Curefoods, the online cloud kitchen operator, is charting out offline expansion plans, where it will operate large-format restaurants for Nomad, its premium pizza brand, founder of the company, Ankit Nagori told Moneycontrol.
The case for offline eateries grew stronger when the Accel-backed company noticed that order volumes spiked towards the close of last year, in comparison with business as usual (BAU) days, but the growth rate was slower on a year-on-year (YoY) basis.
Currently, Curefoods operates small kiosks for some of its brands, like Rolls on Wheels, around different parts of a city. But the plan for Nomad, which will be a premium play, is different for the company that also operates popular brands like EatFit, a healthy food provider, and Sharief Bhai, which makes biryanis.
Curefoods plans to increase Nomad’s physical store count from two to over 10 by the end of this year as it eyes higher revenues by leveraging an omnichannel strategy. During the same time, the company will also double the offline footprint of its biryani brand, which is positioned as a budget-friendly family eatery, from around 15 stores to 30.
"We started the pizza business during the pandemic. Then it was very clear that we had to have an ‘Internet first’ approach. So we built around that. On December 31, 2021, we clocked our highest numbers ever, where order volumes were about 4-5X of BAU. But on December 31, 2022, because the world was open, we did not see that 4-5X; there was a spike of only 2-3X over BAU," Nagori said.
That moderation was when the company decided to open offline stores for biryani and pizza, the two key food categories in India. An increasing number of D2C companies are now taking the offline route to increase sales, after years of having an internet-first approach.
"Of course, 2-3X was massive, but we realised that there are occasions and days of the week where customers, for certain categories of food like pizzas, will always step out. Those occasions are important," he added.
A typical Nomad outlet is a 50- to 70-seater that will be available only in the top 10 cities of India, which include Delhi, Mumbai, Bengaluru, Hyderabad, and the like. Curefoods typically spends about Rs 75 lakh to open a Nomad store.
That compares with Rs 2 crore that would be needed to set up a similar-sized American quick-service restaurant (QSR). In-house, the Rs 75 lakh compares with Rs 40 lakh that a cloud kitchen would cost and Rs 50 lakh that one outlet of Sharief Bhai costs.
Shedding light on the increase in sales by going offline, Nagori said each time the company opened a new Sharief Bhai outlet, online sales went up by 10 percent because of a stronger brand recall, and the physical restaurant brought in an additional 30-40 percent revenue. "And we are confident that the numbers will look the same for even Nomad pizza," Nagori said, despite being at a higher price point.
The average order value at Nomad is around Rs 1,200, which is higher than the Rs 500-odd at Domino’s. This makes Nomad compete more with domestic boutique pizzerias and less with Domino’s and Pizza Hut, even as the traditional players strengthen their premium category.
"There will always be people who will eat the Domino's Gourmet pizza, and it will be 10X the volume at any other small boutique brand like ours. But then the boutique brands offer some level of premiumisation and exclusivity. People want to try a new place every weekend, and that’s what we want to capitalise on," Nagori said while adding that his company was too small to compete with giants like Domino’s, especially because it wasn’t catering to the same price point.
As per industry estimates, Nomad’s margins would be in the 60 percent range, whereas Domino’s has a margin of over 70 percent, thanks to the supply chain capabilities it has built over the years.
The expansion plans come even as Domino’s, in its latest quarterly results, showed that pizza consumption was slowing down because of the buildup of price pressures. Nagori admitted that his company was not immune to the "backbreaking" inflationary environment, but the situation was slowly improving.
In a move to diversify its sales, Nomad aims to get its sales in equal parts from offline and online channels by the end of the year. At present, the split is in the ratio of 70:30, tipped in favour of online.
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