On October 7, 2021, India-based internet restaurant company Rebel Foods Pvt Ltd (Rebel Foods) attained unicorn status with a $1.4 billion valuation as it raised ₹1,308 crore in a Series F round of funding. Rebel Foods operates the largest number of internet restaurants worldwide with 45+ brands across 10 countries globally.
The foodtech operator employed innovative and modern technologies such as Artificial Intelligence (AI), Internet of Things (IoT), and Machine Learning (ML) to efficiently operate its cloud kitchens globally.
Origin story
Co-founded in 2011 by Jaydeep Barman and Kallol Banerjee, Rebel Foods was a pioneer in the multi-brand cloud kitchen space. The craving for Bengali food prompted Barman and his colleague Banerjee to start a small quick-service restaurant (QSR) in Pune in 2004.
However, Barman was disappointed as the income from the restaurant was not even enough to cover the restaurant’s electricity bill.
In 2005, Barman went to France to pursue higher studies. Banerjee too joined him in 2006. They appointed two people to run their food joint in their absence. After completing his studies, Barman moved to London, while Banerjee settled in Singapore.
While working in London, Barman realised that despite the popularity of the cuisine of his home country, there was not a single global Indian food brand. After quitting their respective jobs, Barman and Banerjee returned to India in 2011 and decided to expand their food business.
They established Faasos Food Services Pvt Ltd (Faasos). Initially, Faasos sold only rolls and wraps. Later, the menu was extended to meals that included breakfast, lunch, dinner, evening tea, and snacks.
In 2016, Faasos generated ₹66.21 crore in annual revenues through 40 outlets spread across three cities — Pune, Mumbai, and Bengaluru.
As Faasos grew, the challenges of building a retail network started surfacing. These included high rents for good locations and the difficulty in balancing dine-in and delivery customers from the same store network.
The brand was scaling up fast but the steep rentals affected profits. Losses increased from ₹2 crore in 2012 to ₹105 crore in 2016. Fortunately, around 2013, another business model was starting to take shape — food delivery facilitated by the internet.
The founders decided to change the business model of Faasos from being a QSR to a kitchen with only online delivery. Barman adopted the cloud kitchen concept at Faasos by opening 50 cloud kitchens in spaces that had affordable rents in four Indian cities in 2016.
The shift changed the entire economics of the business. The rent-to-sales ratio dropped from 15 per cent in 2016 to 4 per cent in 2018.
Once Faasos had shifted to the new business model, many opportunities and options opened up for it, and the company expanded exponentially. From 2016 onward, Faasos became a sub-brand of the group and the company was renamed Rebel Foods.
In 2016, Rebel Foods entered the Biryani segment as it launched a brand called Behrouz Biryani, using the same Faasos kitchen and staff to fulfil orders. Within one year, Rebel Foods was delivering 2,00,000 biriyani packets a month.
Banking on the success of Behrouz Biryani, Rebel Foods launched a pizza brand called Ovenstory in 2017 and another brand called Firangi Bake specialised in making oven-baked dishes.
The pivot to a multi-brand, multi-purpose cloud kitchen model doubled revenue from ₹146 crore in 2018 to ₹305 crore in 2019 and reduced losses from ₹105 crore in 2016 to ₹74 crore in 2018.
Inspired by the success of Behrouz Biryani and Ovenstory, new brands — Mandarin Oak (Chinese), Sweet Truth (Desserts), The Good Bowl (bowl meals), The Biryani Life (single-serve Biryani), and Slay Everyday (coffee) were launched in 2019.
With the outbreak of Covid-19 in March 2020, Rebel Foods shut down 70 per cent of its kitchens and launched DIY-meal kits under the Faasos brand in May 2020. Rebel Foods’ global expansion began in 2019 with the launch of its services in the UAE and Indonesia.
In 2020, Rebel Foods entered Singapore, Malaysia, Bangladesh, and the UK. In fiscal 2020 Rebel Foods’ annual revenues grew to ₹561 crore, an 83 per cent increase compared to the previous year.
