A decadent indulgence
Making sense of long distance food delivery
Good morning! A big hello to readers who signed up this week. Welcome to The Intersection, The Signal's weekend edition, which completes one year today. The first of our original Saturday long reads was published on September 11, 2021. Read it here. True to the name, we have explored themes at the intersections of business, technology, policy, and society; 47 times in the past year. We will continue to bring you edgy, eclectic, engaging stories and incisive analyses. This weekend we talk about the latest gastronomic indulgence, inter-city food delivery. Also in today’s edition: we have curated the best weekend reads for you. Thank you for reading.
His two centuries-old dynasty was on its last legs, but the last Nizam’s extravagance suggested otherwise. And Mir Osman Ali Khan’s hedonism extended to food. In Feasts and Fasts: A History of Food in India, Colleen Taylor Sen noted that an early 20th century writer—who perhaps graced the 108-ft dining table at Falaknuma Palace—once counted 221 dishes. Nearly a third were desserts. Compared to the biryani, haleem and salan that eventually travelled beyond Nizami properties, quintessentially-Hyderabadi sweets remain rare finds.
Until now. If you live in the National Capital Region, you can sample the princely khubani ka meetha, jauzi halwa, double ka meetha and ande ka halwa in unprincely fashion: by ordering them straight from Hyderabad, via Zomato.
In an August 30 blog post, Zomato CEO Deepinder Goyal* introduced Intercity Legends, the long distance food delivery service offering iconic regional dishes such as ghevar from Jaipur, Bhubaneswar’s khira gaja, and badushah from Chennai. Delivery times span one to three days. The service caters only to south Delhi and Gurgaon residents, though Goyal wrote that “the sky is the limit to how big Intercity Legends can become”.
“India has over 100 domestic airports. Any airport city could be a potential market. To start with, we want to serve customers in top metro cities,” a company spokesperson confirmed to The Intersection.
Intercity Legends comes at an important time for Zomato. In early August, the food aggregator reported a 67% rise in year-on-year revenues and 36% bump in monthly order frequency for the quarter ending June 2022. It also forecast profitability in the near future, although analysts aren’t convinced owing to inflationary headwinds and a bleeding Blinkit. Suffice to say that inter-city food delivery—which, as we’ll see, is far trickier than on-demand food delivery—is a strange decision for a company trying to minimise its losses.
Zomato isn’t the first to offer the service. Postcard, The State Plate, Food Memories, and Delight Foods deliver regional specialties ranging from murukku to Gobindobhog rice. Their product categories, however, are limited to pickles, staples, and packaged sweets and snacks–items that last much longer than prepared food. This means Zomato is competing with JustMyRoots (JMR) and Tastes2Plate.
The Intersection interviewed supply chain experts to understand what it takes to deliver food across state lines. After all, margins are do-or-die in a business that walks the tightrope between consumer experience and shareholder concerns. And when air freight, temperature maintenance, more expensive packaging, and third party logistics come into the picture, slim margins are bound to turn wafer-thin. This is a story about a business model pushing the boundaries of packaging, logistics and consumer choice.
First Impressions
Zomato criteria for selecting Intercity eateries are unknown. Gourmands will note the absence of some vaunted establishments (Hyderabad’s Sarvi and Paradise, Tunday Kababi in Lucknow, Tom’s and CTR in Bengaluru, etc.). Nevertheless, this writer ordered galawati kebab and sheermal from Lucknow’s Grandson of Tunday Kababi (not to be confused with the OG) and khubani ka meetha from Meethe Miya in Hyderabad.
The Lucknow order arrived the next day but was delayed by a few hours. The support executive cited “operational problems”, saying real-time tracking isn’t possible since packages “come from a different city and via flight”. This means Zomato is partnering with third-party logistics providers instead of fully leveraging its network (including Hyperpure) for the pilot. The Hyderabad order, for instance, was handled in the first mile by hyperlocal logistics startup Shadowfax. It arrived within the delivery window.
Food containers used for Intercity Legends are sturdier and have tamper-evident seals. The sheermal-galawati kebab and khubani ka meetha were good, but you could tell that the former was refrigerated at some point. A given considering its long journey from source to destination. The Zomato spokesperson told this writer that they use “state-of-the-art mobile refrigeration technology” that preserves the food without freezing it.
“We were the first to start this about four-and-a-half years ago, by the way. Deepinder Goyal once spoke to me about the business; I shared only 50% of the information, and he’s started with that 50%,” he guffaws.
This is Samiran Sengupta, cofounder-CEO of inter-city food delivery service JustMyRoots. JMR claims to have over 600 eateries across 30-plus cities on its roster. Criteria for listing include nostalgia value and “only dishes that people crave for”.
The incumbent has tasted the competition, and he isn’t sold on much other than the neat packaging. For one, he says, refrigeration kills the product.
“We don’t refrigerate because we want to retain moisture. But it’s a fine line. If the temperature is too high, the food will spoil; too low, and the moisture will go,” he explains.
But how can cooked food—not least seafood or dishes that are coconut or yoghurt-based—remain unspoiled without refrigeration? Packaging, says Sengupta. JMR uses Israeli and Indian packaging tech that maintains food temperatures at 5°C-8°C for up to 36 hours. He adds that the company is working on two packaging patents: the first to extend longevity from 36 to 72 hours, and the second to keep food piping hot for up to eight hours.
