Junaiz Kizhakkayil, also known as JK, is a prominent Indian Entrepreneur and Business Executive and the Founder/ CEO of [email protected] Prior to [email protected], JK was part of the Empire Group of Hotels for 25 years. His leadership and innovation efforts got him the honour of being General Manager which kickstarted his career towards success. His remarkable acumen and business foresight made the Empire brand synonymous with Bangalore. Junaiz, with his drive for new ideas and the quest to find the next big thing, then pioneered the concept of cloud kitchens in the city backed with strong operating infrastructure and adhering to international hygiene standards. [email protected] became a big success and has now become one of the most popular brands in the city.
The food and beverage industry, dubbed as one of the prominent marketplaces of the twenty-first century, has truly come into its own recently. In fact, the past ten years chart out a rather distinguished portrayal of the F&B space, the phase when the industry underwent a spate of changes owing to ever-changing consumer demands and massive innovations.
This consumer-driven, multi-dollar vertical demonstrated a laudable development rate in these years, at the same time faced a slew of challenges. While some of the present concerns in the food sector have been there for a while, many of the newer challenges ascribed due to changing consumer needs, the abrupt onset, and the presence of a demanding regulatory landscape.
The food and beverage industry has a strong foothold in the market and expecting any disruption in it seems far-fetched. However, when delivery aggregators and cloud kitchens appeared on the scene, it was clear that this model was capable of shaking up the business.
The cloud kitchen market in India is still in its niche phase, but the last three years showcased disruptive capabilities. They have made it possible for restaurateurs to reach a wide audience effectively. As far as delivery applications are concerned, they are more popular in the country. A growing number of individuals are ordering food from the comfort of their own homes, resulting in a rise in the demand for cloud kitchens. To become competent and nimble in creating great quality food and delivering it to customers faster and at low prices, new generation cloud kitchens will have to embrace technology.
To truly create diverse consumer offerings across the board, cloud kitchen players need to identify supply gaps within micro-markets and fill these gaps by either bringing in the right partners or setting up a supply system themselves. This can be achieved through brand partnerships or acquisitions.
As the food options available nowadays are quite diverse, there could be a variety of flavours and pricing points within each category. We need as many brands as required to cater to a full-fledged customer base. Food is also one of the most popular online business prospects, therefore there will be a variety of business models, enterprises, and brands. Most cloud kitchen innovators started as single-brand platforms that operated on a full-stack basis. The consolidation of food brands, in particular, is the newest business model promising to heat the cloud kitchen party. The acquisition of brands by cloud kitchen aggregators poses a significant threat to food and beverage businesses.
Through separate and targeted brands, food variety and density can be established. The end goal should be to execute numerous brands in a single kitchen in full-stack models, allowing cloud kitchen players to make greater use of their kitchen space. Given the market’s value-consciousness, several cloud kitchens have created low-cost brands, particularly meals. As a result, use cases have shifted away from just weekend brands toward daily meals, which constitute the larger market.
Furthermore, people are becoming more health-conscious, preferring fat-free and health-conscious items, and are generally more motivated to maintain good health. This dynamic thought process has compelled brands to make significant adjustments to their present offerings to effectively address some of the market’s most pressing issues.
From my point of view, the idea is that in every micro-market, we should be able to satisfy the top 20 consumer food missions in a variety of ways by partnering up with the right brand.
Building and maintaining the brand image is vital for any restaurant owner, regardless of the size and the type of restaurant they own. Although there’s a case to be made for cloud kitchen aggregators to acquire brands and operate them, I believe a much more fruitful approach starts with establishing a successful franchise relationship with the right brands.
The first thing to understand about a successful restaurant brand is that the relationship is based on a deep connection. The connection must include trust and an emotional bond. These deep-rooted consumer perceptions stem from rendering a service that captures their attention. Brands are built atop that image imprinted in a consumer, which further translates into consistency and brand loyalty.
Restaurateurs operating the franchisees of the top five brands globally are amongst the most successful of the lot. These top 5 brands have around 100,000 franchisees that are very successful restaurateurs. The number of successful restaurateurs who might be operating a franchisee of an existing brand is much larger. By working with someone who has done it before, all of these players have de-risked their business model.
Therefore, industry-wide disruption is an inevitable consequence of such brand partnerships or acquisitions considering the supply consolidation that follows. But merely assimilating brands isn’t enough. Understanding your consumers and building for them is imperative.
So, is it the right time to give away your brand to a cloud kitchen aggregator?
The truth of the matter is that franchise partnerships are much better for both cloud kitchen aggregators and well-established brands who are looking to increase the scale of their operations as opposed to getting acquired by a scale Cloud Kitchen Aggregator, despite the operational scale achieved by the aggregator.
A franchise model allows brands to accelerate their digital footprint by providing asset-light and profitable scale. These relationships can also be built with international players, scaling them as national cuisine champions. Additionally, this creates a win-win scenario, because there’s no exchange of equity as a consequence of the brand acquisition, reducing the amount of risk taken on by the aggregators and, at the same time, retaining the legacy of the brands as well.
Such a structural shift (disaggregation of brands and channels) in a fragmented supply landscape offers a unique opportunity to create or scale propositions with a digital-first approach.
Newer markets, changing consumer spending, varying consumer drivers, increasing food prices, global appetite, and advanced technology are slated to bring about extensive changes in this sector in the next few years. The essential cloud kitchen aggregator structure would be built atop a foundation of such partnerships.
I believe that this is the right time to join this industry. Cloud kitchens are still in their early stages, and as a next-gen business, the future of this industry can be propelled by brands and Cloud Kitchen Aggregators joining hands, thereby helping the entire market scale instead.