Food tech startups were the new trend in 2015 and were some of the top startups where the investors were keen on. Food ordering took off when GrubHub made it possible to find menus online, unlocking a takeout and delivery market of $70bn by taking a 10% commission from restaurants. Grubhub went public in 2014. But with time, looks like food tech startups seem to have been on a roast that doesn’t seem to cease. These startups are now struggling with financial issues that cannot be neglected. According to a January 28 report in The Times of India, Rocket Internet backed Foodpanda has not found a buyer even with a rock bottom price tag of $10-15 million. It came quite a surprise that around 300 employees were laid off in December 2015. Similarly. Even Tony Owl and Zomato have been facing several concerns. There are several challenges that a food tech startup has to deal with. Here are some:
- Choice of restaurants: Assorting the right kind of places for their signature services is crucial. While few of them would have made their mark for biryani other would have set a benchmark for excellent cocktails. Categorising and pitching a clan of similar restaurants is quite a daunting task for any startup. Also, with the newest trends dining out is more of an experience than anything else. Customers come with an expectation that they can get it all. This adds to the difficulty of the already prevalent challenge. Also, the quality of the food service must also be considered. The food offered must be above the par and must be able to give the startup enough traction. If there are any signature delicacies then maintain the consistency becomes the priority and if there is an online order then ensuring good packaging and delivery time becomes priority. All in all, high quality food, service, and every related factor becomes a prominent individual task on its own.
- Delivering what is promised: Once the customer places an order, it is complete responsibility of the food tech startup to ensure that the food is delivered, neatly packed and as expected. But at times during peak hours such as lunch and dinner time maintain the track of time and orders is a nuisance that needs to be handled with care because every order is a customer either lost or gained. Apart from taking care of the order management, startups have to arrange the required number of human resources who will deliver within time promptly. When several orders are places during the peak hours, managing the delivery guys is an equally frustrating task.
- Questioning the earning: It takes quite some time for food tech startups to actually cash in as the profitability is low in the initial stages. Only with aggressive business development and interesting offers the startups will be able to gain. Nowadays the customers are extremely smart with their choices. With the given fact that the food industry itself is very dynamic and also the availability of several options with the smartphones, customers look for deals that excite them. The deals might not help the startup fetch money but will help in grabbing the attention of the customers which will prove to be the only positive attribute.
- Constant need of technology: This is an obvious point but we have to keep repeating it. One biggest disadvantage of food tech startups is that its core audience are the mobile users or the tech savvy younger audience. So the focus is to lure this section alone and the audience is too small to be even targeted. Lack of the internet and the technical knowledge narrows down the option for a wide market and makes it a niche which does not work out much for the startup in the long term.
The food tech startups are seeing newer trends like never before. While players like Swiggy, Zomato work as restaurant aggregators, startups such as FreshMenu, Innerchef are offering full stack food delivery systems. However, interestingly dinner kits are not yet such a hot trend had have the lowest funding momentum. While few food tech startups have outgrown, few of them shut down operations. Only time and trade will tell how is this going to shape up in the next couple of years.