MUMBAI: This was bound to happen. Especially with the quick commerce guys evolving from delivery to making their own food products (call them private labels) and delivering them. This is ruining the appetite of hoteliers and restaurant owners.
And they are voicing their irritation through their representative body - The Federation of Hotel & Restaurant Associations of India (FHRAI), the world’s third-largest hospitality association which has voiced strong objections to Zomato and Swiggy’s entry into the private label food delivery business.
The association has alleged unfair competition, misuse of restaurant data, and potential food safety risks, citing the platforms' market dominance as detrimental to the businesses they were initially designed to support.
FHRAI has announced its intention to meet with the ministry of commerce to push for regulatory action to ensure fair practices in the food service sector.
The association's concerns center on the alleged misuse of proprietary restaurant data by Zomato and Swiggy. This data, encompassing customer preferences, sales trends, and order histories, is reportedly being used to create personalised deals and develop private label products.
FHRAI vice-president Pradeep Shetty highlighted the ethical and legal implications of these practices. “These platforms were originally designed as neutral marketplaces to connect consumers with restaurants. However, by introducing and promoting their own food products, they are exploiting sensitive data to compete directly with the restaurants they serve. This creates an uneven playing field and jeopardises the livelihoods of small and medium-sized businesses,” said Shetty.
He further emphasised that restaurants lack access to the same data, making it even harder for them to compete in an already challenging market.
Another significant issue raised by the FHRAI is the lack of transparency surrounding food safety standards for these private label products. While restaurants are subject to stringent safety regulations, the same standards may not be enforced for products sold by the platforms. This lack of accountability, FHRAI argues, could undermine consumer trust and damage the reputation of the restaurant industry.
Originally established to connect restaurants with customers, Zomato and Swiggy have expanded their operations into the quick commerce space by creating private label food products. This move has raised fears of monopolistic practices, as the platforms now control not just the distribution but also the creation and sale of food.
The association warned that without clear regulations, these developments could harm competition and consumer choice in the food service market.
FHRAI is advocating for enforceable guidelines to:
* Protect restaurant data from misuse.
* Ensure private label food products meet the same safety and quality standards as restaurant food.
* Maintain transparency and fairness in the food service industry.
“We urge regulators to take swift action to address these issues. A transparent and competitive environment is essential for the survival and growth of all stakeholders, including restaurants, delivery platforms, and consumers,” Shetty stated.
Will the regulators do something to restore the FHRAI’s appetite?
