The worldwide phenomenon of dark kitchens and their catapulted growth are one of the few success stories off the back of COVID 19, but can the growth sustain?
Many variations of dark kitchens operate in the UK but the simplest involves
one food brand, which owns or rents a single kitchen location for foodservice with no seating for customers. Usually just one style of cuisine is offered, and the business model is optimised for online delivery orders only. Delivery can be via third-party delivery channels or employees can cover orders and deliveries too.
Deliveroo launched its ground-breaking ‘Editions scheme’ in 2017, introducing the idea of dark kitchens to a wider audience, by providing hubs where catering businesses cook their branded food for delivery to homes. The model has expanded to 14 sites in the UK, with London’s nine locations, including Islington and Whitechapel, making up almost two-thirds of these dark kitchens.
Individual business owners quickly cottoned on to not just the simplicity of the business model but also the improved wholesale start-up and on-going costs, more manageable staffing requirements and the potential to adapt to market changes.
Fortunately, prior to COVID 19, foodservice was already moving increasingly online, so for some dark kitchens the groundwork had already been laid. In a sense COVID 19 has acted as the main catalyst but the adaptability of the dark kitchen business model has played its own part. Dark kitchen operators are better equipped to streamline their production processes and thereby benefit from efficiencies of scale.
A straightforward, scalable business model is far more likely to survive during a crisis. In addition, the data from delivery apps can be consolidated, converted into a market research summary and fed back to kitchen owners, thus enabling further streamlining.
Prior to 2020, the takeaway food delivery market made up 8% of the overall foodservice sector in the UK. The coronavirus pandemic quickly resulted in a 100% decrease in seated restaurant customers and the accompanying loss of turnover forced many restaurant owners to adapt their offering to online delivery, just to survive.
This adaptation goes some way to explain, that during the pandemic, in London alone, restaurants have been selling an extra 900,000 meals per week via apps such as Deliveroo and Uber Eats.
Similarly, UK revenue from takeaway meals reflects the same story:
2018 £3.08 billion
2019 £3.5 billion
2020 £4.3 billion
Not everyone is so optimistic about the apps
The stories of the delivery apps have not been all plain sailing. Deliveroo caught more than a cold with their ill-fated float at the end of March 2021. Reservations about their business model were widely voiced, with high commission fees, worries over customer service and concerns about the handling of personal data among the culprits. Unwelcome publicity added to the fray with many Deliveroo riders complaining they were having to exist on the minimum wage.
The experiences of, Hüseyin Kurt, owner of Shukran, a Turkish restaurant in Seven Sisters go some way to explain growing discontent. He is fiercely proud of the business he has built using fresh produce and excellent service. However, margins were slim and Deliveroo initially seemed to promise a whole new sector of customers.
However, it quickly became apparent that with Deliveroo’s 35%+VAT commission on each order he needed to raise his prices. This naturally went down badly with his existing customer base, who were also tempted by other discounted brands on the same app.
He said: ‘It just felt like Deliveroo were taking in money and information from every angle, while other people, us at the restaurant and the drivers who came to pick up the orders, did all the work.’ The last straw came when Kurt heard on the grapevine of Deliveroo building a series of dark kitchens on a piece of local wasteland.
Raging success or damp squib?
As lockdown restrictions ease pubs and restaurants can once more turn their attention to foodservice. It is difficult to calculate the effect on the takeaway market. Some customers will continue to enjoy the convenience of ordering online and eating at home, while others want to return to the sense of occasion and sociability of a seated restaurant meal. Continuing fears about transmission will be another factor determining whether customers eat at home or in restaurants and pubs.
Research conducted by Lumina Food and Drink Intelligence suggests the takeaway market is expected to decline as lockdown restrictions are removed. Lumina has projected a drop of 7.6% in 2021, however this must be seen in the context that this is still 37% higher than the market value of 2019.
Blonnie Whist, Head of Insight at Lumina Intelligence explains: ‘With dining operations closed or heavily restricted over the last 12 months, consumers have turned to food service delivery in their droves, including an additional 4.3 million UK adults who ordered food service delivery for the first time.’ Lumina goes on to predict consistent robust growth from 2022 onwards.
Promising signs for the future
Euromonitor data’s recent research into the number of dark kitchens worldwide shows the trends. The UK has 750 dark kitchens, the US 1,500, China 7,500+ and India 3,500+.
Naturally, these figures must be seen in the context of the population of the country, but it is clear China and India are a long way ahead. Culturally these two countries have an established tradition of serving delivered hot meals to workers at lunchtime. Currently such traditions don’t exist in the UK or the US, but with the advent of adaptable dark kitchens it wouldn’t be a surprise if the lunchtime market became a mainstay in the US and European countries.
Unilever meanwhile, has been well ahead of the game and started working with dark kitchens in 2015. Something is clearly going right, and the company recently announced a partnership to work with German-based dark kitchen operator, Vertical Food. They are looking to expand from its current Berlin base to other German cities, such as Hamburg, Frankfurt, Munich, and Cologne.
Unilever’s global customer development director, Arnaud Leleu, explains: “We have a ghost kitchen partnership in pretty much all the 70-plus countries in which we operate. This work has intensified over the last year as demand for delivery has grown in the context of the pandemic.’ The dark kitchens will be supplying products to Unilever Food Solutions (UFS), which in turn services companies in the foodservice industry, such as restaurants, hotel chains, and large-scale caterers.
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https://www.hospitalitynet.org/opinion/4103195.html
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https://www.lightspeedhq.co.uk/blog/food-delivery-services-are-the-future-heres-why/
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https://bistrohub.co/uk/dark-kitchens-hotels-and-shopping-malls/