Dining at home is the new normal with Cloud Kitchens: Sehaj Singh Kukreja and Tushar Anand, Co-founders, Cheferd Foods
Cloud kitchens, or cooking facilities that produce food only for delivery with no dine-in or customer-facing areas, could create a $1 trillion global opportunity by 2030.
Hospitality industry is one of the biggest contributors in India’s economy. Since the COVID-19 has emerged as a pandemic situation, the retail-based businesses have been impacted the most, especially the restaurant business. But modern world issues have modern solutions and one such solution to food the cravings of millions of people is Cloud Kitchen.
Cloud kitchens, or cooking facilities that produce food only for delivery with no dine-in or customer facing areas, could create a $1 trillion global opportunity by 2030, according to a Euromonitor virtual webinar presented by Euromonitor & Global Food and Beverage Lead Michael Schaefer. The firm predicts cheaper, faster and more reliable delivery could help this segment capture 50% of drive- thru service ($75 billion), 50% of takeaway foodservice ($250 billion), 35% of ready meals ($40 billion), 30% of packaged cooking ingredients ($100 billion), 25% of dine-in foodservice ($450 billion), and 15% of packaged snacks ($125 billion).
According to a report by CRISIL, India's organised restaurant industry will see 40-50% plunge in FY21 revenues. Pertaining the current scenario, even after Unlock 2.0, not many people are supporting the dining outside and this will lead in minimal business. In an industry majorly dominated but restaurant business or to term in simple words- outlet based model, cloud kitchen startups are cooking up the best deal with the consumers. The models who are already based on no-premises for customers, have nothing to lose during this critical health situation.
Let’s throw some light on few interesting discussions around food business in India:
Shift in consumer behaviour
With the advent of food-tech giants, foodies and individuals have been dependent on online ordering for quite some time now. In fact, thanks to them for bringing a revolution in how people used to order food. This, changed consumer behaviour, has been the biggest stepping stone for Cloud Kitchens to set their foundation in the industry. In context to lockdown, with nowhere to go, ordering online was the only blessing in disguise available with the customers. Although pandemic has acquainted us with the hidden chef in ourselves but has not conquered our food craving notions ‘kuch acha khana hai’ and ‘kuch bahar ka khana hai’. While earlier, the cloud kitchen concept couldn’t survive but today, the industry is mature enough to adopt such models more than before.Diners are becoming more comfortable with food delivery. Restaurant closures, in the wake of the novel coronavirus pandemic, will drive a change in how physical restaurant formats are being used, especially as shuttered businesses leave empty real estate behind. This shift will prime the industry for an acceleration in cloud kitchen development.
Restaurants remodelling their business to Cloud Kitchen to sustain the customers
The pandemic situation has given all of us a chance to take a seat back and revisit our business models. If few outlet-based models have been able to make some money, it is because they were providing deliveries. It is quite challenging to retain customers as restaurants are working with limited operation currently. With a severe competition in the food business it is easy to lose customers. Therefore, one must be in the forefront to win the race. With actively strengthening the online business model, outlet owners are scouting a way to make it through these tough times. In comparison to Cloud Kitchens, the concept is based on ordering online and dining at home without worrying about losing on the customers, as it remains the same. In fact, during pandemic, there is a surge in orders from cloud kitchens. This validates that the concept is more profitable than regular restaurant chains.
Co-cooking concept uniting with Cloud Kitchens:
Co-cooking is the hottest trend in the industry right now which is helping many outlet owners to survive through this situation. Pandemic has surely burnt the wallets of many, and entrepreneurs are resolving this issue with better cost structures. Usually the kitchen business needs some effort to procure the proper equipments and regular maintenance. While this new model involves minimal investment in finances and logistics. This spares more time for entrepreneurs to concentrate on business strategies and expansion. The concept of co-cooking is not only helping in effortless ground work, but it is also helping them to sustain pre-COVID prices of the menu. At similar prices, this will uphold the customers without burning their pockets. Several players have hiked prices to cover the cost for infrastructure (of their outlet) which can impact their customer base.
One of the main drivers of the growth of the cloud kitchen market is the changing cost structures of the business. Cloud kitchens push restaurant cost structures toward delivery rather than in-person dining, and the reduction of employees that comes with a delivery-focused model can significantly bring down rent and staffing costs for restaurants and grow thin margins. For example, 60% of the cost of a Starbucks latte represents the cost of rent and staffing, according to Euromonitor, which cited data from Financial Times. As delivery becomes less expensive and cloud kitchens grow and become more centralized, reducing food delivery times in the process, restaurants could find financial gains in optimizing their business for off-premise rather than dine-in experience.
Hygiene Check First!
One of the biggest reasons behind minimal footfall in the restaurants is the suspicions about the previous customers who visited the place. Restaurants are taking extra measures with continuous sanitisations and taking orders with minimal contact but the fear among people of getting contracted still lives fresh. With Cloud Kitchen, they least worry about such scenarios as there are no premises where customers are visiting; only the in-house staff. To keep customers assured of their health, owners are checking temperatures of their employees and delivery executives on a real time basis and mentioning the same on their bills. In order to be more careful, they are also providing e- bills to avoid any exchange of additional documentation. Additionally, these players are making live cooking is a mandatory move to ensure delivery of fresh and quality of the food.
New-age entrepreneurs are finding the best possible solution for optimum utilisation of their resources. They are hiring local delivery executives who are thoroughly aware about the locality. Along with this, another new-age solution which is becoming more popular these days is contactless delivery. With the local delivery executives, the need to connect with customers multiple times, reduces. This helps save time in finding the destination and helps in delivering fresh and quick.The reinforced concept of Cloud Kitchen has more potential than ever before. With minimal investment in finances and infrastructure, it makes it more lucrative for investors to chip in capital. The chances of recovering from the capex are higher in comparison to other businesses. Deep-pocketed chains are leading restaurant-driven experimentation in the cloud kitchen space, but as millions of small restaurants close permanently due to COVID-19 disruption, this strategy could give surviving small players the chance to buy up new property and continue to cater to increased delivery demand, thereby levelling the playing field.
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