Swiggy to Lay Off Hundreds of Employees From Its Cloud Kitchen Business, Shut Down Half of Kitchens: Report

Swiggy seems to be one of many Indian startups that are largely affected by the ongoing coronavirus crisis and is likely to reduce some impact by discharging a part of its workforce. The Bengaluru-based food delivery startup will lay off around 800-900 employees from its cloud kitchen business next month, according to a report. Cloud kitchens were believed to have emerged as a successful business model for food aggregators including Swiggy and arch-rival Zomato as they don't require large space to enable dine-in facility. However, the COVID-19 spread has made things difficult for the entire hospitality industry.

Initially, Swiggy had planned its layoffs for February-March, though the decision was held back, reports startup-focussed site Entrackr, citing people familiar with the development. The company is also said to have plans to shut down around half of its cloud kitchens while renegotiating rents for many of them.

The report says that about 40 percent of the total layoffs planned by Swiggy would be on the basis of an annual performance review. It is likely that initially, over 300 employees who “have been poor performers and low graders” would be asked to leave. However, the criteria for judging the performance hasn't been reported or revealed by the company itself.

Swiggy acknowledged the layoffs in a statement emailed to Gadgets 360, without revealing the total headcount planned to be trimmed. “As COVID-19 disrupts daily life across the country, the hospitality industry has come under severe pressure. As the lockdown gets further extended, we are evaluating various means to stay nimble and focused on growth and profitability across our kitchens. These include renegotiating contracts with landlords, relocation of certain kitchens to more optimal locations and discontinuing operations at a few kitchens that have been severely impacted since the lockdown came into effect,” the company said.

Additionally, the statement highlighted that Swiggy would “fully support” the staff “during this transition.”

Cloud kitchens are an important source of generating revenues for Swiggy. The company has private brands such as Bowl Company, BrandWorks, and Homely to cater to the growing demands for online food in the country through various cloud kitchens. In November last year, it announced an investment of Rs. 250 crores to set up 1,000 cloud kitchens in the country. The cloud kitchen initiative by the company was also touted to have generated 8,000 direct and indirect jobs.

However, the pandemic has shifted consumer interests and thus dropped the demand for prepared food. The change already pushed platforms such as Swiggy and Zomato to start delivering groceries and home essentials instead of food items.

Unlike Swiggy, Zomato doesn't have any private labels. It, however, does handle orders through cloud kitchens that are operated by its restaurant partners.

In an emailed statement to Gadgets 360, a Zomato spokesperson said that it wasn't looking to lay off any of its employees. “We follow an infrastructure model for Zomato Kitchens, in which restaurants are given space to operate. We don't have any headcount there,” the spokesperson said.

While Swiggy is cutting down the number of employees working at its cloud kitchens, it still has measures such as Income Protection Insurance and No-loss Self-quarantine that are claimed to support its delivery fleet. The company is also running a Hope Not Hunger Fund to support people in COVID-19 relief camps.

That being said, Swiggy isn't alone to initiate layoffs. The pandemic has led to cutting off headcount at many Indian startups, including Meesho, Oyo, and Paytm among others. Various IT companies in the country are also laying off their employees to reduce their cost during the outbreak that has impacted thousands of Indians.