The GCC’s US$3 Billon Cloud Kitchen Industry
According to the report, the cloud kitchen industry is currently booming, especially as more customers are opting for ordering in, instead of dining out, in a world still mired in pandemic realities.
Powered by Foodics, Primed for Growth: Cloud Kitchens In The GCC is a new report published by Entrepreneur Middle East that takes a deep-dive look into the region’s role in a global industry that’s expected to be worth US$71.4 billion by 2027.
ShutterstockWhile much has been written about delivery aggregators like Talabat, Zomato, or Deliveroo, as well as about the F&B industry with regards to dine-in experiences, this special report specifically focuses on cloud kitchens, also commonly referred to as dark kitchens and satellite kitchens, which can be defined as commercial kitchens that prepare food especially for delivery.
When you browse for tonight’s dinner on aggregators like Deliveroo, Talabat, Zomato, or one of the many other food delivery apps available today across the GCC, there is a high probability that your meal is not being prepared in a restaurant, but in a cloud kitchen that you would not be able to visit and get a dine-in experience.
According to the report, the cloud kitchen industry is currently booming, especially as more customers are opting for ordering in, instead of dining out, in a world still mired in pandemic realities. The sector has seen a few business models becoming prominent in the GCC today, which includes the “Kitchen-as-a-Service” model (which is what Kitopi makes uses of), as well as “Rent-a-Kitchen” (implemented by the likes of Deliveroo Editions and Kitchen Nation).
However, the “Virtual Restaurant” model and the “Full Stacked Cloud Kitchen” model are likely the most recognizable in this domain, as they control most of the aspects along the value chain, from menu research and design, food procurement, food preparation in their own kitchens by their own chefs, and in some cases, launching their own food delivery apps.
Players to watch in the “Virtual Restaurant” model include companies like KITCH-IN, Krush Brands, Sweetheart Kitchen, and KLC Virtual Kitchens.
Perhaps one of the most interesting findings in the report was that while the most attractive market for cloud kitchens remains Saudi Arabia, the majority of the industry’s dominant players in the region so far have been mostly born out of the UAE, and instead of expanding next into the Kingdom, they have opted to first attempt an entry into Kuwait. Expansions into Kuwait have had mixed results for cloud kitchen players, with challenges including worsening market conditions, high levels of competition, and labor-related issues.
Cloud kitchens rely on the population density of cities, and thus, with Riyadh and Jeddah being the two most populous cities in the GCC, the Kingdom can be expected to play an important role in determining the size of the region’s market, with it also undoubtedly becoming the battleground for the best and brightest in the industry.
The reality is that Saudi Arabia’s cloud kitchen market is growing at such a hurried pace that the total addressable market for Saudi Arabia alone will be larger than that of all five other GCC nations put together by 2025. This is also likely the reason why every cloud kitchen entrepreneur contacted for this report had expansion into Saudi Arabia on the top of their to-do lists for 2022.
There are lots more to be excited about the future of the cloud kitchen space in the region. Several players have announced their own unique food ordering apps to be launched in 2022, including KLC and KITCH-IN. One of the many advantages of ordering directly through the cloud kitchen delivery apps would be the ability for customers to order various meals from multiple F&B outlets and brands and have them all arrive at their door together.
KITCH-IN has also announced the opening of a physical food hall in Dubai in Q1 2022, where their delivery app can also be used to order take-away or pre-order meals that can be eaten in the luxuriously designed space.
For more insights and data on the region’s cloud kitchen market, along with the snapshots of some of the most exciting business models, entrepreneurial stories, and market stats, check out the report for yourself! Primed for Growth: Cloud Kitchens In The GCC, powered by Foodics, can be downloaded by clicking here.
A Special Report: A Deep-Dive Look at the GCC’s US$3 Billion Cloud Kitchen industry and it’s 16.3 million online food delivery users
As special advisor to the Entrepreneur Middle East data and insights team, I am incredibly excited to see our first special report published on Thursday, sponsored by Foodics, titled, “Primed for Growth: Cloud Kitchens in the GCC”. The report takes a deep-dive look at the region’s role in the global industry that is expected to be worth US$71.4 Billion by 2027.
