Gen.T honouree Max von Poelnitz, founder and CEO of Spoonful and Nosh, on the future of food delivery in Southeast Asia
In the Ask An Honouree series, we ask experts from the Gen.T List to share insights into their industry. First up: Max von Poelnitz, CEO of Hong Kong-based food delivery company Spoonful, on his industry’s rapid expansion in the region.
The startup investment landscape is littered with hype, false promises and massive consumer-facing discounts. Its winner takes all mentality has been particularly strong in food delivery, both in Asia and further afield, much like the similar rush towards expansion during the dotcom era of the early 2000s.
According to technology market intelligence group CB Insights, in 2014 venture capital invested $1.46 billion in on-demand food startups, including restaurant platforms and prepared meal players. In 2019, the Southeast Asia and India markets are heating up; we have seen a flurry of large investments in food and logistics startups such as GrabFood, Go-Jek and Rebel Foods. Amazon’s $575m investment in UK on-demand restaurant delivery platform Deliveroo in Q2 2019 is now also being investigated by the UK regulatory authorities over possible competition irregularities.
WHY IS FOOD DELIVERY ATTRACTIVE TO INVESTORS?
It turns out the unit economics in food delivery are better than standard logistics or ride hailing. With ride hailing, companies typically need to price at the same level as incumbents such as taxis, which does not allow much room for admin, service or delivery fees. In food delivery, the platform collects both a delivery fee from the consumer and a 20-30 percent commission from the restaurant partner.
This doesn’t make for high gross margins, but it does make for better ones. In mature markets, you might see a larger basket size so the commission from a restaurant can be substantial, while in developing markets a lower basket size is the norm but logistics costs can be lower. In addition, food delivery allows for batching, where a single driver collects numerous orders from a single restaurant.
And demand is growing fast. In 2015, for the first-time people in the US spent more money at restaurants than grocery stores, primarily driven by food delivery. In Asia things are even more extreme, with some restaurants already realising 40 percent of their revenue from delivery-only.
As platforms such as Deliveroo, Foodpanda, GrabFood and Uber Eats continue to expand, they are looking to drive down their costs and increase their margins. One way they’re doing this is with cloud kitchens.
Some restaurants in Asia are already realising 40 percent of their revenue from delivery-only
— Max von Poelnitz
WHAT IS A CLOUD KITCHEN?
A cloud kitchen is a single location that serves multiple restaurant brands or virtual brands, allowing logistics platforms to aggregate pickups. It’s a key strategy for food delivery because it lowers logistics expenses and reduces drivers’ waiting time. At my company Spoonful, we have have been making food in cloud kitchens for over two years, giving us insight into the challenges of scaling up these facilities: optimising real estate investment, the location of facilities and production times.
Uber founder Travis Kalanick has invested in and runs a company called City Storage Systems which is building large kitchens all over Asia to help service food delivery platforms. OYO in India already runs hundreds of cloud kitchens through hotel partners. These developments enable more F&B operators to develop delivery-only brands and the platforms to grow the overall pie.
WHAT’S NEXT?
As companies jostle for dominance, savvy F&B operators and content creators will start to become even more important. Consumers will ultimately make the decision regarding loyalty to a product experience or a brand. The key for the delivery platforms will be to engage their customers through additional services such as loyalty programmes, exclusive brand partners and collaborations, and attain deeper data on what those customers want.
Go-Jek’s $125m investment in Rebel Foods is the largest signal in the region of a ride hailing platform betting on the food delivery industry. Food delivery still requires operational skillsets such as quality control, taste and scalable operations. These are not easy at the scale most of these platforms are aiming for: think five million orders a month or more.
Cloud kitchens will potentially become key distribution points not just for food delivery but also for a variety of other items. Consumers will continue to crave convenience above anything else, especially in urban dense environments. Ultimately, it means that as food delivery becomes a habit, consumers across Southeast Asia will have more choice, better quality and better pricing.
The Delivery Dilemma: Exploring the Booming Food Delivery Industry
From steaming pizzas to gourmet salads, food delivery has become an increasingly popular solution for busy individuals and families. With a few taps on our smartphones, we can have a diverse array of culinary experiences delivered directly to our doorsteps. But what lies beneath the convenience of this on-demand service? This article delves into the complex world of food delivery, exploring its benefits, challenges, and potential impact on our lives and societies.
Feeding the Need for Speed and Convenience:
In today’s fast-paced world, food delivery offers an undeniable advantage: convenience. Time-pressed individuals and families can access a wide range of restaurants without leaving their homes or offices. This saves valuable time and energy, especially for those juggling work, childcare, and other commitments. Additionally, delivery services have expanded options beyond traditional pizza and fast food, providing access to diverse cuisines and healthier choices.
A Double-Edged Sword: The Impact on Restaurants and Workers:
While convenient for consumers, the food delivery industry presents challenges for restaurants and delivery workers. Restaurants often face high commission fees charged by delivery platforms, impacting their profitability. Delivery workers, who are often classified as independent contractors, may face unpredictable income, long hours, and lack of basic benefits like healthcare and paid leave. Concerns exist about their working conditions and fair compensation.
Beyond the Food: Environmental and Societal Considerations:
The environmental impact of food delivery also raises concerns. Increased packaging waste and delivery vehicle emissions raise sustainability questions. Additionally, the reliance on delivery services can contribute to social isolation and a decline in traditional dining experiences, which play a vital role in community building and cultural connections.
Looking Ahead: A Balanced Future for Food Delivery:
As the food delivery industry continues to evolve, finding a balance between convenience, fairness, and sustainability is crucial. Regulatory frameworks, fair commission structures, and improved working conditions for delivery workers are essential. Consumers can contribute by making informed choices, opting for eco-friendly packaging options, and tipping generously.
Ultimately, the future of food delivery hinges on striking a balance between technological advancement, social responsibility, and environmental consciousness. By addressing the challenges and harnessing the potential of this industry, we can ensure that it serves our needs without compromising the well-being of individuals, communities, and the planet.
