DIL, Devyani International Limited, which runs popular food chains like KFC, Pizza Hut and Costa Coffee in the country, has now added another Indian dish to its basket. It recently acquired 81% stake in Sky Gate Hospitality, which runs Biryani by Kilo (BBK) restaurants. The deal was done for Rs 420 crore. In this way, DIL has tried to compete with the ‘Ekdum Biryani’ brand of its rival business Jubilant Foodworks. Let us understand why companies running foreign food chains in the country are betting on biryani? They also have their own South Indian food brand Vaango… Question: What does Sky Gate Hospitality do? Answer: The company’s most popular brand is Biryani by Kilo (BBK). Apart from this, there are other brands like Goila Butter Chicken. BBK started as a biryani delivery service, which is famous for biryani made in earthen pots and a small heater that comes with every order. It also has more than 100 restaurants across the country. Question: Why is this deal so important?
Answer: There is no denying that the demand for biryani in India is very high. In just one year (2024), food delivery apps Swiggy and Zomato delivered 17 crore biryanis. That is, 330 orders of biryani are being delivered every minute. In this sense, it is the most popular food dish in India. Question: How big is the biryani market in the country?
Answer: The biryani market in India is around Rs 20,000 crore. Interestingly, most of this market is occupied by small, unorganized players. Large organized brands like BBK, Behrouz and Ekdum Biryani are only a small part of it (about 15%). That is, there is a lot of scope for expansion in this business. Question: How will DIL benefit?
By buying Sky Gate, DIL can add BBK, Goila Butter Chicken and The Bhojan to its existing network of restaurants and cloud kitchens (kitchens for delivery only). DIL’s business is growing regularly, but in comparison, Sky Gate is growing at a compounded annual rate (CAGR) of 55% in the last 5 years. This can lead to a jump in DIL’s sales and profits. Question: How does this deal benefit Sky Gate?
The investors who initially supported Sky Gate are selling their stake. This means that Sky Gate will get fresh capital for future expansion. More than just capital, Sky Gate will get the support of a large and experienced franchise operator like DIL. DIL has more than 1,500 stores across India. Many of these are in small towns. This network can help in making BBK and their other brands reach many more customers. Question: What will be its impact on the biryani market?
This deal will put Sky Gate in a strong position to compete directly with other big biryani brands like Rebel Foods, the parent company of Behrouz Biryani, which is preparing to launch its IPO. It would have been difficult to compete with such a player with only venture capital money. But now, Sky Gate is not only getting capital but also getting access to a wider market by joining hands with a big company like DIL. The benefit of its experience may also lead to improved operational efficiency.