Innovation strategy
With over 4,000+ internet restaurants globally, Rebel Foods has disrupted the traditional restaurant business by developing its own full-stack technology-enabled platform — the Rebel Operating System (Rebel OS).
Rebel OS had four key elements — full-stack tech platform, culinary innovation center, cloud kitchen network or supply chain, and robust operating DNA and infrastructure.
Full-stack tech platform
Rebel Foods developed most of its systems, applications, and algorithms in-house, which gave it immense control on flexibility and speed to build seamless processes and experiences. The tech platform developed by the company’s engineers and product managers operated and controlled queuing, batching, and inventory prediction.
Rebel Foods used data science models for real-time personalisation. It built a recommendation engine based on many fundamental aspects of data collection, storage, analysis, and filtering.
It collected key data points such as transactional/order history, search history, clicks, and cart events, reviews, comments, ratings, and instructions, user location, and taste profile to fine-tune its recommendation model and help customers find relevant products faster.
Culinary innovation center
Culinary expertise and capabilities were used to break down menus into small Standard Operating Procedure (SOP) driven steps that did not require any additional skill. The staff was trained in-house. Rebel Foods’ well-equipped innovation centers helped chefs explore their hidden culinary skills, understand local preferences, make world-class dishes, and pay close attention to the quality of each ingredient.
Between 2016 and 2018, Rebel launched 280 different dishes and recipes across its multiple brands with the help of its core team of chefs who iterated with the dishes to achieve product-market fit.
Technology was at the core of Rebel Foods’ smart kitchen platform. Rebel Foods had multiple industry-first automated products in its kitchens. The company had IoT-enabled deep-fryers and a sensor-enabled quality check station which kept a check on consistency and taste profiles across all its kitchens.
Modern technology, including computer vision and AI, helped chefs at Rebel Foods automate the process of cooking. They used intelligent equipment in kitchens such as —a robotic wok, dum (steam) machine, automated tawas (pans) and auto fryers. As of 2021, smart equipment was installed in 50 cloud kitchens, and Rebel Foods plans to install them in 100 more kitchens by 2022.
These smart kitchens were fitted with learning displays that showed the chefs in the cloud kitchens how dishes were prepared by simply following the instructions, be it Behrouz Biryani or Mandarin Oak. The chef was not required to know how a cuisine or dish was prepared.
The intelligent wok did everything based on the instructions fed. Rebel Foods also introduced robotics-led smart friers, which could identify the food shape — on the basis of that shape; it automatically adjusted the oil temperature without human involvement. The automated wok used at Rebel kitchens dispensed oil or water or any other ingredient exactly based on the instructions given.
Rebel Foods used visual AI and video analytic tools to monitor the activities in its cloud kitchens. Chillers, freezers, and other kitchen equipment in Rebel kitchens were connected through a kitchen monitoring system built on IoT.
Any violation of instructions automatically alerted the designated staff and sent a real-time notification along with red-flagged video clips to managers via the app or email.
The automation and smart machines helped the chefs in achieving near-zero wastage in their kitchens. The Chief Delight Officer (CDO) led the team at each internet restaurant and was responsible for attaining economies, training personnel, and stock control and management.
Cloud kitchen network or supply chain
The third aspect was the pan India supply chain network of Rebel Foods, which was its backbone and helped it in scaling the brands. From raw material sourcing to warehousing to managing logistics, to cloud kitchens to customers, Rebel Foods developed a pan India supply chain network.
Rebel Food’s robust supply chain facilitated sourcing, warehousing, and moving input materials safely and securely in any shape and form across its markets.
Robust operating DNA and infrastructure
Rebel Foods partnered with Amazon Web Services Inc (AWS) to build an in-house IoT platform that allowed it to automate cooking processes, and keep track of inventory, procurement, manufacturing, warehousing, and more. Rebel Foods used AI-based video analytics platform Wobot Intelligence Pvt Ltd’s hygiene and safety suite to keep an eye on the quality of the operations in its kitchens.
