Indian Unicorns 2022: Rebel Foods Takes Kolkata Rolls to Cloud Kitchens

The food delivery market in India is expected to grow at 28% CAGR through 2026, and 26% this year. The market is highly fragmented with global players like McDonald’s and Pizza Hut competing with Indian-origin players like Zomato, Swiggy, and Rebel Foods. Rebel Foods is among the latest Unicorn players in the country that is spearheading the Cloud Kitchen concept.

Rebel Foods’s Offerings

Founded in 2011 by Jaydeep Barman and Kallol Banerjee, Mumbai-based Rebel Foods is a food delivery platform that changes how people order and get food delivered on mobile. The company was started when the founders attempted to recreate street food options in a quick-service restaurant (QSR) format in 2004. They started by exploring the idea of recreating Kolkata’s famous rolls in this format and soon opened up Faasos. Faasos did good business, and the founders ended up opening a few more locations. But while Faasos was profitable, it was a difficult operation to scale. The company continued its small operations for the next six years.

By 2010, India was witnessing a slew of chain restaurants open in the country. The businesses were fairly successful, and the Indian owner of Dominos pizza chains, Jubilant Foods, had also gone public. The market conditions inspired the founders to expand their operations.

In the next few years, Faasos opened 50 locations across the country but failed to make remarkable improvements to its business model. They launched a phone app and built a more technology-focused website. But the high costs of setting up restaurants were a big concern. As part of their drive to improve their financial position, they looked at their historical patterns. They realized that 75% of their orders were for delivery and 73% of their customers knew the brand, but not the outlet. They closed down their outlets, booked kitchen spaces on industrial estates, and created “internet restaurants”, now known as cloud kitchens. They have been on a fast-paced journey since then.

They diversified from Faasos to launch other brands such as Behrouz Biryani and Oven Story. In 2018, they rebranded themselves to Rebel Foods and expanded operations to Indonesia, UAE, and the UK. Besides maintaining their own brands in these markets, they also launched some local brands such as Banzai in Indonesia, 500 Calorie Project, and Sawa in the UAE. As of January 2021, it had over 450 kitchens in 70 cities in 10 countries and manages more than 45 brands.

Rebel also realized that its “internet restaurants” make food serving operations more economical by allowing restaurants to prepare food exclusively for delivery instead of for dine-in or takeaway customers. Their model allows food delivery services, restaurants, and brands to reach a larger market while keeping their operational costs low. They soon started Rebel Launcher, allowing food companies to operate from their kitchens.

Rebel Foods’s Financials

Being privately held, Rebel does not disclose its financials. According to reports released last year, it was trending at an annual revenue run rate of $150 million. It plans on going public within the next two years and has also been exploring acquisition opportunities. The company has raised $549.4 million in 23 rounds of funding, led by Acernis Ventures, Mando Corporation, Alimco Financial, Sequoia Capital India, Coatue, Goldman Sachs, Qatar Investment Authority, Evolvence India Fund, and Alteria Capital. Its most recent round was held in November 2021, where it raised $175 million at a valuation of $1.4 billion.

Rebel’s innovative cloud kitchens are becoming an attractive opportunity to other players as well. India’s food delivery services like Swiggy and Zomato are also exploring similar business models. But both of them have failed to build operations as successful as Rebel. Rebel believes that it has been successful in its venture because it uses science and technology to scale to standardize food creation, and has built kitchen layouts by workflows rather than restaurants.

The funding level that has gone into Rebel is astronomical. However, it is good to see that they have finally found a scalable business model, and the revenue to valuation ratio is not particularly outrageous. The business model is typically not very high margin, and extremely heavy of logistics. While I have not seen the P&L of the company, it would need to pay attention to margin and profitability to be able to take the company public and sustain the valuation levels under consideration.

Photo Credit: Devanath from Pixabay

This segment is a part in the series : Indian Unicorns 2022