Exclusive: Swiggy to lay off hundreds of cloud kitchen staff as it shuts down kitchens

Online food delivery startup Swiggy is expected to lay off around 800-900 employees next month after the company received board approval for their cost-cutting plan, according to two people familiar with the matter. This comes as startups are being forced to take harsh steps due to the ongoing Covid-19 pandemic which has hit the economy with a deathblow. 

“The employees that are expected to be asked to leave are going to be across teams in their cloud kitchen division,” said one of the persons cited above, requesting anonymity. 

The Bengaluru-based firm is also in the process of shutting down around half of its cloud kitchens while also renegotiating rents for many of them, added the people mentioned above. “Whichever ones have low occupancy are shutting down or at least rents are renegotiated,” said the source, requesting anonymity.  

Swiggy had initially charted out a layoff plan in February-March, but that decision was held back. 

With this move, Swiggy becomes the second unicorn in the consumer internet space to opt for mass layoffs. On Monday, Paytm laid off about 700 employees. Entrackr queries sent to a Paytm spokesperson remained unanswered.

The layoffs and downscaling of the cloud kitchen division have come at a time when Swiggy had raised about $153 million from existing investors across two tranches since February. Tencent recently led $43 million in its ongoing Series I round.

According to sources, about 40% of the layoff is likely to be done on the basis of an annual performance review. “Over 300 employees who have been poor performers and low graders will be asked to leave,” added the second source. He requested not to be named.

“As the lockdown gets further extended, we are evaluating various means to stay nimble and focused on growth and profitability across our kitchens,” said a Swiggy spokesperson. “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 spokesperson further added, “This will, unfortunately, have an impact on a certain number of kitchen staff who will be fully supported during this transition.” They did not comment on the number of jobs being impacted. 

The coronavirus pandemic has led to several growth-stage startups trimming their teams in order to preserve cash. This includes companies such as Acko Insurance, Meesho, Travel Triangle, Shop101, among others, that have cut jobs and the salaries of senior and mid-level employees.

Until now, Swiggy had been aggressively ramping up its cloud kitchen business. In November, the firm had claimed that it had established around 1,000 for its restaurant partners across 14 cities with plans to invest $10.5 million more into it by last month. It claims to have created 15,000 direct and indirect jobs through its cloud kitchen vertical — Swiggy Access. 

However, with a countrywide lockdown, food delivery players have seen a sharp drop in their daily orders. Prior to the lockdown, food delivery players used to clock daily 1 million orders each. 

Food delivery orders took a further dent after some food delivery executives were tested positive in some cities. Telangana banned food delivery across the state till May 7 in order to prevent the spread of the virus. In Delhi, a delivery boy tested positive who has come in contact with as many as 70 families.

Importantly, government authorities have also released an advisory for cloud kitchen brands to operate with half of their workforce. This is also a reason for Swiggy cutting jobs across the functions. 

Globally, too, cloud kitchens have seen a negative impact on its business. Travis Kalanick’s CloudKitchens, which was expected to take off as people turned to food delivery, has been severely hit alongside several key employees leaving the firm as well.