Dubai: Which ‘cloud kitchen’ in Dubai is cooking up your next order?
Seemingly, without anyone outside of the industry knowing much about it, cloud kitchens have become one of the hottest new business categories in Dubai after COVID-19 showed up in March last year. It ranks right alongside online grocery app launches and the ‘Buy Now Pay Later’ platforms as the trends to keep watching out for… even in a post-COVID-19 business landscape.
But can Dubai absorb all of these new and existing cloud kitchens? Especially when their business model is based on there being enough orders streaming – daily - through websites and apps to support an industrial-sized cooking and delivery of those meals. (There are now online ads that talk about launching a cloud kitchen in the matter of two weeks…)
Adib Samara, head of Global Brand and Marketing at Sweetheart Kitchen, one of the biggest names in the region’s cloud kitchen space, is hedging his thoughts. “I believe we are in a market with many wealthy opportunistic businessmen who want to leverage the ‘Next Big Thing’,” said Samara, who joined Sweetheart Kitchen after a long stint at Careem, the ride-hailing company.
“I think it also stems from the fact that many people don't really understand the complexities of operating a cloud kitchen.”
And complex, it is…
Cloud cooking
It was during last year’s lockdown phase that the cloud kitchen concept had its biggest breakthrough in Dubai. With restaurants closed and work-form-home the norm, people were hitting the food delivery apps on their smartphones. Those orders needed to be cooked, sealed and delivered.
Centralised kitchens that could prepare these orders at a sizeable scale were making breakthroughs, as food delivery aggregators and restaurants were outsourcing all their needs through these offsite kitchens. Those operators that had an existing network of offsite kitchen locations were the biggest gainers as orders streamed in.
Even with lockdowns being lifted, cloud kitchens in Dubai were still packing it in on the growth side. That was the prompt for others to enter, in the belief that Dubai’s residents and restaurants will keep using a no-frills option they have gotten used to.
“According to research, the global market size of cloud kitchens is expected to grow to $71 billion by 2027,” said Neelesh Bhatnagar, who owns JSB Restaurants, and sees a chance to get deeper into this F&B trend. “As with several first-time adoption of global trends, Dubai is leading the change in the region.
“The sheer size of the F&B market in Dubai is huge with the pandemic being the key factor for cloud kitchen numbers surging. There is also the rent factor, which has led to the explosion of such concepts, especially in Dubai.”
Expo spark
If the pandemic phase created the foundation, the Expo event in Dubai is being seen as the catalyst for the next round of super-charged growth. More restaurants will pass on the actual cooking to third-party kitchen operators rather than do all of the preparation themselves. Restaurants will stick to keeping minimal staff on their premises, sticking to the health and safety guidelines that has become the norm. If that means taking cooking offsite, then F&B businesses are going to do that.
But can this be sustained after the Expo months?
“I believe the pandemic only "fast forwarded" a trend that was already in motion, with the delivery business already growing at a healthy pace and people using aggregators to select from an array of F&B outlets from the convenience of their homes,” said Samara. “While the spike (in demand for cloud kitchen) may not be as dramatic as the start of the pandemic, we are still witnessing a healthy growth in the delivery space even as life returned to some normalcy.
“The Expo is not permanent, and businesses can't depend on a short-term event to sustain long term growth. We have already seen a few kitchens close their doors or change their models in the past few months as people start venturing out of their homes more.
“Over time, many kitchens will learn that they don't have the operational prowess, the right business model, or deep enough pockets to continue operating - and the market will be left with a few players.”
Virtual restaurants
Last year was, without a doubt, the worst possible for the local F&B industry. After the lockdown, there were limits on the dine-in numbers. Customers too, by and large, were squeamish about spending time hitting their favourite food joints… even with all the precautions in place.
This is where virtual restaurants scored. These operate only in the online space, work off a well-defined menu and use extensive online marketing to get their brand popular. Plus, they get their meals and orders done through cloud kitchens, either their own or operated by others on contract.
There are many ways to describe the large-scale single-site kitchen business. Adib Samara of Sweetheart Kitchen gives his thoughts on the naming norms.
"Often, these terms are used interchangeably to identify any kitchen without a customer-facing storefront operating a delivery-only brand or multiple brands," he said. "However, there are various business models that differentiate the players in the market.
"For example, Sweetheart Kitchen is a 'private label multi-brand virtual kitchen', meaning it operates a kitchen that produces food for multiple self-owned brands. Other models include kitchens that only provide commercial space and equipment for third-party F&B businesses to utilize, or kitchens that run the full operations for third-party F&B businesses.
"The use of the term Hybrid just means their model is a mix of the various models."
Hybrid ways
“Chances of success are better for those kitchens with committed contracts,” said Bhatnagar. “But a long-term business vision and plan is key to perform well in this market.
“At JSB Restaurants, we believe all online businesses only supplement brick-and-mortar outlets. As in retail, post-pandemic we believe customers will come back to restaurants where the true brand experience lies. An omni-channel approach is critical to maximize business across channels.”
His company currently has four brands - Biryani Box, which is the cloud kitchen; The Yellow Chilli, which is into Indian cuisines; a fusion concept under Hong Kong Indo-Chinese; and Pressman’s, which serves up pressed sandwiches.
“We launched Biryani Box as a cloud kitchen, which is a delivery-only business caters to areas across Dubai, Abu Dhabi and Sharjah,” said Bhatnagar. “Cost of operating a delivery-driven restaurant business is more or less than same, whether the brand is doing on its own or through delivery portals. At the moment, since third-party food aggregators are investing in reaching out to our customers, it makes sense to ride on their infrastructure and people resources.”
Consolidation or closure?
But everyone in the industry agrees on one point. That the Dubai market can only take on so many cloud kitchen operators.
“The market as it exists today is definitely not large for every player that wishes to play in the cloud kitchen arena,” said Samara. “Much like the market was not large enough for the vast array of brick-and-mortar F&B operators that were present in the UAE prior to the cloud kitchen phenomena.
“But players will continue to enter. Over time, we will eventually witness a consolidation and the closing of those who are not able to establish a sustainable business model. “
Clearly, that old saying of ‘Too many cooks…’ holds true for cloud kitchens.
