Is there a chance that cloud kitchens will succeed in Egypt?

The rapid prosperity that The cloud kitchen sector in the UAE has begun to expand and has reached other parts of the Middle East, as new cloud kitchens have emerged across the region along with start-up companies offering technical solutions for these kitchens just for shipment in the hope of achieving the same. success as startups like Ikcon In Dubai, which was acquired by Reef Technologies, and Kitopi, which secured $ 415 million in a Softbank-led round of financing.

In Egypt, where Talabat and Elmenus dominate the food delivery scene, cloud kitchens are the latest addition to the food technology sector, but the growth rate is somewhat slow, exacerbated by a lack of awareness and low online food ordering. .

Food Nation is the leading company in Egypt, launched in Cairo in 2020 and established its first cloud kitchen that houses 35 different brands. Operating with the support of Tivoli Dome, a food field in Heliopolis, the company offers smart kitchen spaces created specifically for delivery-only restaurants. The company plans to create the largest cloud kitchen in the country and is expected to house more than 41 kitchens.

According to Ahmed El-Naggar, Project Manager at Food Nation, the move aims to raise awareness and encourage more restaurants to transform their business into this growing model.

He adds, “This move coincides with global trends affecting the restaurant business, as cloud kitchens have become the norm in the food and beverage sector due to the cost and efficiency of their operation. This is the future of the restaurant business.” “Abroad and in Egypt as well, but unlike global markets, here we suffer from a lack of awareness of cloud cuisines.”

In an effort to help its virtual kitchens and support the spread of its brand, the company is offering catering services at one of its locations. “Having dining areas attached to cloud kitchens will play a role in building customer confidence in these virtual brands, which will support the adoption of the cloud kitchen concept,” Al-Najjar explains.

In summary, the growing interest of entrepreneurs to enter the cloud kitchen sector stems from the urgent need to provide a solution that can help restaurants recover from the effects of the pandemic in the country. Therefore, most cloud kitchen operators in Egypt are adopting the KaaS “kitchen as a service” model and are offering rental space for brands and restaurants.

Mostafa Wahdan, co-founder of Chef House, a KaaS cloud kitchen that operates a number of virtual restaurants, says his main reason for starting his business was his desire to help restaurants continue to function and enable them to expand their distribution services and expand into new territories.

Wahdan adds: “60% of restaurants fail in their first year of operation and 80% of restaurants close indefinitely after 5 years of operation. Restaurants struggle to survive and many of them lose millions of pounds (Egyptian) every year. We we started this The company aims to help business owners revive their brands And build a trench in this market dominated by the Red Ocean strategy. ”

Reindeer kitchens have proven to be an economically viable solution for many restaurants that require geographical expansion without having to build physical facilities, but the delivery-only model also faces a host of challenges. Restaurant operators have to spend large sums of money on marketing strategies to attract customers, which leads to the fact that many small restaurants can not switch to this model, or rely on cloud kitchens just because they can not afford marketing .

Online food delivery

The ideal would be for cloud kitchens to be built around the online distribution experience, but this should not be the case in Egypt where most food delivery orders are made over the phone rather than the internet. Therefore, cloud kitchen operators tend to cater to users both online and offline.

Wahdan says: “Food delivery online is still in its infancy and is not expected to make big strides, at least in the short term, as the Egyptian consumer is not yet used to this way of making their orders. We chose implement an online (strategy) in the beginning as an operating procedure Ready to work, I personally do not care if the order is online or offline, I will go to customers wherever they are. ”

The fact that online sales account for nearly 6% of total food and beverage sales is why the cloud kitchen market is still considered at an early stage with little activity by venture capital firms. Last month, Egyptian “cloud center operator” Takery secured pre-round funding, with plans to provide up to $ 3 million in 2022. Following this round of funding, Takery will become the first cloud kitchen operator in the state which receives venture capital financing.

Ultimately, as cloud kitchens become more prevalent, more customers and businesses will switch to ordering food online, especially as most KaaS startups offer kitchen service as a service to their restaurant customers. to collaborate with food delivery platforms like Elmenus and Talabat.

Michael Asaad, founder of Toro Cloud Kitchens, believes that the reason for cloud kitchens in terms of popularity is that the level of logistics in the food delivery sector is less than required.

“When shipment logistics become faster and more efficient, then the game will really change,” he says. “The delivery and packaging phase remains a problematic phase for shipping businesses, as many foods are difficult to transport, which leads to a frustrating customer experience.”

As customer expectations increase, the traditional on-demand delivery models that currently exist are becoming insufficient and inadequate to meet the growing demand.

Asaad adds, “The market boasts a lot of players in food distribution, but we need to create an alternative model for faster and more efficient kitchens in the cloud and food delivery.”

If we look to the future, the cloud kitchen market will come out with more players in increased demand and the chances of opening virtual restaurants will increase and fail quickly. Continuous investment in customer-centric innovations is essential to ensure sustainable growth in this market in the future.

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