There is an emerging tech-enabled business model rising in the food retail industry. A growing number of restaurants in Finland are using food delivery platforms to boost their revenue and coverage, while the trend of eating outside your own home has gained popularity in the last few years.
Leading food delivery startups, Wolt and Foodora (Delivery Hero), are competing for the larger market share in Helsinki and other larger cities in Finland. And the food delivery start-up sector has seen an increasing interest from venture capital investors. Wolt, a Helsinki based food delivery start-up on the frontline of food retailing disruption, raised €110 million last year with a roughly half a billion-euro valuation 1) and was selected as the 2nd fastest growing company in Europe in 2019 by Financial Times. 2)
We are seeing the rise in the online food delivery as a continuation of the on-demand culture, which has become all so popular in other segments of the economy with the on-demand series and movies in the entertainment segment or the fast on-demand commutes in the transport segment. Food retailing is experiencing disruption with new innovations and applications aiming to have their share of the bigger market. We expect new business models to become more mainstream in the near term.
‘Dark Kitchens’ challenge the status quo
Restaurants and cafes are rapidly changing their business models to focus on meal delivery and takeaway. Current social distancing measures are making the shift to online food ordering and delivery faster. This has led to an increasing interest into ‘dark kitchens’ – kitchen spaces used for the preparation and distribution of online food delivery orders and ready-made meals. It is too early to see what the rising demand of online food delivery and ready-made meal kits means for the larger real estate market, but ‘dark kitchens’ are one of the most interesting upcoming trends.
All over Finland, and especially in the Helsinki Metropolitan Area, food retailers are supplying their local grocery stores and supermarkets with ready-made meals for the customers to collect during their daily grocery shopping. The meal pickups from the local supermarket and the ‘click-and-collect’ model of picking up your takeaway food are just one part of the larger trend of omnichannel food and grocery retailing, which is seen as a global phenomenon.3) Dark kitchens and other new ways to bring the product closer to the customer in the food retail scene can also be linked to the last-mile delivery and temperature adjusted storage facilities’ trend in the industrial and logistics real estate sector. Dark kitchens need to be located smartly outside the city centres, where the transport and traffic connections ensure efficient delivery routes and time-saving pickup areas.
The implications of ‘dark kitchens’ for the real estate market
The development of dark kitchens is still in an early stage, and it is therefore too early to predict what type of major changes this trend will bring to the real estate market. We could imagine that food retailers and restaurant companies would need the supporting infrastructure required for dark kitchens, where the location would meet the retail and industrial property needs and have all the fittings in place for the online takeaway and readily prepared meal deliveries. Dark kitchen spaces could then be operated with flexible and scalable leasing arrangements allowing the operator to adjust output and increase coverage early on. These properties could be located outside the city centres with good transport connections and supported by a cold storage warehouse for food supplies.
My conclusion
Dark kitchens are becoming increasingly popular worldwide and are one of the most interesting trends in the food retail sector. It is yet to be seen how this trend will transform the food retail industry and what implications it will have on real estate, but it surely is one of the innovations to keep a close eye on.
Sources:
1) Bloomberg – Finnish Food Delivery App Wolt to Hire 1,000 After New Funding - https://www.bloomberg.com/news/articles/2019-06-19/finnish-food-delivery-app-wolt-to-hire-1-000-after-new-funding
2) Financial Times FT 1000: the fourth annual list of Europe’s fastest-growing companies 2020
3) McKinsey – Digital Disruption at the grocery store https://www.mckinsey.com/industries/retail/our-insights/digital-disruption-at-the-grocery-store
Read more about Dark Kitchens, from Australia:
Rise of dark kitchens to be lasting legacy of COVID-19, CBRE says
Dark kitchens in high demand as isolation boost delivery services
Read more about CBREs Research.
