Mapping the rise of smart cloud kitchens
The food and beverage industry is ever-changing. Be it through mergers and acquisitions or technological advancements, there have been many changes in the industry due to its large market size. That has been no different in the Middle East, a region that has seen major change over the last few decades—both economically and socially. Among the changes is the launch of food delivery services, including Talabat, Careem NOW, Deliveroo, Zomato, UberEats and others, which have changed the landscape entirely. Nowadays, with the clicks of a few buttons, food is at your doorstep in no time.
There have been many mergers and acquisitions in the space as well. One of the first large acquisitions in the region were iFood and Talabat, both food delivery platforms that were bought out by international acquirers. More recently, in February 2018, ride-hailing app Careem announced that it had acquired RoundMenu, months before launching its own food delivery platform Careem NOW. This shows that larger players, like Careem and Uber—and recently Amazon through its strategic stake in Deliveroo—are diversifying their portfolios and betting on the food delivery market to be massive, even larger than it is today.
Along with this trend, there has been a shift to online ordering compared to in-restaurant dining. This, in itself, brought forward the opportunity for another trend – cloud kitchens. With the increasing number of food deliveries and the increasing cost of real estate for kitchens, cloud kitchens aim to help restaurants cut their costs and increase their revenues. Simply put, cloud kitchens are shared kitchen spaces for delivery-only restaurants. There is no place for anybody to dine in, it is delivery only.
The trend was pioneered by an Indian company called Faasos, a chain of kebab restaurants from the city of Pune. Due to the difficulties of finding and furnishing restaurants cost-effectively, Faasos decided to change tactic and opened their first centralised cloud kitchen. They closed their restaurants to the public and started to focus on online marketing, fast delivery and cheap rent. Within a year, this model transformed the business. There was no longer a need for these expensive and difficult-to-find restaurants. Instead, delivery-only was a huge opportunity. So much so, that world-renowned venture capital firm Sequoia Capital invested in Faasos, now Rebel Kitchens, in order to grow their business.
After this lucrative development, many cloud kitchens followed. Even Travis Kalanick, the co-founder of Uber, is working on a cloud kitchen startup after leaving the ride-hailing firm that acquired Careem earlier this year. Moreover, venture capital firms have seen the opportunity in the region as well.
Kitopi, a cloud kitchen based out of Dubai, raised investment from Crescent Enterprises Ventures (CE-Ventures) and BECO Capital in late 2018, in order to grow its cloud kitchen network in the region. Kitopi is a delivery-only kitchen platform that cooks and delivers on behalf of other food brands, and has been growing rapidly.
Also Read: Serving Food From the Cloud
Mohamad Ballout, co-founder of Kitopi, said, “the partnership with CE-Ventures gives our unique business model the momentum we need to enhance our expertise and scale up our operations. Kitopi is a new concept, and we have seen widespread adoption by local and international food brands. We have ambitious plans of expanding both regionally and globally. Having the support of investors like CE-Ventures will be important as we continue to grow rapidly and extend support to more F&B businesses through leveraging our innovative tech-enabled ecosystem.”
Through its cloud kitchen, Kitopi aligns well with the requirements of small and medium-sized restaurants to expand their operations and reach, while reducing their order processing and delivery times. Moreover, since there is no investment requirement for an expensive restaurant, the startup allows restaurants and food brands to open delivery-only locations in the region. Seeing a large number of small and medium-sized restaurants in the region, which are hungry for more exposure and customers, cloud kitchens could be the perfect solution.
With the number of food deliveries expected to increase over the coming years, cloud kitchens are tackling the food delivery market, which, according to consulting company McKinsey, is only “at the beginning of the growth cycle” in the Middle East. For Kitopi, and the undoubted competitors that it will see, this will prove to be a lucrative opportunity – provided they can capitalise on it.