Navigating the Feasibility of Subscription Model in India's Food Industry

The subscription model has emerged as a prevalent and well-received format within the food-tech and e-commerce industries in India, encompassing both start-ups and established players. This phenomenon has extended to the F&B industry, with numerous food-tech companies and restaurants embracing subscription-based models. 

While some companies focus on home-cooked meals, others prioritize healthy diet management. The demand for subscription-based models has experienced substantial growth, particularly with the rise of aggregators witnessing significant user numbers, and the prominence of third-party delivery companies like Dunzo.

As per the data by Apollo Research, the Indian healthy meal subscription market value was estimated at $3,732.8 million in the year 2022 and is projected to reach around $13,757.7 million by 2032 with a CAGR of 14 percent. In India, it projected a great potential for meal subscription start-ups given that only 25 such companies have been established.

Within the F&B industry in India, the subscription model offers a unique and convenient approach to food services, attracting a diverse range of consumers. Leading food delivery platforms such as Zomato Gold and Swiggy Super have introduced subscription programs that provide users with benefits including complimentary deliveries, exclusive discounts, and access to special events. By subscribing to these services, customers can enjoy noteworthy savings on their food orders while elevating their dining experiences. 

Sprink’s co-founder, Kumar Setu, believes that meal subscriptions are mainly proposed for individuals who want to save time when it comes to cooking. “Cost-effectiveness is an essential feature for the target customers of this service. Meal subscription platforms primarily target transient population and young professionals who make at least INR 30,000 per month,” he added. Sprink is currently catering to 10,000 meals a day in Bangalore and planning to expand its operations to other cities. 

Additionally, meal kit subscription services like FreshMenu, InnerChef, and Box8 have gained considerable popularity. These services deliver pre-portioned ingredients and recipes directly to customers' doorsteps, allowing them to prepare restaurant-quality meals in the comfort of their homes. The adoption of such subscription-based models within the F&B industry not only offers convenience, variety, and cost-effectiveness for consumers but also enables businesses to foster customer loyalty and cultivate recurring revenue streams.

The popularity of the subscription model can be attributed to various factors. Firstly, it offers convenience to customers by enabling them to pre-order meals or food items for regular delivery. This aspect proves particularly beneficial for busy professionals and students who lack the time to cook or shop for groceries. Additionally, subscription models tend to be more affordable compared to ordering food on a per-meal basis, as subscribing to a plan often entails discounts. Moreover, these models provide customers with a wide range of meal options to accommodate diverse dietary needs and preferences.

While the subscription model in the food industry in India has gained traction, it has faced challenges in becoming a consistently profitable business. Vaibbhav Arora after working with Zomato decided to bridge the gap by launching BhojanTech that offer meals under 100. The B2C offering included seven-day, 14-day and one-month subscriptions for different meal options. While the company gained traction in the initial days during pandemic, it is currently temporary closed with now news of reopening anytime soon. According to Arora, the market is not huge for subscription based food delivery apps in India. He feels that the model is not feasible if one is operating with only few number of subscribers. 

One of the primary challenges for subscription-based food businesses is customer churn. Subscribers may cancel their subscriptions after a short period due to various reasons such as dissatisfaction with food quality, limited menu options, or changes in personal preferences. Maintaining a steady subscriber base becomes crucial to sustain profitability.

Implementing and maintaining a subscription model can be costly for food businesses. They need to invest in technology infrastructure, logistics, and customer support to effectively manage subscriptions. Additionally, offering exclusive discounts and benefits to subscribers can impact profit margins.

The competitive landscape and market dynamics in the food industry can result in thin profit margins. Offering discounted prices to attract subscribers while covering operational costs can be challenging, especially for small and medium-sized businesses.

Subscription-based food businesses often face significant overhead expenses related to food procurement, storage, preparation, and delivery. These expenses can erode profitability if not carefully managed, particularly as the volume of subscriptions increases. “If you still see many subscription based food apps in India operating in India that is because many are still running with investors’ money rather than own profit. Not even 5 percent of total such companies have reached break-even,” Abhishek Tyagi, founder od Absolute Food Consultants informed. 

The target customer base for subscription-based food services may be relatively small, primarily comprising urban consumers, students, or office-goers. Expanding the customer base beyond these segments can be a challenge and may require additional marketing and promotional efforts.

The food industry in India is highly competitive, with a plethora of options available to consumers. The presence of multiple players, both subscription-based and traditional, makes it challenging to attract and retain customers in a crowded market.

The demand for food can be subject to seasonality and fluctuations, affecting subscription-based businesses. Managing inventory, maintaining quality, and meeting customer expectations during peak and low-demand periods can impact profitability.

Food businesses operating on a subscription model need to comply with various regulatory requirements related to food safety, hygiene, licensing, and delivery. Adhering to these regulations can add complexity and cost to the business operations.

The subscription model in the food industry has undoubtedly made its mark in India, offering convenience, cost-effectiveness, and a diverse range of options for consumers. However, achieving profitability in this model remains a complex challenge. The key lies in focusing on customer retention, delivering exceptional quality and service, optimizing operational efficiency, and continuously adapting to evolving customer preferences. Despite the obstacles, the subscription model holds immense potential for growth and success in India's dynamic food industry. As businesses navigate the path to profitability, those that can effectively address the challenges and consistently deliver value to their subscribers will be well-positioned to thrive in this evolving landscape.