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Food & Beverage

Southeast Asia's cloud kitchens swell, powered by Grab and Gojek

Ride-hailers tap pandemic-fueled demand as restaurants play catch-up

The coronavirus pandemic has made food delivery more important than ever to Southeast Asian ride-hailing companies like Grab.   © Reuters

MANILA/BANGKOK -- "Number 62! Number 62!"

A voice reads out the number of a finished order at a GrabKitchen in Bangkok during lunchtime on Monday. Nearly 100 drivers for the Grab ride-hailing service pick up freshly made meals and hop on their motorbikes to deliver to waiting customers.

Singapore-based Grab's first GrabKitchen in Thailand, which opened in October, serves as a shared kitchen for 14 popular restaurants. Food preparation areas are spaced out to protect privacy.

"I was surprised that I could order from and pay multiple places at once," said a 25-year-old self-employed worker who has recently bought such dishes as seafood fried rice and pad thai from the facility.

Such centralized delivery-oriented spaces, known as cloud kitchens, are a growing presence in Southeast Asia, lowering the barriers to entry in the food service industry but posing a threat to traditional restaurants.

Ride-hailers like Grab and rival Gojek have jumped into the business to reap additional revenue from rent and delivery fees. This has paid off as the coronavirus pandemic whets consumers' appetite for delivery while sending demand for ride-hailing services plummeting.

The market has boomed over the last year in particular. Online food delivery in Southeast Asia surged 13-fold from 2015 to $5.2 billion in 2019, according to a report by Google, Bain & Co. and Singapore state investment company Temasek. The report forecasts the market reaching $20 billion in 2025, on a par with online transport services. The coronavirus is likely to accelerate this trend.

Grab drivers await orders from a GrabKitchen in Bangkok. (Photo by Marimi Kishimoto)

Grab, which jumped on the trend relatively early, has set up more than 50 cloud kitchens across the region, including in Thailand, Singapore and the Philippines. It has expanded particularly aggressively in Indonesia, opening over 40 locations over the past year. Indonesia-based Gojek has launched 27 cloud kitchens in the country, setting the stage for a fierce battle.

Gojek's Thai arm announced on Wednesday a plan that would turn food trucks into something much like a cloud kitchen. Partner trucks gather at a designated location and make meals for delivery through Get, Gojek's local brand.

"Food delivery is showing double-digit growth due to the coronavirus," Pinya Nittayakasetwat, CEO of the local unit, told a news conference Wednesday in Bangkok. "We'll use this new method to tap that demand."

The project has signed up 40 food trucks so far, and the company expects to have 100 participating on a trial basis in three months, Pinya said.

Tokyo-based Line, best known for its eponymous chat app, offers an array of delivery services in Thailand through its Line Man platform and is looking to disrupt the Grab-Gojek duopoly. The company's local arm launched its first cloud kitchen this month with 13 restaurants, offering delivery across a 25 km radius.

"We estimate that this initiative will be able to increase the amount of orders from this area by 30% to 50%," said Waranan Chuangcham, head of business development and marketing for Line Man.

The rise of cloud kitchen apps presents a threat to big-name restaurant chains. This is especially true in the Philippines, a country that had banned sit-down dining for three months.

Jollibee Foods, which runs the largest fast-food chain in the Philippines, does take remote orders for delivery, routed through the nearest restaurant. But because the company has prioritized walk-in dining, the delivery setup was overwhelmed by the uptick in demand.

One angry customer in Manila, who ordered from Jollibee at least twice a week, reports frequent cancellations by the chain because of being swamped with orders.

In response, Jollibee said in May it will spend 7 billion pesos ($139 million) to open cloud kitchens. The structural overhaul will also combine multiple affiliate restaurant brands under single roofs, and optimize the leaner organization for app deliveries.

The group aims to leverage its household name to win back customers. A Jollibee cloud kitchen has opened across the Pacific in Chicago as well.

In Thailand, Central Restaurant Group is set to fully enter the cloud kitchen game next month. The enterprise, part of the Central Group conglomerate, will expand its pilot program of managing small facilities that house tenant restaurants.

Central Restaurant Group will place a heavy focus on the cloud kitchens due to its growth prospects in the post-coronavirus environment, said President Nath Vongphanich.

For ride-hailing startups, cloud kitchens exemplify a new business opportunity emerging from an unforeseen crisis. Southeast Asia is poised to be the staging ground for a global phenomenon.

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