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The last five years have witnessed a major shift in the food business, with more money being invested by private equity (PE) and venture capital (VC) players in online food delivery platforms. Swiggy and Zomato have received approximately USD 700 million in funding, as compared to USD 843 million invested in organised restaurants.
According to an Indian Express report, in the past five years PE and VC investors have pumped in USD 143 million more in quick service, casual dining and fine dining restaurants as compared to Zomato and Swiggy.
Companies such as Sapphire Foods that operates Pizza Hut and KFC franchises; Burger King India, Costa Coffee outlets, and Impresario Entertainment & Hospitality which operates Social and Smoke House Deli restaurants, received significant investments from PE-VC companies, according to data provided by Chennai-based Venture Intelligence.
The data shows that the most active investors in the restaurant segment have been Everstone that has invested heavily in Burger King; Massive Restaurants in Farzi Café, Masala Bar and Pa Pa Ya, and Blue Foods which has restaurants like Copper Chimney and My Square. Now Capital has also invested in several cafes. Goldman Sachs invested heavily in Sapphire Foods and Azure Hospitality.
Experts have deemed the organised food business far less lucrative than the ever growing consumer internet space, where platforms like Swiggy and Zomato operate. One of the primary reasons being, it takes far more capital expenditure to operate and the rate at which physical restaurants scale up is slow in comparison to food-tech companies.
Although such companies report losses from operations, they still seem to be a good bet for PE investors considering their market expansion.
Firms like Sequoia Capital, Info Edge, Temasek Holdings have pumped in funds into Zomato, while Swiggy has raised funds from Naspers, Accel Partners and Bessemer Venture Partners.
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