Much has been written about delivery aggregators like Talabat, Zomato or Deliveroo, or even the F&B Industry with regards to dine-in experiences; think, “Top 50 restaurants in the GCC” round ups; but, this special report specifically focuses on Cloud Kitchens, also commonly referred to as Dark Kitchens and Satellite Kitchens. Cloud Kitchens are commercial kitchens that prepare food especially for delivery.
When you browse for tonight’s dinner on aggregators like Deliveroo, Talabat, Zomato or one of the many other food delivery apps available today across the GCC – there is a high probability that your meal is not being prepared in a restaurant, but in a commercial kitchen that you would not be able to visit and get a dine-in experience. This cloud kitchen industry is booming, especially as more customers like you and I are opting for ordering in instead of dining out in a world still mired in pandemic realities.
What’s interesting about the Cloud Kitchen market, is that it is gaining significant traction because it solves challenges for many stakeholders. For you and I, the consumer, we want a plethora of good food-delivery options. Gone are the days where Pizza Hut and Dominoes were the only good delivery gig in town. Now, especially after the pandemic caused restaurants to shutter or limit dine-in guests, restaurants have tried to get their menus up online and on delivery apps.
But, as the special report points out through the various case studies talking to some of the most prominent cloud kitchens that exist in the region today, most restaurant kitchen’s aren’t designed to prepare food for delivery. A busy restaurant might turn over 50-100 meals in an hour; a typical cloud kitchen turns over 200-300 meals in an hour. Thus, cloud kitchens aren’t just virtual restaurants that have virtual-only brands and delivery-only menus (though that is one business model, adopted by the likes of The Leap Nation or Cloud Restaurants).
The special report details out 5 key business models that are prominent in the GCC today. That includes the likes of Kitopi – which follows a “Kitchen-as-a-Service” Model, or “Rent-a-Kitchen” Model implemented by the likes of Deliveroo Editions and Kitchen Nation.
The “Virtual Restaurant” Model and the “Full Stacked Cloud Kitchen” Model are likely the most recognizable, as they control most of the aspects along the value chain, from menu research and design, food procurement, food preparation in their own kitchens by their own chefs, and in some cases they also are launching their own food delivery apps.
Players to watch in the “Virtual Restaurant” Model include the likes of KITCH-IN, Krush Brands, Sweetheart Kitchen, and KLC Virtual Restaurants. Many of the above mentioned players are highlighted in deep-dive case studies in the report.
Perhaps one of the most interesting findings in the special report was that the most attractive market for Cloud Kitchens remains the Kingdom of Saudi Arabia, but the majority of dominant cloud kitchen players in the region so far have been mostly born out of the UAE and instead of expanding into the Kingdom, have opted to first attempt a go-to-market into Kuwait.
Saudi Arabia’s current Online Food Delivery Market is valued at US$1.8 billion, while the UAE’s market is valued at just over US$1.0 billion, and Kuwait follows at US$740 million. Kuwait expansions for cloud kitchen players have had mixed results – due to market conditions worsening in Kuwait, both due to saturation from high levels of competition, as well as the labor challenges in Kuwait which have made hiring cooks and delivery drivers to expand quickly and efficiently difficult – especially during the past 2 pandemic years.
Despite hurdles posed by the Kuwait market, the country does have the highest ARPU in the region (and quite likely amongst the highest ARPU in the world), at $498 average revenue per user. For comparison, the USA’s ARPU is US$235, the UAE’s ARPU is US$356, and the KSA’s ARPU is US$194.
Cloud Kitchens rely on the population density of cities, and thus, with Riyadh and Jeddah being the top 2 most populous cities in the GCC, the Kingdom will play an important role in the GCC Cloud Kitchen market size going forwards, and will undoubtedly be the battleground for the best and brightest in the industry.
The reality is that Saudi Arabia’s cloud kitchen market is growing at such a hurried pace that the total addressable market (TAM) for Saudi Arabia alone will be larger than the TAM of all 5 other GCC nations put together by 2025. It is likely that reason that every cloud kitchen entrepreneur we spoke to had Saudi Arabia expansion on the top of their to-do lists for 2022.
