Travis Kalanick readies recipe for India cloud kitchen foray

BENGALURU: Uber cofounder Travis Kalanick has discreetly begun building an India team to drive his new venture, City Storage Systems, which runs delivery-only kitchens called CloudKitchens, five people aware of his plans said.

The company, which continues to operate on a stealth mode, has started engagements with restaurant chains and real estate developers in Mumbai, as well as begun early discussions with marketplaces including Swiggy, UberEats, and Zomato, these people said. Cloud kitchens are exclusively delivery restaurants without a dine-in facility or walk-in customers.

Former TexMex Cuisine India CEO Ashish Saxena is the general manager for Mumbai and has been overseeing operations reporting directly to Kalanick.

“India is one of the top in the priority list right now, just given how interesting the market dynamics are with both large companies (Swiggy and Zomato) investing in inducing a food delivery behavioral change in consumers,” said a person directly aware of the matter. “That, given with the lack of restaurants in the country, as well as reasonable real estate rates, makes Travis excited about doubling down his focus on India,” he said.

The company is in the process of setting up teams in other cities as well. It will also hire a country head once the business launches and scales. “Mumbai is the first city scheduled to be launched, followed by Bengaluru, Delhi, and Hyderabad,” said this person, adding that operations would go live soon. “Efforts of operations have begun on the acquisition side,” he said.

Last week, the Wall Street Journal reported that CloudKitchens had received a $400 million investment from Saudi Arabia’s sovereign wealth fund, valuing the startup at around $5 billion. The other market in the pipeline is the Middle East, these people said.

All five people ET spoke to requested anonymity given they have signed non-disclosure contractual agreements with the company. An email sent to City Storage Systems did not elicit a response till press time Sunday.

Kalanick has kept the structure of CloudKitchens similar to Uber’s international expansion strategy, with a general manager heading operations in a city and working closely with the real estate and operations team. While operations will be lean, each city will have a sales, operations, business intelligence, policy and analytics executives, said a person directly working with the team. He added that hardware and software development was based in the US.

“They don’t just think of themselves as a real estate play … The company’s pitch is that they are rethinking the commercial kitchen and how food is prepared,” said a restaurateur who is engaging with the company for setting up kitchens. The larger plan is to make it online ordering, affordable and efficient using technologies like automation, IoT and robotics, as well as help facilitate demand generation through every online ordering platform, consulting, and marketing, a direct source said.

Aligning with infrastructure players like CloudKitchens helps brands service on both Swiggy and Zomato without the fear of alignment, restaurateurs said. “It expands our scope of scale,” said the restaurateur cited earlier.

Today, a majority of food delivery takes place from dine-in restaurants, but these locations are not optimized for delivery. And, while delivery is an increasing percentage of the business, many operators are forced to trade off the dine-in experience with delivery.

To address this market in India, two of India’s largest food delivery companies, Zomato and Swiggy, have set up a kitchen infrastructure business. With a delivery-only kitchen setup, companies can dramatically reduce their real estate and labor costs, while keeping the window of expanding brands and offerings fast.

Last month, City Storage Systems bought a small stake in cloud kitchen company Rebel Foods which runs multiple delivery-only brands including Fassos and Oven Story. Rebel is just one of the bets it has taken in India and will not come in the way of its own operation expansion, a person directly aware of the matter said.

Kalanick was ousted in 2017 from the US ride-hailing platform he cofounded after a series of scandals, and since then he has quietly been building CloudKitchens. He acquired a majority stake in City Storage Systems for $150 million through his investment fund 10100, which he had set up using the proceeds of his $1.4 billion stock sale from Uber. Headquartered in Los Angeles, CloudKitchens leases real estate, often in distressed locations, and converts those into high-technology kitchen infrastructure buildings.

The company, which plans to develop a global footprint, has begun acquisitions in the US and in the UK, Singapore, South Korea, China, and India. Kalanick believes that this business will be bigger than Uber, said sources.