Rebel Foods used visual AI QC machines that could detect SWAT (size, weight, appearance, and temperature) of every dish prepared. If any one of the parameters was not met, the machine raised an alarm that notified people in the kitchen. Since this alarm was raised in real-time, the team could intervene and correct the dish by making changes, thus, creating negligible food waste.
The QR code ensured that everything was checked from who had cooked the food, their body temperature, medical certificate, which kitchen the food had come from, the quality checklists at those kitchens, ingredients’ quantity and their source, sanitisation process adopted, and the process of packaging it had gone through.
Challenges
Despite its success, it was likely that Rebel Foods would face some challenges going forward. One of the biggest challenges going forward would be the growing competition in the cloud kitchen space.
The company faced strong competition from food aggregators such as Zomato and Swiggy, who also had their own network of cloud kitchens. Other competitors in the cloud kitchen space include Ola Foods, FreshMenu, Box8, Innerchef, and QSR Foods, among others.
Moreover, Rebel Foods’ business was totally dependent on sales through its online platform or through food aggregators, experts felt. There was no physical platform to reach out to customers. Rebel Foods’ expansion, it was believed, would not be without its challenges.
As Indian dishes varied from one region to other, Barman would need to standardise the menu in a way that would provide consistency while catering to regional sensibilities. Another challenge for the founders of Rebel Foods would be to ensure that the losses did not pile up as the chain planned to scale up globally.
Reportedly, the overall expenses in fiscal 2020 increased 124.5 per cent to ₹1,003.4 crore compared to the previous year.
The Indian cloud kitchen space was expected to grow to $1 billion by 2023, with a double-digit growth rate every year. As Rebel Foods continued to focus on growing its international footprint, technology, and brand acquisitions, analysts wondered whether it would be able to deliver on its vision of bringing the highest quality brands across food missions to customers globally.
Analysis
The case discusses how India-based food tech operator Rebel Foods reinvented the cloud kitchen space through innovative technology and emerged as the world’s largest internet restaurant company operating in the cloud kitchen segment.
Multi-brand cloud kitchen model
With the Covid-19 pandemic boosting demand for cloud kitchens and delivery-only brands, the internet restaurant businesses gained momentum.
Cloud Kitchen emerged as a new vertical due to the following reasons:
- Increased trust in the quality and freshness of the food vs food from the ‘Delivery Only’ food apps
- Their flexibility in continually experimenting with the menu
- Their higher operational efficiency vs QSR due to pooling of resources
- Their ability to create multiple private brands at a lower marketing cost and higher operating leverage per brand
Rebel Foods followed a multi-brand-cloud kitchen model. The company gained a head start as it pivoted from being a quick-service restaurant (QSR) chain to a multi-brand cloud kitchen model powered by an efficient operating system.
A multi-brand cloud kitchen model owns several brands under one parent company. All the brands share a large kitchen space, under one roof. Each brand is cuisine-specific and positioned in a way that caters to different customer needs.
Rebel Foods operated under a single kitchen infrastructure and offered multiple food varieties and operated multiple cloud kitchen brands such as Faasos, Behrouz Biryani, Oven Story, Mandarin Oak, Lunch Box, Sweet Truth, The Good Bowl, The Biryani Life, Firangi Bake, and Slay Coffee.
One of the most significant advantages of a multi-brand cloud kitchen is that it makes it possible for a single parent company to offer several different cuisines from the same premises. As there is no front-of-house at all, multi-brand cloud kitchens have evolved to cater to appetites of various customers, each functioning under a separate brand.
For instance, one cloud kitchen company can operate three brands, each specialising in Indian, Italian, and Chinese cuisines, respectively, from a single unit. To customers, however, it may seem that these are independent brands with independent operations serving distinct cuisines. As it is a delivery-only format, low start-up and marketing costs are often termed as the biggest game-changer.
