Ex-McKinsey consultant turns failed restaurant into $770m start-up – The Australian Financial Review

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Backed by Sequoia Capital, Mumbai-based Rebel Foods in July received a $US125 million ($184 million) injection from Coatue Management, Goldman Sachs, the Indonesian delivery service Gojek and others. The company, which is valued at $US525 million ($773 million), says it more than doubled sales last year and is now expanding into south-east Asia and the Middle East. Over the next 18 months, Rebel and Gojek will build 100 Indonesian cloud kitchens dishing out biryani, pizza, Chinese food and local fave Nasi Goreng. Rebel plans to open 20 kitchens in the United Arab Emirates by year-end.

“Cloud kitchens are red hot because they add a fast-delivery layer on top of restaurant brands, allowing them to scale quickly,” says GV Ravishankar, the Bangalore-based managing director of Sequoia Capital India. He says Rebel Foods is well positioned because young diners in India and beyond are eager to try new foods and flavours.

Around the world in recent years, a crop of food delivery companies like Munchery, Sprig, Maple and SpoonRocket raised tens of millions of dollars only to fail. There was no shortage of demand for their services; many millennials would rather order in than cook at home, and UBS’s Evidence Lab predicts the global food delivery market will grow tenfold by 2030 to $US35 billion. The first wave of food delivery start-ups were felled by steep operational costs and profit-gobbling discounts.

An employee prepares a dosa order at a Rebel Foods. Bloomberg

Barman, who is 45, runs Rebel Foods from an office park in the Bhandup West area of Mumbai and grew up in the food-mad city of Kolkata. His career took him to Switzerland, the UK and France, and he realised that, despite the farflung popularity of the cuisine from his home country, there isn’t a single global Indian food brand. The triumphant 2010 IPO of the Indian operator of the Domino’s pizza chain was a sign that it was time to return. He quit McKinsey just a few months from becoming a full partner.

Back in India, Barman teamed up with INSEAD business school classmate Kallol Banerjee in 2012 and started a bricks-and-mortar restaurant chain called Faasos that sold kebab wraps. With Sequoia as an early backer, they opened about 50 locations. But crippling rents prompted the duo to shut down the operation three years later and switch to cloud kitchens. “We went completely dark and saw the light,” Barman says.

Ghost kitchens have also caught on in the US and Europe and have various permutations. Uber co-founder Travis Kalanick owns CloudKitchens, which doesn’t operate any restaurants but rents cooking space to the likes of fast-casual chain Sweetgreen. London-based Deliveroo plans to use some of an Amazon-led $US575-million funding round to expand its network of cloud kitchens. On Rebel’s home turf, delivery startup Swiggy, backed by Naspers and Tencent Holdings, is building out its own ghost cooking operation, Swiggy Access.

Like Kalanick, Barman wants to upend a dining business model invented centuries ago and forge something better suited to the times. “It’s useful to have a solid head start,” he says.

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Rebel Foods says its 235 kitchens in 20 cities produce 2 million orders a month. Most are located in industrial complexes, first floor walk-ups or side alleys where rents are low and capacity is not a constraint. The kitchens are all built from the same template – the cooking and prep equipment stackable and space-saving. Pizzas move along a conveyor belt from prep to oven to carton. The printer spewing out online orders makes a different sound depending on the restaurant brand.

A kitchen in Mumbai’s Vikhroli industrial suburb is crammed into 800 square feet (74 square metres). Every square inch of the space is filled with freezers, shelves brimming with kitchen equipment and prepped ingredients. During the lunch rush one recent day, about two dozen apron-clad men and women are preparing orders (two shahi biryani, four paneer piquante pizza, bhuna chicken wrap, butter chicken royal meal) streaming in by phone and app – all the while trying not to collide with one another.

The printer spewing out online orders makes a different sound depending on the restaurant brand. Bloomberg

With each order, the kitchen becomes more frenzied. The finished dishes arrive in bowls, trays and small cartons at a small pickup counter, where they are whisked away by an endless stream of delivery boys, who roar off on a fleet of motorcycles and scooters and fan out across the neighborhood. The kitchen produces about 60 lunch orders during the week and triple that on weekends. The entire Rebel Foods operation runs the “equivalent of 1600 restaurants”, says Ankur Sharma, Rebel Foods’ senior vice president of product and supply chain.

Besides harnessing the cost-saving power of cloud kitchens, Barman and his partner leaned heavily on marketing lessons from business school. Each of Rebel Foods’s dozen brands has a back story-the more kitschy the better. Chinese dishes from Mandarin Oak were supposedly created by a monk who lived in an oak forest in China’s Shaanxi province. Slogan: Explore Heavenly Chinese from a Wise Monk’s Wok! Firangi Bake sells Indian versions of lasagna, quesadillas and mac cheese, lovingly prepared by the “mystical chef” Guru Firanga “with flavours from around the globe”.

The expansion hasn’t been without challenges. Indian dishes vary from one region to the next – biryani recipes change every 100 miles or so – forcing Barman to set up a food lab and standardise the menu in a way that provides consistency while catering to regional sensibilities. The quality of ingredients also varies wildly across the country; paneer, a cottage cheese found in many Punjabi dishes, can be more or less fatty and sugary. If it isn’t kept cold, the cheese can spoil quickly; without the right fat content, it can turn tough. So Rebel selected one paneer supplier and helped the company expand India-wide to feed its kitchens.

Gig-economy companies suffer high employee turnover, and Rebel is no exception. To ensure that kitchen staff make the individual dishes consistently no matter how long they’ve worked there, food engineers created pre-prep items such as a 36-spice biryani blend. “That takes the judgment out,” Barman says. Each dish has been deconstructed to create an exact timeline; for instance, workers can churn out dosas every two minutes.

In a team-building exercise, the cooks huddle three times a day and scream: “Tasty tasty, fresh fresh, that’s why Rebel is best best.”

A Rebel Foods chef holds an uncooked pizza. Bloomberg

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