This article first appeared in Digital Edge, The Edge Malaysia Weekly on August 22, 2022 - August 28, 2022
Digitalisation and technological innovation have trickled, and in some cases bulldozed, their way through many ecosystems. The food and beverage (F&B) industry is no exception. The pandemic, with all its uncertainty, was a facilitator of this phenomenon.
On the one hand, lockdowns and physical distancing measures forced F&B operators to adapt or shutter their businesses. On the other hand, the pandemic fuelled the explosive growth of cloud kitchens. Also known as “ghost kitchens”, cloud kitchens — which serve as commercial kitchens solely to prepare food for delivery or takeout and were well under way, albeit in different names and forms, long before the pandemic — became a wildly popular proposition. Restaurants and cafés no longer needed to concern themselves with trying to create Instagram-worthy dining experiences or worry about foot traffic from not being present at prime locations.
Even though pandemic-induced restrictions have been lifted, the digitally-focused concept continues to grow.
“Tech helps speed up the processes, and as things get faster, it’s more efficient,” says Huen Su San, founder of Cookhouse, a hybrid cloud kitchen chain that doubles as a co-working and dine-in space as well as an event venue.
According to UOB FDI Advisory, Asia-Pacific is expected to have the largest cloud kitchen market with annual growth of 14.4% from 2021 to 2027. The growth is largely owed to operators leaning more into food delivery to serve customers who prefer dining at home.
Globally, the cloud kitchen market reached a whopping US$56.71 billion (RM253.3 billion) in 2021. The figure is expected to grow to US$112.53 billion by 2027, notes market research platform Research and Markets in its “Cloud Kitchen Market: Global Industry Trends, Share, Size, Growth, Opportunity and Forecast 2022-2027” report. The report attributed this proliferation to the increasing use of smartphones, easy access to high-speed internet and a vast catalogue of delivery aggregators. Cloud kitchens largely depend on these platforms to get orders and send them to customers.
For instance, Cookhouse enables food operators by assisting them on different platforms such as GrabFood, foodpanda and Lalamove. A host of other cloud kitchens — notably, My Ghost Kitchen, KitchenCo, COOX and KitchenConnect — have also sprouted.
Southeast Asia’s technology behemoth Grab, too, decided to jump on the bandwagon and expand its suite of services in Malaysia to include GrabKitchen, a concept it piloted in Jakarta, Indonesia in 2018. It has since expanded to 56 cloud kitchens across the region.
In September 2019, popular South Korean fried-chicken franchise KyoChon launched three cloud kitchens in collaboration with Grab to cater to demand. The company utilised data based on consumer insights and surveys to identify locations with the highest demand to reduce barriers to entry for restaurants to expand into new areas.
Likewise, Cookhouse began with the idea of enabling F&B operators to expand their business using shared resources in 2019. Huen picked up on the idea of a cloud kitchen from the co-working space playbook. Co-working spaces enable people to share a workspace in a more flexible environment while saving on operational costs.
Cookhouse currently operates out of five outlets: three in Kuala Lumpur (Taman Tun Dr Ismail, Bukit Bintang and Jalan Ipoh) and two in Selangor (Sunway and Section 17, Petaling Jaya). “Our cloud kitchen very much operates on having equipment that can be shared. We put in commercial-sized equipment, and businesses can share the equipment without maxing out capacity,” Huen says.
With its ready-to-use facilities, Cookhouse offers a value proposition to food operators who utilise its space. This includes low-risk, low start-up, maintenance, real estate and staffing costs, as well as business development start-up.
The cost of rent to operate out of a cloud kitchen is also decidedly lower than owning a restaurant. According to news reports, the average cost to rent a cloud kitchen space ranges from RM900 to RM4,000. Cookhouse offers rates for up to RM900 a month or at RM200 per day, while another cloud kitchen, KitchenConnect, has a rate of RM3,500 a month.
Prior to starting Cookhouse, Huen was already in the F&B line, running eight outlets of her own (under the Beyond Korea Dining Group and Glasshouse at Seputeh) for more than five years. Her experience exposed her to the different pain points of having several outlets needing to move production to a centralised location, while also spending a substantial amount of capital to acquire the assortment of equipment necessary to run a restaurant.
“People are now spoilt for choice. Customers might be inclined to grab something quick while on the go, where they would resort to fast food. Some occasions call for a nice ambience, with music in the background, while dining and talking with friends or family,” she says.
This is why Cookhouse decided to go with a hybrid set-up rather than sticking to the cloud kitchen model down to a T. The hybrid concept combines a storefront and virtual restaurant, offering both takeaway and delivery services. A diner can just walk in, take a seat and scan a readily available QR code for the menu or order at the self-service kiosk. As soon as payment is made, the order is sent to the kitchen and the food will be delivered to the table.
At Artisan’s Playground by Cookhouse located at Plaza Rivercity in Jalan Ipoh, there is an added benefit for dine-in customers. Food is delivered by one of the nine robots that expedite food delivery. The space, which spans 33,000 sq ft, also serves as an event venue that can accommodate 450 guests.
“The current food concepts and chefs [occupying the units] at Artisan’s Playground are by invitation as we want to curate the dining experience for diners while ensuring that the food selections complement each other,” Huen clarifies. “Looking back, I felt there was a better, more cost-efficient and flexible way while going through the same journey, and I wanted to provide this option to other entrepreneurs.”
In the case of Lai Wick Kee, co-founder of Epic Food Hall (EFH), one of the pioneers of online food halls and cloud kitchens in the country, the focus is always on the customer, by providing food he appreciates at the right price. Currently operating from Damansara Perdana, Bandar Sunway and Mont’Kiara, EFH offers selections from Pak Adam’s Nasi Lemak, The Thai Guys, Noryangjing Cupbob, Pasta King and New York’s Patty ’n Toast, among others.