With minimum entry barriers and low capital costs, multi-brand cloud kitchens are more profitable set up than traditional restaurants or even standalone cloud kitchens. Multi-brand cloud kitchens cater to a wider customer base and have the capacity to leverage growth levels from a single kitchen unit. Efficient utilisation of resources, adequate inventory levels, and controlled food costs provide better predictability in the business.
Disruptive innovation
In order to stay ahead in the global marketplace, businesses must constantly look for innovative strategies to gain competitiveness. Innovation comes in many forms. Some innovations focus more on cutting-edge technology, while others are about disrupting markets and sustaining market positions.
The Innovation matrix categorises innovations according to both the technology it uses and the market it operates in. The matrix identifies four different forms of innovation:
Incremental innovation: Continuous improvement of existing products or services to provide more value to an existing market.
Architectural innovation: Modification of existing processes for an entirely new market.
Disruptive innovation: New technologies and products are created to serve an existing market. This type of innovation is supported by new technology that provides a more effective alternative to what already exists in the market. Businesses apply disruptive innovation to serve the evolving needs of their consumer base, thereby creating entirely new value streams and service offerings that did not exist before.
Radical innovation: When a business applies new technology to a new market.
Rebel Foods is more along the lines of disruptive innovation as it disrupted the traditional restaurant business by introducing innovative technology in its cloud kitchens to ensure seamless operations and to cater to different customer tastes.
Rebel Foods’s core elements/ competencies around which the disruptive innovation was based were:
- End-to-end tech platform
- A culinary innovation center
- Supply chain network
- Robust infrastructure
Rebel Foods disrupted the cloud kitchen space in India with the introduction of patented machinery and a highly efficient operating system. All its kitchens ran on the Rebel OS that combined technology with culinary expertise and supply chain.
Rebel Foods struck the right balance between exquisite culinary craftsmanship and technological infrastructure and built an efficient operating system with a full-stack tech platform, culinary innovation center, cloud kitchen network/ supply chain, and robust operating DNA, with smart infrastructure at its core.
The foodtech platform leveraged modern technologies such as IoT, AI, and robotics in all its cloud kitchens that allowing it to automate cooking processes, and keep track of inventory, procurement, manufacturing, and warehousing.
Future strategy
Going forward, Rebel Foods can adopt the following strategies to consolidate its position in the cloud kitchen space:
- Focus on product innovation and continue investing in technology to stay ahead of the competition.
- Collaborate with top global food brands by offering them its key technological features — efficient smart kitchen platform, robust infrastructure, and supply chain network.
- Attract new customers. Rebel should focus on peer advocacy through both monetary and community engagement initiatives.
- Explore data analytics to build operations such as network optimization and roadmap for entering new verticals — growing into groceries, medicines, and fresh meat.
- Diversify into several new offerings by leveraging its customer base, delivery, and service expertise.
- Promotional campaigns. Attract customers with loyalty-based promotions, promo offers, discounts, memberships, and cashback offers
- Leverage marketing communication around subscriptions, loyalty-based promotions that highlight the value for money for consumers.
- Environmental friendly packaging. This is another way of establishing a stronghold in the food-tech space where sustainability initiatives are much appreciated and adopted by consumers.
- Promote its 100 per cent sanitised kitchens protocol where hygiene and safety are of primary importance in the post-pandemic world.
- Develop strong supplier engagement and partnerships backed by big data that can provide increased loyalty with restaurants, higher customer satisfaction, increased negotiation power, and higher quality assurance.
- Implement a feedback system that automatically flags any quality issues in the kitchens.
- Focus on peer advocacy. Create and execute scale advocacy programs through monetary measures (referral codes) and social marketing/ influencers.
- Open a few physical outlets in malls/shopping centers to promote and create brand awareness of the parent brand Rebel Foods for customers who are not online.
(Syeda Maseeha Qumer is Adjunct Research Faculty, and Syeda Ikrama is Senior Research Associate, at IBS Case Research Center, Hyderabad.)