What will happen to delivery when covid is gone
What will happen to delivery when covid is gone

Few topics felt the Covid-19 tailwind more than delivery. In India, the category’s share of foodservice sales doubled to more than 15 percent and even as delivery catches its breath, the veterans expect 2022/2023 to usher in a fresh era of growth, with sales sticking 40 to 80 percent above 2019 figures in nearly every major market. As always, though, delivery isn’t a simple numbers game.

There’s little confusion why delivery swelled in 2020, with domestic channel sales climbing nearly 75 percent: Dine-in exited the picture. As did many restaurant concepts that couldn’t sustain operations, or decided to wait it out. Fewer options in a suddenly less saturated field.

According to several reports, 90 percent of customers said they changed delivery behaviour as a result of Covid-19. Just in terms of adoption, the category exploded out of the trough. In the year ending March 2021, restaurant digital orders ballooned 124 percent compared to the prior year. Digital orders for carryout, which represented 62 percent of all digital transactions, jumped 130 per cent. Digital orders for delivery lifted 140 percent. Even quick service, a segment responsible for the major chunk of the industry’s share of digital mix pre-coronavirus, realized triple-digit growth.

Understanding the present, imagining the future

“Cloud kitchen is playing a role of 'Major Lifeline' for the whole F&B sector from last year. The concept has been there for quite some time but it got more popularity during this pandemic as people were not stepping out and deliveries were in huge demand, shared Chef Harangad Singh, Chef and Founder at Parat by adding that the pandemic has brought out the importance of cloud kitchens.

Chefs are also coming up with creative ways to bring the gourmet experience at doorsteps with all the safety measures. With Covid-19, the future of dine-in restaurants is uncertain while Singh believes that cloud kitchen is the safest and best alternative for many people now.

In full service, particularly fine dining, opportunities for social interaction will limit delivery penetration to a certain extent. Meanwhile, the prevalence of cheaper off-premises channels, like pickup and drive-thru also beneficiaries of Covid’s clamp on dine-in will curb delivery’s growth across counter service. Convenience is the great equalizer. The economics for take-away and drive-thru win out for restaurants as well, and efforts to foster them will balance the future.

Commenting on the same, Debashish Yadav, CEO, Licorne Hospitality said, “The pandemic has given a booster shot to the dine-at-home movement. Indian households have warmed up to the idea of ordering in as they devote more time to either work or leisure at home. Further, the consumer has matured and is now demanding a better food experience at home from restaurants and cloud kitchens. The industry has responded with premium food offerings to alleviate the dine-at-home experience.”

At Lattu Biryani and Rocket Pizza, the company plans to integrate board games with the food packaging to allow users to spend quality time together. The majority of the food delivery consumers who were added due to the pandemic will remain active users even after the pandemic subsidies, thus, adding to the overall industry revenues. “While people will be back in restaurants, the propensity to consume restaurant food at home has definitely increased and is likely to remain high even after the pandemic,” Yadav opined.

Considering the factor that deliveries have always been a very important parameter to the entire food industry, Prasuk Jain, owner of Pink Wasabi in Mumbai commented that the only difference for before and after Covid is that there could be a rise in direct sales with walk-in and deliveries would go down by 20 percent but not more.

Not completely replaceable

This subjects an important questions. Will delivery drive incremental growth? Before Covid, global foodservice sales increased at a compounded annual growth rate (cagr) of three to four percent over the last three, five, and ten years, respectively. This is a relatively consistent line, even as delivery growth accelerated from an 11 percent CAGR between 2013 and 2016 to an 18 percent CAGR between 2016 and 2019, doubling delivery’s share of total sales from 4.2 percent in 2013 to 8.4 percent in 2019.

Pre-coronavirus, traffic and on-premises sales were going in the opposite direction, perhaps at the expense of this growth. The category’s share declined consistently from 73.8 percent in 2013 to 68.6 percent in 2019. It was 52.8 percent in 2020, a strange year to measure against.

Another major factor to be considered is that food delivery does not appear a serious substitute for home-cooked/ready meals from supermarkets. Not unless the price of a meal delivered drops to a comparable level. The rise of larger, well-capitalized delivery platforms/aggregators and better packaging might improve the overall experience and attract new and repeat users.

For easy and quick money, yes!

There are scenarios as well where delivery lowers barriers to entry for new competitors and startups by limiting initial CapEx. No need to invest in a site with seating space and worry about prime real estate, as evidenced by COVID breaking the dam on virtual concepts and ghost kitchen expansion. An entrepreneur can now just rent a small space and get to work.

Labor costs are lower. No wait staff. Further, the absence of a pre-established physical presence is less of a headwind today thanks to how customers find food. Guests are far more adept at search and quality-control strategies using third-party platforms, social media, and online reviews.

Additionally, back to the ghost kitchen lure, some established operators have incorporated delivery-only brands to their offering and from their existing sites. In other cases, operators with established concepts extend their catchment area beyond historic reach via delivery.

Covid has surely forced the delivery hand for a lot of restaurants. Brands jumped in because they had no other lifeboat. It went behind the fear of ceding share; it was the only outlet. Sign up, figure out the profitability later.

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