February 24, 2024

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Adoption in Cloud Kitchen Spikes During COVID-19 in Indonesia

Before the global pandemic hit the world in 2020, at least 70% of the restaurant’s business was attributed to dine-in, with deliveries accounting for the remaining 30%. There were restaurants that relied solely on dine-in customers, such as those in hotels. The Coronavirus, on the other hand, changed everything.

As a result, the concept of cloud kitchens, which had been circulating for a few years, gained widespread acceptance. In the last year, the concept has proven to be a major lifeline for the global F&B industry. Since last year, approximately 1,600 food establishments in Indonesia have closed due to the pandemic, which has wiped out a large portion of their sales.

To survive, the entire F&B industry was forced to quickly adapt to the new normal, which meant utilising online channels more aggressively to reach customers. As a result, food delivery in Southeast Asia had increased by 183% in 2020 compared to 2019, reaching an estimated gross merchandise value (GMV) of USD 11.9 billion by the end of 2020, according to a report.

The rise of the food delivery industry has increased the global popularity of the cloud kitchen model. The global market for the sector was valued at USD 43.1 billion in 2019, and it is expected to grow to USD 71.4 billion by 2027, with a compound annual growth rate (CAGR) of 12% from 2021 to 2027. In Indonesia, meanwhile, cloud kitchens are expected to grow at a CAGR rate of 20.7% from 2021 to 2028, according to research. The country also represents Southeast Asia’s biggest market for the food delivery sector with an estimated GMV of USD 3.7 billion in 2020, followed by Singapore’s USD 2.8 billion and Thailand’s USD 2.4 billion.

A global cloud kitchen report identifies three major types of cloud kitchens: independent cloud kitchens, where one operator manages a single kitchen (or different virtual restaurants under one roof) but without a storefront; commissary or shared kitchens, where multiple F&B brands operate in a single commercial-grade kitchen facility managed by cloud kitchen operators; and shared kitchens, where multiple F&B brands operate in a single commercial-grade kitchen facility managed by cloud kitchen operators and which are outfitted kitchens in small movable containers.

Cloud kitchens are a highly localised business, which means that each location’s offering should be tailored to local demand. As a result, a thorough understanding of supply and demand patterns is critical to the success of a start-up in this sector.

Restaurants operating under a cloud kitchen roof, on the other hand, must compete with hundreds of other merchants on food delivery apps. As a result, their businesses have less visibility, particularly for pure virtual restaurants that do not have an established name in the F&B industry.

According to a consulting firm’s advisor, the average order value and the number of daily transactions are critical for the success of a cloud kitchen model. “While the model could be a stopgap solution for large established offline F&B merchants, it may not be the case for emerging or online brands that do not have legacy margins to protect. Hence, for new brands, it could be about driving high volumes and riding on along with the sustained demand for on-demand food,” he added.

However, as demand for dine-in facilities is expected to rebound once the pandemic is contained, not all F&B merchants should adopt a 100% cloud-based or 100% offline model. A hybrid model would be the best option. There is no doubt that the dynamics of the food and beverage sector have shifted in recent years. They have become more customer-oriented, transparent, and increased the usage of technology.


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