Restaurant density will drive food delivery economics: Swiggy's Rohit Kapoor

Rohit Kapoor, CEO, Food Marketplace, Swiggy

The density of restaurants will be a bigger driver of economics for food aggregators than factors like delivery wages and consumer spends, according to Swiggy's food marketplace CEO Rohit Kapoor.

"The bigger driver of economics will be restaurant density. What affects the cost the most is the delivery distance. In China, the delivery radius is very low because of high density of restaurants," he said.

"Koramangala is today one of the highest density locations in the country. That one locality has got 2,000 restaurants. Any cuisine, any price is available there. It is faster and cheaper."

Kapoor was responding to a question on whether the rise of costs such as delivery wages, coupled with a slow growth in average order values, could impact profit margins in the online food ordering sector.

India has 1,000-2,000 restaurants per million urban population, lagging behind Brazil's 7,000-9,000, China's 7,000-8,000, and 2,000-3,000 for the UK and the US, according to a report by Swiggy and Bain & Company.

Kapoor said that more restaurants are coming up in India, compared to the number shutting down which bodes well for the food delivery sector.

"If you look at the location of any restaurant, it doesn't die. The brand changes typically but the location does not. So, a new entrepreneur makes it work," he said.

India's online food delivery market is growing at 18 percent annually and is expected to cross Rs 2 lakh crore by 2030, according to the report by IPO- bound Swiggy and Bain & Company.

However, the average spend per order is projected to only see a slight increase from Rs 220-240 in CY23 to Rs 230-250 in CY30.

The report said that the addressable customer base for the Indian food services market is expected to expand by 110 million, growing from 320-340 million to approximately 430- 450 million by 2030. This surge will be supported by macroeconomic tailwinds, including rapid urbanisation and a rise in affluence.

The report highlighted that eating out is a special event for Indian consumers, occurring an average of five times a month, and this frequency is expected to increase to seven-eight times by 2030. This gradual shift will point to a transition in the way eating out will be perceived, moving from special occasions to a matter of convenience, with new occasions (e. g., mid-meal dayparts) and greater access (expansion of organized supply, food delivery growth).