Ghost kitchen trends are showing an upward curve thanks to the pandemic. But the story behind the curve itself goes a lot deeper…
Last week saw a couple of eyebrow-raising events in the financial markets. AirBnB and DoorDash both went public and saw trading day debut surges of 113% and 86%, respectively. Even for IPO novices like me, this sounds pretty impressive since we are operating amidst a global pandemic and possibly an economic recession. While I have a sneaking suspicion that these two very different companies are now forever bound in comparison, my focus was immediately drawn to DoorDash.
As the leading food delivery platform in the US, DoorDash has undoubtedly had a phenomenal year as we all hunkered down for a foreseeable homebound future. It fulfilled more than three times the volume of orders in the first nine months of 2020 compared to the same period last year. Its revenue more than tripled during this time and its net losses fell by 72%. It even posted a profit – US$23 million – for the first time in its seven-year history during the second quarter of the year.
This is a gutsy move, since DoorDash operates in a not only a fragmented marketplace, but in one that has unique issues due to the nature of the product and being profitable is tough. So much so that even the big daddy of delivery, Amazon, said ‘no, thanks, all yours’. DoorDash’s journey from here on out is going to be interesting and I will be keen to see how they navigate through the following specific challenges.
Spoonshot’s research found a 68% surge in interest in direct-to-consumer or delivery services over the last 12 months. But a look at how these services would have done sans the impact of COVID-19 shows a stark difference: they would have grown by a more modest 16%.
There has been much said about businesses that have grown because of the pandemic versus despite it, but the reality is that food delivery was around long before our little global nightmare and will continue to be around long after.
Perhaps the only thing that will happen is that the spike in people ordering in will come down, forcing delivery platforms to expand their offerings and set themselves apart from their peers.
The issue of waste
One issue that might have a big impact on ordering in just the sheer amount of takeout-related waste that gets generated. Over the last few years, the momentum to tackle and reduce single use plastic waste had gained significant traction. In one fell swoop, this issue has taken a backseat. The high volume of ordering in during the pandemic, not just for food but for pretty much everything, has seen significant waste being produced. And because it’s all at home now, we’re likely becoming acutely aware of how much waste we generate and how difficult disposal actually is.
This is an opportunity for delivery partners like DoorDash to push for more eco-friendly packaging amongst their food partners or look at a sustainable disposal option in conjunction with recyclers. For some innovative ideas on plant-based packaging, check out our blog.
Also Read: 5 Current Trends in Food Service Industry
Restaurants in crisis
Due to the pandemic, the overall restaurant industry is struggling. According to the National Restaurant Association, as of the first week of December, 17% of US restaurants (over 110,000 outlets) had closed permanently or long-term. Most of these are independent, local businesses that mainly serve the communities they are in. The pandemic forced many to turn to delivery and takeout to stay afloat, but food delivery platforms charge a pretty hefty fee that cuts significantly into restaurant margins. And this makes such platforms quite unpopular within the industry.
A compromise here is for restaurants to look at pivoting to a delivery-only ghost kitchen model, thereby significantly reducing overheads.
Over the last year, interest in ghost kitchens has grown by 182%, and restaurants, as well as delivery platforms, have been expanding into this space. This shift has even helped drive growth in ancillary players, like Nextbite, who specialize in helping companies set up and manage ghost kitchens.
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DoorDash, a couple of months ago, launched an initiative to match closed restaurants with ghost kitchen facilities but this could be extended into one where shuttered restaurants can partially be converted into this model. Check out the ghost kitchen trends graph below.
Getting back out there
We have a vaccine now that’s actually being administered and large-scale deployment strategies are being formulated across the world. While it may be several more months before most of us come face-to-face with the business end of a needle, the optimism is infectious.
We’ve been at home for a long time now and have missed out on a number of activities that we’d taken for granted – vacations, holidays with our families, going to the grocery store, and eating out.
Consumer conversations about dining out spiked 126% over the last year, primarily about the inability to do so with friends and family. Otherwise, conversations on dining out would have been pretty steady at much lower levels.
We are social creatures and a significant part of dining out is experiencing that sense of camaraderie with our fellow humans. Dining out is about new experiences and memories. The feel-good factor of such experiences can’t always be recreated at home, and consumers will want these once again – at least on special occasions. So, make no mistake, we will be out mingling with a vengeance for a while, which would not bode well for food delivery platforms.
Of course, that doesn’t mean that we won’t be ordering in altogether, but the rate at which we do will normalise again.
The ultimate point here is just that DoorDash is going to have to have a pretty solid post-pandemic strategy to bolster its operations once this boom fizzles out and to keep its new shareholders happy.
Ranjana works as the Lead Research Analyst for Spoonshot. Her past experience includes working with a major global market research company, specializing in food and drink trends. She has also worked with major publications as a writer and editor.