Kitchen-as-a-service is a fast-growing business model in the UAE food services sector and is projected to be a $225 million market by 2023, piggybacking on the exponential growth in the online food delivery services.
A host of pandemic-hit standalone and mid-size restaurant chains are among the players entering this segment in numbers, hoping to regain their fortunes by catering to the entire spectrum in the value chain, according to industry experts and a new market study.
The kitchen-as-a-service (KaaS) market size was estimated to be about $70 million at the end of 2020.
Sandeep Ganediwalla, managing partner of RedSeer Consulting.
“This new model is seen to be emerging as a highly viable business of late, with some of the brick-and-mortar restaurant players trying to re-imagine and reinvent themselves to survive in an industry, a major part of which has been one of the worst hit in the pandemic,” said Sandeep Ganediwalla, managing partner of RedSeer Consulting, which has conducted a market study on the segment.
Under the KaaS model, a player rents or buys a location and builds up multiple small kitchens under the same roof, specifically designed to fulfill online orders.
These kitchens are rented out by restaurants and other dark kitchen players either by paying a fixed rental fee or a variable commission fee, based on the business generated out of the location, or a combination of the two.
Ghost Kitchen, Karma Kitchen, Grab Kitchen, Zuul, Virtual Kitchen, Foodstars, Kitchen Nation, Food to Go, Kitchen Park and Express Kitchens are among the new crop of KaaS players in the UAE market.
Leading companies, such as Swiggy and Kitopi, provide a fully-fledged offering of kitchens, including delivery and sometimes cooking also, according to industry insiders.
Potential customers of KaaS include integrated dark kitchens, virtual restaurants, virtual brands, independent large and mid-sized restaurants and restaurant chains.
“As the online food delivery market matures in the UAE, and more dark kitchens enter the geography, the KaaS model is going to witness accelerated growth, solving some of the challenges associated with the sector,” a senior executive with a virtual restaurant chain said.
“The KaaS players can help the online players by finding the right micro-market and building up a kitchen location in it by leveraging the economics of scale achieved by hosting multiple brands at a time,” the executive, who wished not to be identified, added.
The RedSeer market study said with the dark kitchen penetration in the UAE expected to double by 2023 from the current level of 400 brands spread over 80 locations, KaaS will see great growth potential going forward, acting as the backbone supporting the rest of the business models.
The overall online food delivery segment in the UAE is expected to grow by a 23 percent compounded annual growth rate, with the rising penetration of dark kitchens, the study added.
Leading companies, such as Swiggy and Kitopi, provide a fully-fledged offering of kitchens, including delivery and sometimes cooking also, according to industry insiders.
“As the dark kitchen penetration increases with the entry of new players and expansion of incumbent ones, the firms in the segment will face challenges to find a more cost-efficient method of food preparation, either for themselves or the brands they serve. This is where KaaS brings in its value proposition, where it not only caters to brands with its distributed operation cost setup but also helps other dark kitchens to focus on broader aspects of their offerings, while leaving the kitchen setup and operations to KaaS,” the RedSeer study said.
“The dark kitchens can, either themselves or via their brands, focus on meal preparation, branding and marketing, and logistics, while the backend operations are handled by a KaaS player,” the report said.
“This will enable KaaS to grow its share by more than 2.2 times to become the dominant model in the overall dark kitchens market, making it a backbone of this segment,” the study said.
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