Cloud kitchens are platforms that offer a wide range of foods, drinks, and cuisine items intended for delivery only. The thriving food-delivery ecosystem served as the central pillar for cloud kitchens, also referred to as "ghost kitchens" or "virtual restaurants"—however, different countries follow various terminologies when they define this term. Cloud kitchens have indeed disrupted the conventional restaurant industry. Online food delivery has become the new norm given the ongoing changes in the restaurant industry.
Independent cloud kitchens, commissary/shared kitchens, and kitchen pods are the three main types of cloud kitchens. The Independent cloud kitchen does not have a storefront and is run by a single brand out of a single kitchen. In contrast, the commissary/shared kitchens are common kitchens where several brands run their operations. Instead of a restaurant, they are owned and run by a different business or an individual. Kitchen pods are shipping containers that have kitchens inside. Kitchen pods are useful because they are designed for effectiveness and efficiency.
Advantages of Cloud Kitchens
Cloud kitchens are flexible and can shift their operations conveniently and seamlessly without worrying about staffing or a venue. There are certain defined benefits associated with cloud kitchens that act as a key differentiator from other food & beverage models in terms of location:
- Low Operating Cost: A cloud kitchen does not need to fulfil the prerequisites for setting up a front, so there are no significant costs associated with décor, dinnerware, signage, or location.
- Low Overhead: Traditional restaurants typically struggle to remain profitable due to their high overhead costs, which include the labor costs of the service staff, exorbitant property taxes, and high utility costs—things that cloud kitchens don't have to worry about. These kitchens, which focus on limited on-demand labor with one or two chefs, have higher profit margins.
- Menu Flexibility: When it comes to creating a menu, a web- or app-based ordering system in cloud kitchens gives you more freedom, and you can easily change the price of a dish based on customer feedback without having to pay for printing menus.
- Low Startup Costs: Compared to physical restaurants, cloud kitchens offer the chance to enter the restaurant business easily and launch a food business for very little investment.
Regional Popularity of Cloud Kitchens
While dine-in culture abruptly came to an end during the pandemic, cloud kitchens quickly filled the void in the market. The concept of the cloud kitchen was quickly adopted owing to market-leading technological advancements, constantly evolving consumer eating patterns, the rise of online ordering, and an increase in the number of delivery options.
The organized foodservice market alone in Asia witnessed a significant decrease in growth rate from 25% to 30% in 2020. There were over 8,000 cloud kitchens recorded in China, and in India these numbers were around 3,500 as of 2020. The market for cloud kitchens in the Asia Pacific region is expected to expand as a result of the significant change that the food and beverage sector has undergone in order to satisfy customer demand and keep their profitability.
Major players which dominate the cloud kitchen market in their respective countries are expanding their footprints and geographical reach. For instance, Rebel Foods, an Indian-based online restaurant company, owns 12 cloud kitchen brands; some of them are Faasos, Behrouz Biryani, and Oven Story. As of March 2021, the company had more than 350 cloud kitchens in the country, making it as one of the largest chains of cloud kitchen restaurants within India. In 2020, Grab, a Singapore-based cloud kitchen, opened more than 50 cloud kitchens across Thailand, Singapore, and Philippines. Over the past year, Grab has opened more than 40 locations in Indonesia, where it has expanded particularly aggressively.
Within Europe, countries such as Germany, the United Kingdom, Spain, and Italy play a major role within the cloud kitchen market. For instance, even before 2020, 8% of the UK's total food service industry was accounted for by the market for delivery of takeout food. As of 2020, the UK had about 750 ghost kitchens, and more online restaurant chains, delivery services, and start-ups are making significant investments in the delivery and takeaway industries. The market is witnessing a significant number of opportunities to enhance their customer engagement and supply chains as a result.
