Skip to content
search
Big ConceptsAsk An Honouree: Why Have Food Delivery Investments Exploded In Southeast Asia?

Ask An Honouree: Why Have Food Delivery Investments Exploded In Southeast Asia?

Ask An Honouree: Why Have Food Delivery Investments Exploded In Southeast Asia?
By Max von Poelnitz
September 06, 2019
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.

Photo: Shutterstock
Photo: Shutterstock

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.


About the author
Serial entrepreneur and Gen.T honouree Max von Poelnitz is founder and CEO of Spoonful, which operates food delivery brand Nosh. Existing investors investors include Alibaba Entrepreneurs Fund; the startup is currently raising US$5m in Series A funding to expand in Southeast Asia.

The opinions expressed in Ask An Honouree don't necessarily reflect the views of Generation T. 

Tags

Big ConceptsAsk An HonoureeFood DeliveryHong KongSoutheast AsiaInvestmentNosh

clear
keyboard_arrow_up

In order to provide you with the best possible experience, this website uses cookies. For more information, please refer to our Privacy Policy.

close