JMR’s most notable claim, however, is that it can bundle multiple items from different cities in a single order. Since this is a logistical feat even Amazon struggles to pull off, we put it to the test by ordering omit khar from Guwahati, mudhi alur dum from Bhubaneswar, and rajgira puri bhaji from Mumbai.
The platform didn’t pass the test. While multiple orders can be bundled into one delivery, the one from Guwahati couldn’t be scheduled alongside the others. That said, all dishes reached within their delivery windows. And they were delicious, albeit up to their gills in tape and packaging.
If nothing else keeps you from ordering food from another state, the reams of plastic will.
The Network
Here’s a peek at the challenges of long-distance food delivery– and we aren’t talking prepared food here.
Raghav Jhawar is co-founder of The State Plate (TSP), which featured on Shark Tank India and received funding from Lenskart founder Peyush Bansal. It delivers pickles, masalas, staples, snacks, sweets and other packaged items from different Indian regions. Over a phone call with The Intersection, Jhawar says his startup relies on a form of drop shipping.
Let’s say TSP places a bulk order for 200 packets of gathia from a vendor in Gujarat. It does so on the basis of demand forecasting, or using historical customer data to predict future demand. The gathia reaches TSP’s Bengaluru warehouse, from where it’ll be dispatched to fulfil orders. This stock should ideally be exhausted when the gathia is halfway into its three-month shelf life; if not, TSP will use discounts or promotions to sell it off.
It took TSP significant trial and error to avoid anything with a shelf life of under a month. That meant no modaks or Rajasthani ghevar. For sweets like kaju katli, the company uses modified atmosphere packaging (MAP), which preserves freshness by displacing oxygen with a mix of nitrogen and carbon dioxide. The company also stocked fewer ‘bulky’, but cheap products like puffed rice. The reasoning, Jhawar says, is that it doesn’t make sense to have more stockkeeping units of something that costs just ₹30-₹70 a kg when shipping claims nearly a third of margins.
“I’m not sure whether nostalgia or strong emotional connect is scalable to the point of breaking even,” he says about long distance delivery of prepared food. It’s a fair point, because Zomato doesn’t seem to be prioritising margin recovery for Intercity Legends. Not now, anyway.
A half kg pack of khubani ka meetha from Meethe Miya costs ₹500. Zomato charges ₹240 for packing and delivery, which brings the total to ₹740. But the platform is offering a ₹100-₹300 discount depending on order value, meaning it’s sacrificing on whatever net margin it could’ve pocketed post the stiff air freight charges, and cuts to third vendors and party service providers.
Contrast this with JMR, which not only levies shipping and taxes for each item, but marks up dish prices by 4x-7x. The Assamese eatery’s omita khar, which costs ₹70 on the menu, is priced at ₹513. Panshikar & Co’s rajgira puri bhaji costs ₹90, but is priced at ₹379.
JMR’s average order value is ₹1,800, and Samiran Sengupta intends keeping it that way. The rationale is that his company develops its own food tech and oversees all logistics—save for the middle mile—in-house. He claims to have people who visit eateries for routine hygiene checks, and a team that tests food samples for safety. JMR also has a vast network of finishing stations and distribution centres.
But not everyone is convinced about the infallibility of high margins. Rajat Gupta, CEO of cold chain services company Tessol, believes Zomato (high commissions notwithstanding) brings with it the promise of high volumes.
“This means third parties like packaging manufacturers would optimise costs or offer better prices to Zomato,” he reasons. This is more or less in line with what the Zomato spokesperson said in response to one’s question about thin margins:
“Overall, our approach is to bring efficiencies and ensure the pricing is not prohibitive. We believe that over time, customers will place larger orders and economies of scale will kick in.”
Zomato’s track record also shows us that it’s willing to burn cash for experiments; Blinkit’s recently-piloted printout service in Gurugram is just one example. JMR is a financial minnow in comparison. Documents sourced from Tofler show that the company’s parent, Createcomm Tech Pvt. Ltd., reported revenues of just over ₹2.5 crore for the financial year ending March 31, 2021. Its losses amounted to about ₹5 crore.
That’s not to say Zomato may be doing things the right way with Intercity Legends. Gupta reveals to The Intersection that he was in talks with the food aggregator to offer cooling and packing services. He proposed using central kitchens to not only blast chill items, but reconstitute food before distribution. Reconstitution is the process of improving food texture and consistency by adding moisture to it. Tessol also suggested that primary packaging remain unchanged from the source (eatery) to the destination (customer), since opening a parcel in order to repackage it increases risk of contamination.
Zomato ended up partnering with another company. Gupta doesn’t say who or why, but hints that the food aggregator wasn’t keen on the higher infrastructure investment. The end result could be more instances of fungus-ridden kalakand.
If there’s one fundamental question for it all, it’s this: what is the point? Even assuming that Intercity Legends is a discovery ‘hook’ to retain customers—9 out 10 Zomato orders are from existing users—how often would one choose an Arsalan biryani over a local biryani? The unmatched experience of eating an iconic dish, made fresh, in an iconic eatery notwithstanding, there’s a bleakness to burning air traffic fuel to satiate a craving– via an app that promises “100% plastic neutral deliveries”.
It’s not Nizami hedonism, but it’s hedonism alright. And the sooner it fades into oblivion, the better.
*Disclosure: Deepinder Goyal is an individual investor in Frontpage Media Technologies, the parent company of The Signal. The full list of our investors is here.
ICYMI
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