggy now appears to be following a similar trajectory.
Swiggy, which launched its cloud kitchens under Access, offered its restaurant partners a proposition to set up their kitchens in areas where they are not located in. The move allowed restaurant partners to reach more customers at a fractional cost.
“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, chief executive officer (CEO) of Kitchens@.
Selling off Access to Kitchens@ appears to be part of Swiggy’s strategy to scale down or shut unprofitable verticals amid the slowdown of its core food delivery business. The Bengaluru-headquartered firm closed its meat delivery arm last month, laying off around 380 employees across product, operations and engineering teams in the process.
"While our cash reserves allow us to be fundamentally well positioned to weather harsh circumstances, we cannot make this a crutch and must continue identifying efficiencies to secure our long-term," Swiggy’s co-founder and chief executive officer Sriharsha Majety had said at that time. He also weighed that the company’s growth rate for food delivery has slowed down in comparison to the company’s projections.
Late last year, Swiggy had also shut cloud kitchen brand The Bowl Company in the Delhi-NCR region as the vertical did not perform as per the company’s expectations. It piloted The Bowl Company brand in Delhi-NCR after its launch in Chennai, Bengaluru and Hyderabad, where it continues to operate.
The slowdown in the online food delivery space is deeply hurting both food delivery platforms as well as cloud kitchens. The decline in the food delivery business post-Diwali weighed in on Zomato Ltd’s financials for the quarter ended December 2022. The company’s consolidated loss widened to Rs 346.6 crore against a loss of Rs 63 crore in the year-ago period.