Currently, the Middle East and Africa region is also experiencing significant growth in the global cloud kitchen market. UAE holds the maximum number of cloud kitchens across the region. Some of the major brands operating in the country are Kitopi, Kitch, Kitchen Nation, Kitchen Park, and others. Kitopi is one of the most well-liked cloud kitchen platforms in the UAE that began in Dubai in January 2018 and has since spread to Kuwait, Saudi Arabia, and the United Arab Emirates. Also, Sweetheart Kitchen has further expansion plans in the country; the company raised USD17.7 million in Series C funding in October 2020.
Rising Investment
Venture capitalists are hopping on board as cloud kitchen start-ups recognize their potential. There are now a number of well-known venture capitalists who dominate the market. These investors have high expectations that investing early will yield significant returns.
- The Kitchen United company, a US based company, was founded by the former executives from Taco Bell and McDonald's. The company announced USD100 million Series C funding round, bringing its total funding to about USD175 million. Cities like Miami and New York City will both benefit from the Series C funding.
- Founded in January 2018 in Dubai, Kitopi (also known as Kitchen Utopia) is a cloud kitchen startup with operations in five GCC nations, including UAE, Saudi Arabia, Kuwait, Bahrain, and Qatar. The company received USD415 million in July 2021 from a group of investors led by SoftBank's Vision Fund 2, which was also one of the largest funding rounds in the Middle East region. By extending the Series C round and attracting an additional USD300 million in late 2021, Kitopi valued at USD1.55 billion, making it a unicorn company.
- Rebel Foods after receiving financing totaling USD175 million, which increased the company's valuation to USD1.4 billion, was classified as a unicorn company (a privately-owned startup business worth more than USD1 billion) in 2021.
Influence of COVID-19
Following the emergence of ready-to-eat delivery platforms, lockdowns, and social distance regulations helped the concept of ghost kitchens to move beyond its initial stage. Online food delivery services and other food disruptors experienced impressive growth in 2020, increasing by up to 30% from the previous year. Additionally, the expansion of food delivery services by companies such as Rebel Foods, Gojek, GrabFood, LINE MAN, based in Singapore, India, and Thailand, has actively aided the market's expansion in the Asia-Pacific region.
In the midst of the pandemic, cloud kitchens offered many small businesses and up-and-coming food companies a profitable solution, allowed established food service restaurants to scale back, and newcomers to optimize their menus and refocus on quality and taste.
Market Entry and Partnerships by Foodservice Restaurants
Various international foodservice companies are either establishing their own cloud kitchen or they are entering into partnerships with eateries that aren't their direct competitors to increase their brand's visibility and encourage mass reach. For instance, in 2021 the market witnessed the opening of a ghost McDonald's in London. Also in 2019, US based restaurant chain, Chick-fil-A entered in only delivery options with DoorDash Kitchens, who provides kitchen spaces on rents and is the leading player in cloud kitchen market.
Key Players and Trends in the Cloud Kitchen Market
Top players in the cloud kitchen market include:
- Pop meals (Farm to Fork Sdn. Bhd.)
- DoorDash, Inc.
- Kitchen United Inc.
- Kitopi Catering Services LLC
- Rebel Foods (Rebel foods Private Limited)
- Starbucks Coffee Company
- Ghost Kitchen Orlando (Ghost Kitchen, Llc)
- Cloud Kitchen PTY LTD
- Swiggy (Bundl Technologies Pvt. Ltd.)
- Zomato Limited
Where to Learn More
To learn more about this fast-growing market, please see the113-page report Cloud Kitchen Market - Global Industry Size, Share, Trends, Opportunity, and Forecast 2018-2022 by TechSci Research. The report provides an in-depth analysis of the key development strategies and market trend dynamics which include drivers, restraints, and opportunities prevailing in the cloud kitchen market. Key market players are also analyzed and profiled in the report.
About TechSci Research
TechSci Research is a research-based management consulting firm providing market research and advisory solutions to its customers worldwide, spanning a range of industries. It provides off-the-shelf market research reports to its clients along with customized research solutions and helps global companies to enter, expand, and succeed in different markets. With the help of its strategic solutions and business implementation assistance, TechSci has helped many companies to make crucial strategic decisions.
