#Asia Indian culture and the foodtech calamity

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Eating out is more of a recreation in India; people are not in a rush to order food online. Instead, they want to go out with family few times a year for enjoyment

A family at an Indian restaurant

Startups in India are frequently in the headlines. Companies such as TinyOwl, Swiggy, Zomato, and Dazo raised millions of dollars from leading venture capital firms. But they are now struggling to understand what went wrong.

UK-based JustEat is a clear market leader in 14 of the 16 geographies it operates. foodpanda and Deliveryhero own a significant market share in Europe. While in the US there is no clear market leader; Grubhub-Seamless is heading towards that path.

With several acquisitions in 2015, it appears that the foodtech industry is moving towards consolidation. Struggling companies in business listing or coupon services are entering the foodtech marketplace.

In February 2015, Yelp acquired Eat24 and in July, Groupon acquired OrderUp. Wisconsin-based EatStreet has raised more than US$27 million to gain a competitive edge. East coast-based delivery.com and Foodler have made acquisitions to increase their market presence.

Easy to start, but hard to sustain

Foodtech is relatively easy to start. A quick Google search or an app store search in food delivery lists dozens of foodtech apps and websites. Most of these companies started after 2010. You build a website or an app, get orders and send the orders to restaurants via fax. As a middleman, you get a cut anywhere between 3 per cent and 15 per cent. Restaurants are inclined to sign up any startups since the agreement is not exclusive. Irrespective of which app or website generates the ticket, the restaurant gets an order.

Foodtech companies in Europe and the US have distinct industry characteristics that are not necessarily true for India. Online ordering is seen as a convenience for a lot of western world population. It saves people’s time. However, the same tools aren’t necessarily convenient for India. There is a huge difference in culture.

Indian consumers rarely go out to eat at restaurants. A few of my relatives have never been to a restaurant. Caste system and various superstitions divide the kitchen.

Religion, caste and hygiene matter

India

Some would doubt whether the food was prepared by a cook who did not take a shower, while some other wouldn’t eat out because they doubt the food might have been prepared by a cook who was wearing slipper while cooking.

There are some others, who won’t go to a restaurant which is owned by an individual of another religion or the cook follows a different religion. The reasons are aplenty.

Several others do not eat at a restaurant because they do not trust the quality of food. Restaurants don’t have a set standard where they follow sanitary regulation. There aren’t cases where the government has enforced sanitation and hygiene requirements. Often times, people get sick because of the food they eat outside.

Nearly half of the population eat or don’t mind eating from a street vendor, because the food is priced much cheaper than a restaurants located in a shopping complex, and are also tax tree. For example, a cup of tea at a street vendor right outside of a shopping complex would cost just INR INR 10 or 20 (under US$0.30), but the same tea inside a shopping complex or a mall would cost INR 100 (US$1.5), plus taxes. Unless it’s a special day, most choose to take the tea sip out on the street while enjoying its surroundings.

Most of the street diners are males. Females are less likely to travel, work or eat outside. They tend to cook at home most of the times.

Females wake up very early in the morning, prepare breakfast and get kids ready for school, while males usually have breakfast at home and pack the lunch. Once the kids and spouse leave home, females have plenty of time to experiment with new dishes. Often times, husband and wife discuss what they would cook for dinner or for the next day.

There is also a perceived value of eating out. Since women and children rarely get an opportunity to go out, they see this as an opportunity for recreation.

At the same time, in the US and Europe, people tend to eat out to enjoy the various cuisines available from different geographies of the world. Most of these nations have immigrant populations who brought these dishes from their home countries. As such, there is great variety of food that you can eat.

Conversely, most restaurants in India sell only Indian food. Except in rare cases such as the malls, major strips and high-end restaurants, it is not possible to find a cuisine other than Indian food.

Since most of the food that you eat out is same as the food cooked at home, consumers don’t prefer eating out. Moreover, Indians are very selective food eaters which make them less likely to experiment with foreign food.

The generation gap

Generation gap is another factor. For example, my father believes that only those people, who are not lucky enough to get home-cooked food, go out and eat. People of his generation believe that home-cooked food is the best. They say that they work hard in life so that we can eat good food.

While we tend to eat out for the variety of cuisines that we can choose from, he doesn’t feel the desire to eat the food that he is not used to. He doesn’t find the food appealing or delicious enough to eat, let alone spend money for that food or order online. He grew up eating north Indian food and that’s what he wants to eat everyday, no matter where he goes – be it India or the US.

Eating out is more of a recreation in India. People are not in a rush to order food online. They want to go out with family few times a year for enjoyment.

Online ordering platforms run into issues regardless of these. Either there are consumers who don’t want to eat food from restaurants or there are consumers who want to go out eat for experience. People generally are ethnocentric to their food and culture both. They take decades to change.

Foodtech firms and their investors would need to wait for the “great change” for their efforts and investments to show growth. Or they should actually diagnose the product features needed in India and design around the actual pain points.

The author Ash Shrivastav is an M&A banker where he advises foodtech companies. He has advised King Gyanendra of Nepal on his digital strategy. He has led investments in several technology startups and oversees the portfolio operations. He is also Founder of Callitme.

Ross Ford contributed to this article. He is currently an MBA student at the University of Chicago’s Booth School of Business. He is a graduate of Harvard College where he was heavily involved in the Harvard Institute of Politics and served as a member of the Student Advisory Committee. He has worked as an investment banker and a strategy consultant. Ross is also Founder of Votera.

The views expressed here are of the author’s, and e27 may not necessarily subscribe to them. e27 invites members from Asia’s tech industry and startup community to share their honest opinions and expert knowledge with our readers. If you are interested in sharing your point of view, please send us an email at writers[at]e27[dot]co

 

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