Remaining Relevant in the Age of Digital Disruption

The last eighteen months have seen a tremendous rise in the acceptance of food delivery into our daily lives. Whether it’s prepared food or fresh food, the trend is obvious and apparent to all. In February this year, Hello Fresh NZ (a meal box delivery specialist) announced a 143% revenue increase year on year, with their workforce tripling in size during the same period, a quantifiable outcome of the changes and impacts of the pandemic-response effect on our purchasing habits.

 From a prepared-food perspective, the rise of delivery aggregators is gaining momentum at a terrific rate of knots. In evaluating the competitive landscape for any modern food and beverage precinct, it is no longer enough consider the immediate surrounding competition, but rather we also need to consider the competition provided by “Netflix & Order-in,” working in tandem to make a quiet night in on the couch a serious competitor for restaurant spending.

 In the early days of delivery apps (UberEats only launched in Australia in 2016 in the wake of  Foodora’s exit from the marketplace), the emphasis was on developing alternate revenue streams for established restaurants, cafes and takeaways, but a new phenomenon is taking over – Ghost kitchens.

 Ghost kitchens, dark kitchens or cloud kitchens, have no front of house area at all; no seats, no tables and no waiters. Rather these proxy brands are created with delivery app customers as the sole target market developed through proprietary brands specifically designed for the delivery platforms. These ghost kitchens create food specifically for delivery, in kitchens that are specifically created for the format and strategically located to maximise supply coverage. These brands are not limited by the numbers of seats or the capacities and capabilities of the waiters, but rather by the marketing reach of the brand and the algorithms and commission levels inherent within the platforms.

 And the industry is morphing quickly, former CEO of Uber - Travis Kalanick has recently started a company called Cloud Kitchens. He subleases delivery only kitchens on monthly memberships providing restaurant operators with access to infrastructure with no upfront costs, lead-in times or start up compliance etc. Whilst this concept is US based currently, it is a matter of time before operators globally, adopt this approach.

 18 months ago, in the relative calm of the pre-covid environment, Future Food was approached by a major delivery platform to understand what their target consumers wanted, in order to drive greater acceptance of their business model and uptake of delivery platforms as a whole. In just a few short months, the landscape has changed dramatically, delivery has ballooned hand in hand with population lockdowns and the promise of contact less delivery; the bad press of labour conditions and unfair treatment of “contractors” merely an inconvenient truth for a rapidly growing and evolving customer base.

 And the growth is not just in the home delivery sector, but trends indicate that it is likely to be adopted across a number of new sectors in the near future. Airports, Universities and hotels are just some of the sectors that are deliberating how the technology may work specifically to their environment.

 In the US, education catering company Chartwells (Compass Group North America) is trialling the approach in the University sector with the adoption of a dark kitchen approach that will bolster its on-campus dining halls. Whilst it is likely a strategy to counter the loss of revenue to third-party delivery firms, the approach also uses up underutilised kitchen space in Universities. It also provides a way to increase demand outside of traditional dining hall hours which traditionally have not been met by the universities or their caterers.

 A number of airports around the world are also considering options for food delivery at the gate from dark kitchens within the airport itself. The aim is to provide a plethora of menu choices without the limitation of common area seating layouts or peak period queuing. This is not even a new concept, Dubai airport trialled this way back in 2017, in partnership with Deliveroo and allowed passengers to get food delivered to them at their boarding gates. Amsterdam and Toronto airports have both tested the scheme, and with the growth in acceptance of delivery platforms (some market research companies indicating that this may be as high as 250%) it is likely to lead to many more transport hubs looking towards these types of solutions.

 Acceptance of food delivery and home delivery as a normalised method of food purchasing will continue to grow, we like it for a number of reasons:

1. It's easy! – This is the age of convenience and I want it now. (Consider the current marketing campaign of KFC – “Shut up and take my money” or the astronomic rise of finance company Afterpay). This is an era where Millennials & Digital Natives are taking over from Baby Boomers and successful businesses adopt an adapt-or-die mentality in the age of disruption! Convenience is a highly valued commodity in a fast-paced world.

2. We know the cost. No getting talked into an extra glass of wine by smooth talking bartenders, no pre-dinner drinks, no extra sides or condiments and no taxi fare/Uber charges to get there and back. Your favourite condiments are already in the fridge and we know the price of the experience will be exactly the same as when we press “accept” on the delivery platform app.

3. Choice. Whether it's the choice of delivery platform; choice of restaurant; choice of cuisine; choice of price point or even enjoying different meals with the same people in your house from different restaurants at the same time; choice is at the forefront of the popularity of delivery platforms.

 But as is so often cited, home delivery can never match the experience of a great meal OUT! And this must be the mantra of modern food projects; they must be anchored by memorable experiences - delicious food from well considered menus; thoughtfully complemented drinks lists and personable, friendly, deliberate service within design driven environments.

 If physical food and beverage businesses are to remain relevant in an age of virtual restaurants it must be through the creation of memorable, positive, real food & service experiences.