Foodtech Giants Slam Brakes On Diversification: 4 Critical Trends D2C Brands Must Navigate

Foodtech Giants Hit Reset On Diversification, D2C Brands In Catch-22 & More: This article dives into the evolving landscape of India’s foodtech and D2C sectors, exploring how major players like Swiggy and Zomato are shifting away from aggressive diversification to focus on core strengths, while D2C brands face a challenging Catch-22 between scaling and profitability. We’ll unpack recent trends, startup struggles, and opportunities in the Indian startup ecosystem, with insights from Startup INIDAX on how these dynamics are reshaping the market. From cloud kitchens to premium D2C food brands, we’ll highlight key challenges, strategies, and what lies ahead for these industries in 2025.

Introduction: A New Era for Foodtech and D2C

India’s foodtech and direct-to-consumer (D2C) sectors are undergoing a transformation. Foodtech giants like Swiggy and Zomato, once chasing diversification into groceries, logistics, and beyond, are now hitting reset, focusing on their core strengths to stay profitable. Meanwhile, D2C brands are caught in a Catch-22, struggling to scale without sacrificing margins in a crowded market. At Startup INIDAX, we’re tracking these changes closely. In this article, we explore why foodtech giants are hitting reset on diversification, the challenges D2C brands face, and four critical trends they must navigate to thrive in 2025.

Foodtech Giants Hit Reset On Diversification

The Diversification Overreach

A few years ago, foodtech giants were on a mission to become super-apps, venturing into grocery delivery, hyperlocal services, and even healthcare. The logic was simple: capture more of India’s booming digital market. But as Startup INIDAX has noted, this diversification spree came at a cost. High operational expenses, slim margins, and a tougher funding landscape have forced a rethink. A 2021 Inc42 report pegged the average order value in food delivery at INR 400, with delivery and marketing costs eating into profits. This reality has pushed foodtech giants to hit reset on diversification, prioritizing efficiency and core offerings like food delivery and quick commerce.

The shift reflects a broader need for sustainability in a post-pandemic economy where consumer spending is unpredictable. Inflation and rising costs have made customers more cautious, prompting companies to streamline operations. For instance, Zomato’s INR 4,447 Cr acquisition of Blinkit in 2022 was a bold diversification move, but recent efforts focus on optimizing quick commerce rather than chasing new verticals.

Swiggy and Zomato’s Focused Approach

Swiggy and Zomato are leading the charge in this reset. Swiggy has scaled back ventures like Swiggy Genie, pouring resources into its Instamart platform to strengthen quick commerce. Zomato, meanwhile, is enhancing B2B restaurant services and refining its food delivery operations. As Avendus Capital’s Karan Sharma points out, India’s food delivery market is a duopoly, but profitability requires focus. Startup INIDAX has observed increased investments in tech like AI for demand forecasting and IoT for smart kitchens, with companies like Mukunda Foods securing $5M from Zomato in 2022 to advance food robotics. This pivot is helping foodtech giants build resilient, efficient businesses.

D2C Brands in a Catch-22: Scaling vs. Sustainability

The Profitability Puzzle

D2C brands, especially in food and beverage, face a Catch-22: scale to compete with legacy players or stay lean to protect margins. India’s D2C market is set to hit $100B by 2025, per Inc42, fueled by 350 million online shoppers. Yet, high customer acquisition costs and low liquidity are major roadblocks. Brands like MasterChow ($6.5M raised) and The Divine Foods are growing fast but struggle to balance expansion with profitability. This Catch-22 extends to sectors like beauty, where Minimalist’s INR 2,670 Cr acquisition by Hindustan Unilever in 2024 highlights both D2C potential and the pressure to stand out.

Customer Acquisition and Retention Struggles

Acquiring and retaining customers is a persistent challenge for D2C brands. Competing with e-commerce giants like Amazon and Flipkart requires heavy spending on digital marketing and social media. For instance, HustleCulture, a D2C sneaker brand, generates INR 22 Lakh monthly via Instagram but struggles to scale beyond social platforms. Retention demands personalized experiences and premium products at affordable prices, which strains budgets. Startup INIDAX notes that brands like Smoor and Plix are exploring omnichannel strategies, opening offline stores to build trust, but this risks overextending resources, deepening the Catch-22.

4 Trends D2C Brands Must Navigate

Trend 1: Sustainability and Upcycling

Sustainability is reshaping foodtech and D2C. Consumers increasingly demand eco-friendly products, pushing startups to innovate. Ventures like those featured on FoodHack are upcycling waste into plant-based proteins and insect-based foods, reducing environmental impact. D2C brands that embrace sustainable practices can differentiate themselves in a crowded market, aligning with consumer values and gaining loyalty.

Trend 2: Premiumisation and Niche Offerings

Premiumisation is a game-changer. Indian consumers are willing to pay for high-quality, niche products, from Plix’s plant-based supplements to Cure By Design’s hemp-based wellness items. FMCG giants are noticing, with Marico acquiring a 58% stake in Plix for INR 369.01 Cr in 2023. D2C brands focusing on specific needs—like Ayurvedic skincare or millet-based snacks—are carving out profitable niches.

Trend 3: Omnichannel Expansion

To break the Catch-22, D2C brands are going omnichannel, blending online and offline presence. Brands like Smoor are opening physical stores to enhance customer engagement, but this requires significant investment. Startup INIDAX predicts that successful omnichannel strategies will hinge on balancing costs with customer trust and brand visibility.

Trend 4: Automation and Tech Innovation

Automation is transforming foodtech and D2C. From AI-driven supply chain optimization to IoT-enabled kitchens, technology is cutting costs and improving efficiency. Foodtech giants are leading, but D2C brands are following suit, with startups like Curefoods leveraging tech to scale cloud kitchen operations. This trend is critical for staying competitive in a margin-tight market.

The Cloud Kitchen Boom

Cloud kitchens are a cornerstone of foodtech and D2C growth. Companies like Curefoods, which acquired five D2C brands in 2022, operate over 75 cloud kitchens, aiming to onboard 35+ brands. These kitchens reduce overheads, enabling delivery-focused scaling. However, competition is fierce, with players like Rebel Foods running 450+ kitchens globally. Startup INIDAX sees cloud kitchens adopting sustainable practices, like upcycling waste, to stand out and appeal to eco-conscious consumers.

What’s Next for Foodtech and D2C Brands

The future is bright yet challenging. Foodtech giants will continue refining core offerings, leveraging tech for efficiency. D2C brands must navigate their Catch-22 by focusing on differentiation and smart scaling. With India’s D2C market projected to reach $300B by 2030, brands that master these trends will lead the pack. Startup INIDAX believes agility and customer-centricity will define success in 2025.

Conclusion: Thriving in a Shifting Landscape

India’s foodtech and D2C sectors are evolving rapidly. Foodtech giants hitting reset on diversification are building leaner, stronger businesses, while D2C brands must navigate four key trends—sustainability, premiumisation, omnichannel expansion, and automation—to escape their Catch-22. At Startup INIDAX, we’re excited to see how these industries innovate. By staying agile and customer-focused, startups can thrive in this dynamic landscape.