There are lots more to get excited about in the cloud kitchen space as well. Several players have announced their own unique food ordering apps to be launched in 2022, including KLC Virtual Restaurants and KITCH-IN; one of the many advantages of ordering directly through the Cloud Kitchen delivery apps would be the ability for customers to order various meals from multiple F&B outlets and brands, and have them all arrive at your door together.
KITCH-IN has announced a physical Food-Hall to be opening in the DIFC in Dubai in Q1 2022, where their delivery app can also be used to order take-away or pre-order meals that can be eaten in the luxuriously designed Food Hall.
$15 million cloud kitchen launches in Saudi Arabia and the UAE
Walid Hajj and Fahad Alhokair, have officially launched the region’s first hybrid, delivery-focused, cloud kitchen and premium store-front operator, Kitch, in Saudi Arabia and the UAE.
Kitch, a brand-name coined to represent two important aspects of the business – kitchen and technology, makes its foray into the F&B sector with privately raised capital of US$15 million. The tech-integrated, virtual restaurants and brick-and-mortar facilities of Kitch will offer brands state-of-the-art avenues to enter new markets as well as provide an option to diversify and scale their food delivery and customer engagement with minimal investment.
Kitch will offer an exclusive mix of new and existing brands in the region in addition to international franchises. The team will also test new restaurant concepts, menu items, and seasonal brands to deliver a differentiated customer experience.
Launching first in key markets such as Saudi Arabia and the UAE, the vertically integrated, hybrid food-tech start-up is set to open four delivery kitchens in Riyadh within the first quarter of 2021 and additional 15 kitchens across the GCC in the rest of the year. Each delivery kitchen is spread over an area of 450sqm to 500sqm and is fully equipped to house around 10 food concepts.
Kitch will be delivering world-class infrastructure and expertise enabling food concept owners to enter, adapt and thrive in this new environment while building its reputation as the world’s best delivery-focused franchise operator. The hybrid model will utilise all the operational efficiencies of the cloud kitchen business model as well as provide access to prime locations to set-up and expand the franchise presence.
Walid Hajj, Co-founder and CEO of Kitch, said: “We are thrilled to launch the region’s first hybrid cloud-kitchen and premium store-front operator Kitch. Saudi Arabia and the UAE offer huge potential for this concept, and we are looking to be a part of an industry valued at over US$3 billion. With my experience in the food & beverage industry for more than two decades, I believe it is important to adapt and transform the offerings and services to be relevant and meet future demands.
“Our operational value-chain model and carefully curated portfolio of brands will reimagine the restaurant experience, allowing consumers to enjoy high-quality food from the comfort and convenience of their homes, and at the same time provide food concept owners a platform to explore the market and increase their customer base beyond their physical locations. If a brand is part of our portfolio, we will make sure there is a scalable market ready for it.”
Fahad Alhokair, Co-Founder of Kitch, said: “I am excited to join hands with Walid to embark on this new decade of F&B innovation and transformation. The food and beverages industry is ever evolving, and it has become more apparent this year. We are constantly on the lookout for new investment opportunities and we see a strong growth potential and bright future in the hybrid cloud-kitchen model of Kitch in both Saudi Arabia and the UAE.
We are looking to feature a diverse set of concepts to meet the changing trends and demographics that affect the F&B industry. Whether you are an entrepreneur thinking of opening your first food concept or an F&B leader who is looking to expand, Kitch’s flexible hybrid model will help you meet your purpose.”
Kitch’s experienced team of professional F&B operators, brand strategists, and technology specialists led by Chief Operating Officer, Yousef Al Barqawi will guide interested food concept owners, step by step towards launching a successful brand into the markets. The omni-channel cloud kitchen framework offers unparalleled advantage to entrepreneurs as they can test the waters of their food concept without making a full commitment.
Kitch is the brainchild of Walid Hajj and Fahad Al Hokair’s mission to be at the forefront of food innovation and take the kitchen in the cloud concept to the next level through a more flexible, hybrid cloud approach. The operator aims to achieve operational excellence and set industry benchmarks by offering an integrated, next-generation model that focuses on quality over quantity.
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