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What is right is often forgotten by what is convenient . Bodie Thoene

I came across news on the growth of home delivery platforms in the last few years. This is a story about Zomato. In FY 18 the company had a turnover of Rs 466 Crores. In the last three years the company grew by 5.5 times to close FY 21 at Rs 2604 Crores. The number of orders delivered grew by 13.1 times from around 30 millions in FY18 to 403.1 millions in FY21.

In other words the average order value reduced from Rs 150 in FY18 to Rs 65 in FY21. Isn’t it strange to see the cost of ordered food getting cheaper than the cost of cooked food at home ? I have been taught since childhood that there is no such thing as a free lunch. The news forced me to question my conventional wisdom and I took the challenge to find the root cause.

Being in the dairy-industry for over three decades has conditioned me to look at all the problems from the dairy -perspective. So I picked up a simple case of a pizza delivered through a Zomato like-platform. Cheese is the biggest cost in a Cheese pizza . The basic recipe calls for 10 gms of cheese per inch size of the Pizza. So for a 6 inch pizza you need 60 gms and for a 10 inch pizza you need 100 gms of cheese.

The economics of making a Pizza

The average cost of a 6 inch pizza at online platforms may start from Rs 60 onwards. If the restaurant person uses the basic recipe then he is required to use 60 gms of cheese in this Pizza. The price of mozzarella cheese in Horeca is anywhere between Rs 390-Rs 420 per kgs inclusive of gst. Which means that only the cheese component may cost around Rs 25 in this pizza. The cost of pizza base, packaging, sauces, power, fuel, labour, rent and cost of capital may be considered as Rs 25. This makes the total cost of Rs 50 and a margin of Rs 10 per pizza.

Now let us look at the cost of delivery service. The platforms like Zomato , Swiggy etc charge minimum of 28-30% inclusive of gst for on boarding any such restaurant. The minimum cost of such delivery platforms becomes Rs 18-20 per pizza. As the average order value is Rs 65 so we are considering the small pizza case only. It is very difficult for you to sell on such platforms unless you fall prey to their promotional traps like banners, 50% discount etc.

The easy way out

So the restaurant starts to think an easy way out . The simplest formula is to reduce the quantity of cheese per pizza from 10 gms per inch to 5-6 gms per inch. Some knowledgeable consumers may complain about it. So in order to extract more juice from the consumers pocket the Horeca replaces dairy based cheese with analogues which are available anywhere around Rs 240-Rs 290 per kg inclusive of gst.

This practice is not prevailing in the pizza segment alone. The restaurants and street food vendors have found an easy way out by replacing their butter with margarine, paneer with tofu or Vanaspati filled paneer and cream with imitation cream. In the menus you will never find the word analogues and everyone is conveniently using the dairy terms like cheese pizza or paneer burger etc.

Consumer patronises taste

Someone was sharing a story about a cheese sandwich seller in Mumbai who puts around 100 gms of shredded cheese in a sandwich for Rs 35. The visual experience is great. Interestingly the consumer was aware of the market price of cheese . But when asked how one could put Rs 40 worth of cheese in a Rs 35 worth of sandwich , she got a little disturbed. Same thing is happening when in your bun maska or butter toast the person is using a quarter of a 100 gms butter pack and charging Rs 15-20 only. Amul butter costs around Rs 46 for 100 gms which means around Rs 12 for a quarter.

Such stories are very common and consumers all over the country are enjoying the softness of paneer (because of palm oil ) and richness of cheese pizza and sandwich (because of mayonnaise and analogues).

I feel that the convenience has closed the consumer’s eyes. She wants everything delivered to her at the least cost. The spade of convenience is killing the mark of authenticity. The regulator is silent, the economy of inauthentic businesses is booming and the consumer is happy.

Is this how the dream of our PM Modi ji of “Make in India”and”Atmanirbhar Bharat”be fullfiled ? I leave you with this question.

Source : A blog by Kuldeep Sharma Chief editor

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