Cloud kitchens heat up: India’s US$ 1.9 bn food revolution

India’s cloud kitchen market is transforming the food industry, projected to grow at a CAGR of 24% to reach US$ 1.9 billion by FY26. These delivery-only kitchens offer a cost-effective, scalable model by eliminating dine-in expenses and optimizing shared resources.

However, competition from QSRs, reliance on third-party platforms, and operational inefficiencies pose challenges. To sustain growth, cloud kitchens must innovate, enhance customer experience, and streamline operations.

India’s food and beverage sector has long been dominated by dine-in restaurants, which require significant investments and high operational costs. However, the emergence of cloud kitchens is reshaping the industry, offering a cost-effective model for chefs and food entrepreneurs.

A cloud kitchen is a commercial kitchen facility exclusively dedicated to preparing food for delivery or takeout, without a dine-in option. Also known as virtual, shadow, or ghost kitchens, these setups enable restaurateurs to expand their existing business or launch virtual brands with minimal investment. By focusing solely on delivery and takeout, cloud kitchens eliminate the need for dine-in spaces, significantly reducing overhead costs while maximizing operational efficiency. This has led to rapid growth, with India’s cloud kitchen market expected to expand at a CAGR of 24%, reaching US$ 1.9 billion by FY26, according to a report by Wazir Advisors.

The broader Indian food market, valued at approximately US$ 80 billion in 2024, is projected to grow at a CAGR of 10-11% through 2030, as per Redseer Strategy Consultants. The report highlights cloud kitchens have revolutionized the food services industry by enabling multiple brands to operate within shared infrastructure. This model maximizes resource utilization, reduces time-to-market for new concepts, and enhances kitchen efficiency. By offering diverse cuisines from a single setup, cloud kitchens cater to a wider audience while driving higher revenue.

Source: Redseer Strategy Consultants; values in thousands INR for FY24

Their ability to scale rapidly sets them apart from traditional restaurants. Many brands have crossed the INR 100 crore revenue mark within 2-3 years by leveraging shared resources and a plug-and-play approach to new offerings. This has allowed cloud kitchens to quickly adapt to changing consumer preferences, introduce new brands, and sustain long-term growth in an evolving market.

Growth drivers of cloud kitchen

Change in consumer behavior: Changing consumer behavior is fueling cloud kitchen growth, driven by demand for convenience, diverse cuisines, and on-demand food. The young generation prefer delivery over home cooking and while multi-brand kitchens are catering to evolving tastes which are accelerated by food delivery platforms.

Technological growth: Technology is improving efficiency, with food delivery applications optimizing order management, minimizing waste, and enhancing speed. With the growth of social media, digital marketing is boosting brand visibility and strengthening customer engagement.

Low cost infrastructure: Cloud kitchens cut costs by eliminating dine-in spaces, reducing rent and staffing expenses, this becomes a motivating factor for quick brand launches and leads to higher profitability.

Despite their advantages, cloud kitchens face intense competition from established Quick Service Restaurants (QSRs) like McDonald’s, Subway, and Starbucks, which offer diverse menus and strong brand loyalty. Unlike traditional restaurants, cloud kitchens lack the dine-in experience, limiting direct customer engagement and brand-building opportunities. Their reliance on third-party delivery platforms also impacts profitability, as high commission fees and operational constraints reduce margins.

Maintaining efficiency while managing multiple brands becomes challenging requiring strict quality control and seamless operations. Also, they should be able to navigate inconsistent experiences on delivery platforms, which can affect customer retention whereby also catering to specialized dietary needs, such as vegan or gluten-free options.

The sector becomes quite vulnerable to technical glitches as they’re heavily dependent on technology, affecting operations and customer service. So as to maintain growth, cloud kitchens needs to continuously innovate and optimize their operations as per the requirements.