Growth of the Cloud Kitchen Market in Indonesia
The Southeast Asian food delivery market saw an astonishing 183% growth in 2020 compared to the previous year. The COVID-19 pandemic, with its lockdowns, significantly reduced opportunities for dining out, leading more people to order food through apps. This surge in the food delivery industry has brought about notable changes in the concept of "restaurants" that support it. In Southeast Asia, particularly in Indonesia, which has high population growth and promising domestic demand, the cloud kitchen business is rapidly expanding.
Business Model of Cloud Kitchens
A cloud kitchen is a service that rents out kitchens and cooking equipment to online order and delivery-only restaurants. The main advantages for restaurants are cost-effectiveness and flexible space rental. Cloud kitchens are typically located in industrial parks, empty warehouses, or parking lots rather than expensive storefronts on busy streets, allowing for relatively low fixed rental costs. Additionally, each facility usually contains an average of 10-15 kitchens, which can be rented on a short-term or long-term basis according to the needs of the restaurant. Consequently, restaurants can minimize their investment in real estate rent and kitchen infrastructure.
One of the most common operational models for cloud kitchens is the commissary kitchen. In this model, multiple restaurants or individual chefs share a single facility, including the refrigeration/freezing equipment, kitchen appliances, and cleaning tools provided by the cloud kitchen operator. The demand for cloud kitchen businesses has increased with the rapid expansion of online food delivery services like Uber Eats and Food Panda.
Indonesia's Online Food Delivery Market
When looking at the food delivery market that underpins the cloud kitchen business, Indonesia boasts the largest scale in Southeast Asia. According to a report by Singaporean venture capital firm Momentum Works, Indonesia's online food delivery market in 2020 had a gross merchandise value of $3.7 billion, accounting for about 31% of the combined total of six countries (Thailand, Singapore, Malaysia, the Philippines, Vietnam, and Indonesia). The leading players in this market are Grab Food, operated by the Singapore-based Grab, and Go Food, run by the local giant Gojek. Grab Food holds a 53% market share, while Go Food has 47%, resulting in a duopoly in Indonesia's food delivery market.
Both companies have started venturing into the cloud kitchen business. In 2020, Grab Kitchen led with the opening of 40 cloud kitchens, followed by Go Food Kitchen with 20 kitchens. Go Food Kitchen combines the expertise of India's cloud kitchen company Rebel Foods with Gojek's customer data. Both have an advantage in using a large network of on-demand delivery services tied to their cloud kitchens.
Cloud Kitchen Startups
In addition to these major players, two startup cloud kitchen management companies are emerging in Indonesia. Hangry, a rapidly growing cloud kitchen business, had 40 kitchens in 2021, with 34 opened in 2020. The company plans to expand to 120 locations, including dine-in restaurants, by 2021. One of Hangry's differentiating factors is its focus on its own brands. In addition to renting kitchen facilities to restaurants, Hangry operates four brands, including Indonesian chicken dishes (Ayam Koplo) and Japanese cuisine (San Gyu). CEO Viktor said, "Our company is rapidly gaining popularity with its own brands, and we should allocate kitchen resources to acquire potential customers for these brands."
Yummy Corporation, which launched its cloud kitchen service in 2019, raised approximately 1.3 billion yen in a Series B funding round led by SoftBank Ventures Asia. CEO Mario Santanu stated, "This funding will be used to expand into more major cities and develop a technological platform that includes data analysis." Yummy has over 70 HACCP-certified facilities in Jakarta, Bandung, and Medan and plans to further expand its cloud kitchen network. Santanu emphasizes that Yummy's strengths, compared to other cloud kitchens, lie in fully managed facility locations and kitchen operation services, allowing restaurants to leave the preparation and delivery of meals to Yummy's staff. Both startups are strategically competing with Grab and Gojek, focusing on how they can capture market share in the cloud kitchen sector.
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