Leading food delivery service Swiggy has announced the sale of Swiggy Access, its cloud kitchen division, to Kitchens@. The deal, which included a share exchange, was part of the company’s cost-cutting measures after 380 employees were let go due to a lack of funding.
Sriharsha Majety, co-founder and CEO of Swiggy, said that in order to meet its goals for profitability. The company had to look at its overall indirect costs. This was because the growth rate for food delivery had slowed down compared to what they had expected, which was the case for many similar companies around the world. Because of this, the business took steps to cut other indirect costs. Such as infrastructure and office/facility costs, and also made sure that its staffing costs were right for what it thought the future would bring. After the company closed its meat business, Swiggy Access was one of the business lines that had to be cut.
Access to Swiggy’s delivery-only locations
Starting in 2017, Swiggy Access locations were only for delivery. This meant that restaurant partners could open kitchens in places where they were not present or where they did not do business. Restaurants could increase their customer base and shorten delivery times in this way. The company invested about 175 crore in the company between 2017 and 2019, and they expected to invest another 75 crore by March 2020. However, the pandemic disrupted their plans, and they had reduced their presence to four cities before making the agreement.
Swiggy participates in kitchens
After the transaction, Swiggy will own a stake in Kitchens@, expanding its operations across 52 locations. 700+ kitchens in four cities and giving customers more practical and effective options for food delivery, according to Junaiz Kizhakkayil, CEO of Kitchens@.
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While Swiggy’s revenue from operations increased by 125% to 5,704.9 crore during the period, the company still posted a net loss of 3,628.9 crore. The capital expenditure for cloud kitchens is typically 2-3 times less than that of a dine-in establishment. Swiggy is right-sizing its business verticals and cutting costs as a result of the sale of Swiggy Access to Kitchens@. Swiggy also becomes a Kitchens@ shareholder. The move will expand Kitchens@’s operations and reach into four cities. In order to meet its profitability targets. Swiggy is paying closer attention to its overall indirect costs as the growth rate for food delivery is slowing down.
