The tech-led drive for delivery

Incredible as it sounds half the world’s internet users aged 16 to 64 have placed an order for takeaway food for delivery in the past month, according to Hootsuite and We Are Social. I’m certainly one of them and I don’t know anybody who isn’t. Maybe this statistic is not too surprising really because the hospitality industry around the globe has been almost totally reliant on takeaway and delivery for its survival over, pretty much, a full year.

It has been so long since we’ve been able to simply walk into a restaurant or other dining venue that it is almost as if consumers have forgotten about this experience. Lifestyles have adapted under covid-19. It’s easy to begin to overlook the fact the vast bulk of the hospitality industry’s revenues are normally derived from people actually sitting in venues with a knife and fork in their hands. It’s not been about people sitting at home with takeaway cartons. 

Yes, food delivery was growing at a terrific rate and had become a meaningful part of the sector but it was never going to replace the dining-out experience and become the dominant force that it has during covid-19. It has clearly only become so prominent because of unprecedented circumstances. It will certainly not replace the old dining-in model. Eating out will return “big time” and delivery volumes will drop accordingly because consumers only have so much disposable income to allocate.

Try telling that to the many serious investors and start-up businesses that are entering the market to take advantage of the present growth in takeaway and delivery. The most interesting element of the market involves ghost kitchens that were originally developed by Deliveroo with its RooBox (renamed Editions) kitchens. These were originally designed as shared kitchens built into old shipping containers for branded restaurants to use in locations where they did not have a physical presence. 

In these frenetic times, this rather sensible model has been jumped upon by the likes of Curb, Karma Kitchen, Taster, Foodomnia and others entering the market. As activity has increased, the model has been stretched to include thousands of virtual, delivery-only brands. But it is in the US where things are being taken to the extreme as the land-grab for takeaway meals is picking up pace. 

Cloud Kitchens in action

Among the players are Kitchen United (investors include Google Ventures), CloudKitchens (backed by Uber co-founder Travis Kalanick) and car park operator Reef Technology (which recently raised $700m from Softbank and other investors) that has ghost kitchens parked on some of its 4,500 sites. These businesses contributed to the 11% rise in money invested in such kitchens in 2020 in the US, hitting the $3bn mark.

This area continues to attract great interest from technology investors who seem to be taking food brands (virtual or otherwise) ever further away from the actual food itself and stripping out all hints of hospitality. Consider that one ghost kitchen operator – Mealco – simply requires the chef to initially create the dishes. It then sources the ingredients and farms out production to its dispersed kitchen network. Its founder acknowledges that if the chef wants to be in the kitchen every morning then Mealco is not for them.

I suspect Asia-based JustKitchen is also not for them. It regards food as a “content play, with recipes and branding instead of music or shows as the content”. Ingredients are prepped in a hub kitchen before final assembly and delivery at spoke kitchens. But if this wasn’t enough of a commoditising of the process, the company plans to outsource/license some of its spoke kitchen activity to other food vendors and manufacturers. It will then focus on order management software and recipe content – no doubt to the great comfort of the technology entrepreneurs involved and its investors who can wash their hands of all that messy food handling.

Amid this tech-led frenzy of activity, I’m hoping we can take some comfort from the National Restaurant Association findings in the US that found 72% of people believe it is important delivery orders of food come from a location that they can actually visit in person – ie, a restaurant.

This will hopefully ensure that when the real-world bricks and mortar restaurants open up again, they will be used just like before covid-19 – for both takeaway orders and the much-missed dine-in experience. Only then will the real test come for the numerous opportunistic tech-led, virtual hospitality creations that are currently flooding the market.

Glynn Davis, editor of Retail Insider 

This piece was originally published on Propel Info where Glynn Davis writes a regular Friday opinion piece. Retail Insider would like to thank Propel for allowing the reproduction of this column.