UAE’s dark kitchens to shine bright as more rely on deliveries

The dark kitchen concept is poised for growth in the UAE as online food delivery witnesses a surge even after the Covid-19 outbreak.

In simplest terms, dark kitchens — also known as ghost and cloud kitchens — refer to food that is prepared at separate takeaway premises rather than a restaurant. Compared to a usual takeaway format, however, orders are placed online, without the option for the public to enter the premises.

The current market size of food deliveries and cloud kitchens are estimated at Dh2.73 billion, out of which online deliveries account for 91 per cent and dark kitchens represent nine per cent, according to RedSeer Consulting. The sector is poised to see growth of 16 per cent for dark kitchens and online food deliveries may witness a reduction to 84 per cent.

Kitch, the Middle East’s first hybrid and delivery-focused cloud kitchen, was launched in February this year in Saudi Arabia and the UAE with privately=raised capital of $15 million.

Its co-founder and CEO Walid Hajj said: “The food and beverages industry is ever evolving, and it has become more apparent this year. In the last couple of years, there has been a rapid adoption of technological innovation in the UAE restaurant industry. However, the Covid-19 pandemic has brought even greater disruption and boosted the online food delivery market. To satisfy an increasing appetite for online food orders, restaurant’s business growth strategy and business mode has also evolved to include cloud-kitchens. Several brands have started to explore the untapped potential of the food-delivery market in the UAE.”

The cloud-kitchen model is driving the future of the restaurant industry and helping restaurateurs take their business to the next level by providing consumers with the ultimate convenience when they want to dine-out, or order food at their home.

Kitchen-as-a-service (KaaS) is perhaps the most simplistic cloud kitchen model, wherein a player rents (or buys) out a location and builds up multiple small kitchens within the same roof specifically designed to serve online food orders. 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 for the challenges associated with 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.

There are also ancillary services that will continue to give a further boost to cloud kitchens, explained Sandeep Ganediwalla, managing partner at RedSeer Consulting.

“Cloud kitchens come with the promise of low-cost structures, faster go-to-market and modular scaling of the restaurant operations. With customer preferences changing towards more food variety and ordering food at home, cloud kitchens are helping independent and chain restaurants by offering rvarying degrees of asset ownership, making it easier for them to pivot to online food delivery,” added Ganediwalla.

The food services industry in UAE had been growing on the back of rising disposable income among the working population supplemented by a continuous increase in the region’s tourism. The estimated $35 billion food and beverages market of the country was growing roughly 6.5 per cent year-on-year pre-Covid and the food services sector constituted roughly 45 per cent of it by 2019. From the supply end, online food delivery held an 8.3 per cent penetration with tech-enabled dark kitchens being the fastest-growing segment, almost doubling in size for the last two years.

Dubai-based Cloud Restaurants is a collection of online delivery-only restaurants that you can find on your typical online delivery apps. Owning some of Dubai’s most popular online restaurants, you have probably ordered from them without even knowing.

The company have diversified and adapted in the midst of the pandemic, causing them to grow significantly. In the past year alone, the company’s order volume has increased by 76 per cent from 6,000 orders per month to over 22,000 orders per month.

Ziad Kamel, CEO of Cloud Restaurants, said: “To date, we’ve created 12 delivery-only brands. We operate in our cloud kitchen partner network of 16 cloud kitchens across the UAE and we own all our brands. This year, we plan to expand operations into 50 plus cloud kitchens. We’re in a high growth phase and continuously working on brand creation, development of strategic partnerships, and scaling the number of cloud kitchens our brands operate in, within the UAE and internationally.”

Sweetheart Kitchen, another Dubai-based company, launched new a initiative to reward its growing customer base for their loyalty.

“As we continue to build up our back-end technology, we will enhance and improve the functionality and the reward mechanism. Today, we are able to incentivise particular behaviour such as increasing average order value and frequency of purchase. Tomorrow’s functionality will allow us to drive different behaviour,” said Adib Samara, vice-president for global brand and marketing at Sweetheart Kitchen.

Sweetheart kitchen joins a growing number of delivery-only food businesses that are leveraging data, on-demand transport infrastructure, and strategically placed kitchens to deliver quick service food in under 20 minutes. The startup Sweetheart Kitchen, founded by serial entrepreneur Peter Schatzberg, has recently launched its seventh kitchen in Dubai Silicon Oasis area, expanding its delivery reach in the UAE. The startup utilises its €36 million in funding to date to develop a series of advanced systems to monitor raw materials, expiry dates and match supply with demand.

— sandhya@khaleejtimes.com