Kolkata-based quick service restaurant (QSR) chain Wow! Momo Foods plans to foray into cloud kitchens as it enters the next phase of growth on the back of a $23 million Series B funding round led by Tiger Global Management.
The company will follow what it dubs a click-and-mortar strategy that will focus on building a hybrid operating model. The model will be a mix of physical stores at prominent retail locations and cloud kitchens to cater to its growing delivery business, said a statement. It currently has a presence on all major aggregator platforms including Swiggy, Zomato and Uber Eats.
The Series B round values Wow! Momo at $120 million, a nearly three-fold increase from the firm’s reported valuation when it raised around $450,000 from William Bissell, founder of ethnic apparel and furnishings retailer Fabindia. The deal is Tiger Global’s first investment in a QSR in India and a departure from the New York headquartered hedge fund’s recent dealmaking spree in the B2B space.
The $23 million capital infusion includes a secondary portion that delivers a partial exit for existing investor Indian Angel Network (IAN), which stands to make a 70% IRR on a four-year investment, the statement added.
Founded in 2008 by Sagar Daryani, Binod Kumar Homagai and Shah Miftaur Rehman, the company operates two brands -- Wow! Momo and Wow! China – and runs 293 outlets in total across 15 cities combined. The platform will soon launch a range of packaged momos and momo sauce offerings and also plans to add 120 outlets to its offline network.
“From running a handful of kiosks in Kolkata to becoming a brand operating in over 15 cities, our make-in-India journey has come a long way. We will smartly use the capital infused to further scale our operations backed with disruptive research and development,” founder and CEO Sagar Daryani said.
The company’s cloud kitchen ambitions come at a time when the model has emerged as the new growth frontier for India’s biggest and most heavily funded food ordering and delivery platforms. The market consists of standalone cloud kitchen or internet-first restaurant players such as Rebel Foods, FreshMenu and InnerChef and aggregators such as Swiggy and Uber Eats who are increasingly looking at it as a growth opportunity. Both sets of players are currently pumping in millions of dollars to muscle their way into the cloud kitchens business with varying strategies.
Among standalone cloud kitchen players, Mumbai-based Rebel Foods gained a headstart when it pivoted from being a QSR to a pure-play cloud kitchen model comparatively a few years ago. The company has since built 10 brands each serving different target segments including Behrouz Biryani, Faasos, and Oven Story Pizza. It is looking at creating at least 15 large categories in five years.
Bengaluru based FreshMenu, which started up about six years ago, quickly broke into the ranks of the leading food-tech players in the market, chiefly on the back of its full-stack cloud kitchen model and found investor backing from Lightspeed Venture Partners, Zodius Capital and Growth Story. The company has lately had a rough ride in terms of being unable to attract investor interest and has even been speculated to be on the block.
Among the aggregators, Swiggy got off the mark with its cloud kitchens programme ‘Swiggy Access’ as early as November 2017. The company’s strategy is to offer partner restaurants a supply-only kitchen facility for faster delivery. Rival Zomato invested in a third-party cloud kitchen company Loyal Hospitality, which provides ready-to-occupy kitchens to restaurants. Uber Eats India has partnered with retail coffee chain Cafe Coffee Day to launch its first virtual restaurant. Ola, the Bengaluru-based ride-hailing unicorn that competes with Uber, is driving its cloud kitchens strategy through Foodpanda, which it acquired in late-2017. Both Uber Eats India and Foodpanda have slowed down on their food business over the last few months, largely due to high cash burn.
The most recent entrant in the cloud kitchens segment is SoftBank-backed budget hospitality chain OYO. The Gurugram-based company recently forayed into the online food business with the launch of a couple of private labels on existing food delivery platforms.