In A Bid To Rationalise Costs, Swiggy Sells Cloud Kitchen Business

Online food delivery platform Swiggy announced that it has sold its cloud kitchen business, Swiggy Access to Kitchen@, The Financial Express reported. The transaction has been carried out in a share swap deal. The decision has been taken to bring down costs. Earlier, Swiggy had fired 380 employees in a similar cost rationalisation exercise. Companies across the board have been taking similar steps as the market conditions have turned tough, the report said.

"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. In addition to this, he said that the company was reconsidering some of its other business verticals.

The email from Majety read, "…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."

Swiggy Access was started in 2017. It worked as delivery-only spots and as a programme that allowed restaurant partners to open kitchen spaces in areas where they were not present or in areas where they did not operate. This facilitated eateries in widening their reach along with reducing the delivery time.

Swiggy started the Access platform between 2017 and 2019 with an investment of Rs 175 crore. Announcements were made to infuse an additional 75 crore by March 2020. The company had also invested in over 1 million square feet of real estate spanning 14 cities. However, the pandemic derailed expansion plans.

Before this deal, the Swiggy Access service had contracted to only four cities. The deal will make Swiggy a stakeholder in Kitchen@, the report added.

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

According to the FT report, Swiggy reported a net loss of Rs 3,628.9 crore in FY22, while its revenue from operations increased 125 per cent to 5,704.9 crore during the period.