Swiggy, the Indian food delivery giant, has sold its cloud kitchen business, Access Kitchens, to Kitchens@ in a share swap deal. The move comes as Swiggy, backed by SoftBank, looks to dispose of nonviable business verticals ahead of its planned public listing. Swiggy Access, which was launched in 2017, allowed 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. The cloud kitchen operator Kitchens@ acquired Swiggy's Access Kitchens business through the share swap deal. Swiggy has been focused on better unit economics and profitability in recent months, having sacked 380 employees and shut down its Meat marketplace in January.
The acquisition will bolster the reach and operations of Kitchens@ in four Indian cities across 52 locations and more than 700 kitchens, providing customers with more convenient and efficient food delivery options. "These "delivery-only" kitchen spaces align with Kitchens@'s own cloud kitchen model. By leveraging Swiggy's analysis of local demand and selection of high-performing partners, Kitchens@ can diversify food options and meet customers' needs in specific areas," said an official statement on the acquisition.
Swiggy's founder and chief executive officer (CEO), Sriharsha Majety, had previously attributed the company's layoffs to the challenging macroeconomic conditions and hinted at further cost cuts to meet its profitability goals. "The growth rate for food delivery has slowed down versus our projections (along with many peer companies globally). This meant that we needed to revisit our overall indirect costs to hit our profitability goals. While we'd 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. Our over-hiring is a case of poor judgement, and I should've done better here," he said in an internal email sent to employees during the time of layoffs in January.
Swiggy's exit from the cloud kitchen space comes after Zomato, a competitor, shut down its own cloud-kitchen program, Zomato Infrastructure Services (ZIS), in 2018 and instead invested in Kitchens@'s parent company, Loyal Hospitality, for an exclusive partnership. However, Zomato exited the company within two years.
The acquisition of Access Kitchens by Kitchens@ is expected to give Kitchens@ a boost in India's highly competitive food delivery market.