“It [the cloud kitchen model] is a ‘red ocean’ market, and ultimately, profitability and unit economics are the key components that every business needs to focus on,” says Lai.
In their book Blue Ocean Strategy, marketing theorists W Chan Kim and Renée Mauborgne describe red oceans as crowded market spaces where companies engage in bloody competition for market share.
To be competitive, cloud kitchens have to offer customers something different from restaurants. Such kitchens typically do not have physical customers to cater to, therefore they play to their strength, which is quick delivery of food.
Will cloud kitchens outlive the pandemic?
In the post-pandemic world, people emerging from lockdowns are itching to be out and about, which means food delivery could be set to experience a downturn.
“That’s one trend we have noticed. People have been locked indoors and not eaten out for so long, there is an uptick in consumption, which will normalise over time,” says Mohammad Wassem, CEO and founder of Easy Eat AI, a cloud-based, point-of-sales systems start-up.
Although there is likely to be a drop in food delivery orders, Huen of Cookhouse believes the market will recover and stabilise in time. “In terms of convenience, the food delivery market has been growing before the pandemic. I believe it will continue on the same track, although not at the trajectory we have experienced over the last couple of years,” she says.
Delivery serves convenience in a time-starved society, concurs Lai of EFH.
The question lingers on the role cloud kitchens are to play in a future where lockdowns are no longer a common occurrence and people are back in their pre-pandemic fervour and enthusiasm.
“My personal view is that cloud kitchens will have some role to play in the entire ecosystem, but it will be limited,” notes Wassem.
This is due to the fact that people tend to associate good food with places they have visited previously. A diner who has been to a particular restaurant and recalls a memorable experience he had there is more likely to order from the same restaurant when searching for a delivery option.
“A majority of customers tend to order delivery from the same restaurants they have eaten at, therefore it is important to have a physical space for dining where people come and experiment with the food, and if they like it, they will choose to have it delivered,” explains Wassem. “I believe there will be many more hybrid models where there is a physical infrastructure with a –brand people can look at, and thereafter, delivery can be promoted to them.”
The rise of the machines
The labour shortage in Malaysia has permeated almost every industry. Businesses are struggling to stay afloat and cater to rising customer demand while trying to retain current employees who may be lured by opportunities elsewhere.
Malaysia is currently facing a serious manpower shortage. In June, the media reported that South Indian restaurant Kanna Curry House resorted to offering free Apple iPhone SEs to entice locals to work as waiters for a minimum of six months, in addition to an eight-hour workday and RM10-per-hour wage.
Cookhouse utilises robot servers to combat the shortage. “The robots we have can carry four tiers of food, whereas a human waiter will have to carry one tray at a time,” says Huen Su San, founder of Cookhouse.
Artisan’s Playground by Cookhouse hosts nine such robots, all named after famous chefs including Gordon Ramsay, Jamie Oliver and Heston Blumenthal. “They are pretty smart,” Huen says with pride. “You’ll notice, especially on busy days, that the robots give way to one another and choose their routes while sending out multiple orders.”
The robots are used specifically to deliver food to the tables. An employee is stationed at the front desk to facilitate the process of ordering and dining in. Huen adds that the use of robots brings about a less intrusive experience for the diner.
“Tasks such as the delivery of food can be automated and replace waiters, but we need people to be there to address other concerns,” Huen notes. “I strongly believe we should use human capital for more important things like logical mind analysis, and replace physical work with robotics as it will be more efficient in doing the work for longer hours.”
Living with The Jetsons
What will food look like in the distant future? Cloud kitchen operators that we spoke to share their thoughts.
“In 10 or 20 years, I see the means of production and kitchen spaces becoming very small to maximise efficiency,” says Lai Wick Kee, co-founder of Epic Food Hall (EFH).
“I’ve always thought that [humans] will be replaced with technology or robots. Eventually, we’ll get to that point where we use human capital for more difficult tasks. As time goes by, [we will likely see more] self-serve restaurants, where robots could be cooking,” postulates Huen Su San, founder of Cookhouse.
“As a restaurant owner, I would love a restaurant with a self-cleaning kitchen,” she adds wryly.
Mohammad Wassem, CEO and founder of Easy Eat AI, is counting on personalisation — a future where two different customers get menus that are tailored to their likes and dislikes, just like how social media platforms use algorithms to design user experience.
Even the food we consume 100 years from now might not look like what we are eating today. With climate change and food insecurity on the horizon, there might not be hundreds of fruits and vegetables to choose from.
The likelihood of sustaining on a Food-a-Rac-a-Cycle — an imaginary contraption introduced in the 1962 cartoon The Jetsons that could pretty much spit out any food one fancies at the push of a button — is slowly becoming reality with inventions like 3D-printed foods.
Due to the food shortage, EFH’s Lai says that produce that is commonplace today might soon be considered a rare and luxurious item. Sharing his dystopian outlook, he believes our civilisation might just not exist anymore. Thus, food consumption and the eating habits of future civilisations may be completely different from what we see today.
“In 100 years, I don’t think we will need food to satisfy our hunger. We will probably just need to consume some capsules, and these will contain all the different dietary and nutritional requirements,” speculates Wassem.
However, Huen does hope the joy of eating and socialising over food doesn’t diminish in the distant future, although this looks increasingly likely due to growing populations and an urgent need for more sustainable food production.
“I would love to continue what we are eating today. It’s the joy of eating food and what it does to your senses,” Huen enthuses. “The smell, the taste … it visually brings back memories, triggers feelings and I think that’s the magic of food. It brings you comfort, it brings you so many things, just from eating something.
“However, I think in 100 years, we will just be drinking our food.”
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