Post-Pandemic Analysis: Cloud Kitchens Will Bounce Back The Fastest
We believe that delivery-only businesses will have a faster and more sustainable recovery compared to their dine-in counterparts after the Corona crisis.
With social distancing becoming the new normal for society, the world is changing even faster than we know. New long-term trends are forming, which will drive a structural shift in consumption patterns, creating a lasting impact on our businesses. To understand the impact of such global turmoil, we have to evaluate the sentiments from all the different stakeholder’s perspectives.
The pandemic has forced governments to impose a lockdown, closing all ‘dine-in’ facilities of a restaurant and allowing only ‘food delivery’ operations to keep their businesses afloat.
Globally, there has been a mixed reaction to food delivery operations, during the lockdown. Where some of the western markets saw a massive surge in online food delivery, some saw a sharp dip from the ‘shock effect’ due to massive paranoia, followed by sustained growth. We have seen that the food delivery and takeaway market has recovered and grown even when the cities remain under lockdown.
“More an I-shaped recovery than a V-shaped!” said Giles Thorne, analyst at Jefferies, referring to the shape of Takeaway’s revenues over time and implying a recovery so fast the dip was barely perceptible. “Indeed, we see positive longer-term implications from the accelerated change in behaviour from the virus.” - Financial Times
With prolonged lockdown and working from home, consumer behavior now has new triggers, as we have listed below.
Fear & Paranoia – A global pandemic of this scale (More than 1.8 million confirmed cases with 100,000+ deaths) has definitely created a sense of anxiety among all consumers. Consumers may feel scared to go to crowded places or share social spaces for a longer duration, till the time a vaccine or cure is invented. This may reduce footfalls at dine-in restaurants and pubs, but on the contrary, they might feel more comfortable ordering a home delivery via online apps or a quick takeaway from a neighborhood eatery.
Lifestyle Fatigue & Boredom – Prolonged quarantine has changed our lifestyle in a big way. The majority of modern, urban, young consumers are not used to cooking their daily meals. With lockdown, even though they start doing the domestic chores, very soon people will grow weary of cooking at home or canned and frozen food and seek to change their daily routine. Also, as the habit of working from home becomes the new normal and schools are shut sill September in many countries, parents will find it extremely difficult to balance their domestic and work life at home and will be desperately looking for convenient alternatives. With limited options available in the market, consumers will turn to food delivery and takeaway. This will add a new set of users to the food delivery apps, ordering their food for the first time and creating a habit of convenience among them.
Affordability – The global economy is struggling from the impact of this pandemic and with unemployment on the rise, and salary cuts happening across the board, consumers will have limited resources to spend on their lifestyle. This will make food delivery and takeaway a more affordable and attractive choice compared to a dine-in restaurant experience.
Hygiene – The hygiene level of the kitchen, staff, packaging, and delivery partner has become of utmost concern of all consumers. Brands from the production and delivery side are consistently trying to give an image of hygienic facilities and communicating their changing business practices to reassure consumer confidence. With practices of contactless delivery and online payment, consumers are more likely to trust food delivery brands over cooked food from a supermarket shelf or a street food vendor.
RESTAURANTS, TAKEAWAYS & CLOUD KITCHENS
In these difficult times, when dine-in restaurants, cafes, and pubs are closed, many brick-and-mortar restaurants started online delivery. However, delivery-only kitchens will always have a better competitive edge over them. With high rental and salary overheads, traditional eateries, have a much higher operating cost compared to lean delivery-only kitchens. This will contribute to a lower pricing or higher margin benefit to cloud kitchen brands, leading to sustainable growth. Post-pandemic, we will see many business closures as they will not have the financial resources to sail through this lockdown. In such a business environment, even though we have a solid demand, there will be a gap on the supply side, creating opportunities for new delivery-only brands to start and grow.
FOOD DELIVERY APPS
Food delivery and cloud kitchen are relatively new disruptive concepts in the traditional hospitality sector. Most companies working in this space are start-ups with a young team and brief business experience. A crisis like this has made them adapt their operations in many ways. Managing unpredictable behavior on both the supply and demand sides at the same time working with fewer employees has made them efficient, faster, and smarter. With new practices like ‘Contactless Delivery’ and ‘Employee Health Monitoring’, these newer brands have been able to win their consumer’s trust. On the humanitarian ground, many platforms have reduced their commission, cut down on delivery fees and surge pricing, making online food delivery accessible for all. These swift actions from the delivery company have already shown promising results. In many markets, even though there was a ‘shock’ reaction and strong business dip in the first week of lockdown, soon people started going back to delivery apps for their meal supply. This pandemic will surely reinforce this habit of convenience and make consumers loyal to these platforms even after the lockdown is over.
During the lockdown phase of this global upheaval, we have seen sizable growth in the food delivery sector. With a healthy network of restaurants, new customers, and established delivery players, we are looking at a very fast and robust bounce back from the fall, otherwise being faced by the rest of the food service industry.
If you are a chef, investor or a food service employee, watching at the instability of the hospitality sector, now is your time to dip your feet into cloud kitchen. Instead of waiting on the side-lines, get ready to start your own venture and stay ahead of the curve. Join our program to understand the business of delivery only models and become more competent to take on this opportunity head on.