India’s largest hospitability company OYO Rooms is in talks to acquire cloud kitchen startup FreshMenu for nearly $50-60 million, Economic Times has claimed after citing three unidentified sources. The talks have progressed well beyond the initial stage and closure of the deal will depend on due diligence, sources add.
FreshMenu’s acquisition will help OYO in improving its food experience across hotel chains, an initiative that has been work in progress for the hospitality company for long time now.
SoftBank backed company’s emphasis on food and beverage (F&B) operations is not surprising given that F&B is a critical function for hospitality chains; more so in today’s highly competitive scenario where attaining even a slightly bigger market pie is an achievement.
If FreshMenu’s acquisition deal does go through then it will be Gurgaon headquartered company’s first major acquisition in 2019. It had lapped up quite a few promising startups last year including Weddingz, Novascotia Boutique Homes and AblePlus Solutions.
OYO’s aggressive international expansion strategy was one of the major talking points last year. Apparently, it seems that international expansion will also dominate in the current year as the company few hours back announced its entry in Japan.
Apart from Japan, the company now operates hospitality operations in China, Nepal, UAE, Indonesia, Malaysia, Philippines, UK and Dubai.
OYO’s aggressive international expansion and acquisition drive is partly possibly because of its strong fund reserves. The company only few weeks back had officially closed its $1 Bn funding after Didi Chuxing pumped $100 Mn in the company.
FreshMenu Acquisition: India’s foodtech sector heading for consolidation
FreshMenu acquisition talks with OYO has come closely on the heels of rumors that Uber Eats India business is likely to be acquired by Swiggy. These acquisition reports clearly indicates that India’s foodtech sector is heading for much needed consolidation.
FreshMenu was widely considered as primary target for the upcoming consolidation phase. This is simply because the cloud kitchen startup has failed to scale up its operations. This has only compounded startup’s vulnerability especially in the wake of Swiggy and Zomato’s growing domination.
Although FreshMenu, unlike Swiggy and Zomato, is not a food delivery company per say. However, this differentiating factor has hardly helped the company in growing its business. Not to mention that with Swiggy and Zomato’s entry in the cloud kitchen, FreshMenu’s business model has somewhat lost its novelty.
FreshMenu had earlier pursued acquisition talks with Swiggy, Ola, Eat.fit, Zomato and Faasos. However, sources claim that mismatch in valuation led to the failure of talks.