The Way We Get Our Food May Change Forever
Behind the door of a nondescript former warehouse unit in Hackney, east London, lies a microcosm of how the way we get our food is likely to be permanently changed.
At Karma Kitchens, a dark kitchen startup, demand for takeout food and meal kits is spiking. Global multinational company Unilever has paired up with the kitchen’s smaller tenants, and staff who are no longer working on corporate catering accounts are packing grocery delivery boxes for people unable to leave their homes.
The restaurant, hospitality and retail industry is changing in real time across the world as a result of the coronavirus outbreak. In the UK and many parts of the U.S., pubs, cafés and restaurants have been ordered by the government to close their dining rooms, and stay-at-home orders are keeping people away. As a result, delivery instantly became an essential part of the strategy for operators to maintain an income stream.
The need for delivery is not just limited to meals from restaurants or takeout operators: With some people being told to self-isolate to avoid contracting or spreading the coronavirus, delivery of groceries also has become an essential service.
The equation is not as simple as everyone being forced to stay at home equals an increase in food being delivered to our homes. Beneath the surface, a process that might have taken years to unfold is happening in a space of weeks, but while for some operators this will provide a big opportunity, others will be left behind. And the impact on commercial real estate can be significant.
Initial data indicates that takeout orders are increasing, as restaurants in the UK and across much of the U.S. are shut down by government decree. Uber Eats saw a 10% increase in U.S. sales in the week beginning 16 March, the Information reports, citing unnamed sources. UK takeaway orders increased by 8% in the first week of March, according to payment provider Barclaycard.
“A lot of people who have never used delivery will be introduced to it for the first time, and I think they will continue to use it,” Karma Kitchens co-founder Eccie Newton told Bisnow.
At the company’s dark kitchen in Hackney, operators can take space for as short a time as a single morning, up to signing a multiyear lease. It has two other facilities under construction in north London, and is offering to pay rent to restaurants with underused kitchen facilities if it can use the space to fulfil orders.
At dark kitchens, restaurant brands can fulfil takeout orders away from traditional restaurant premises. The pivot to delivery in restaurants might accelerate the development of dark kitchens, which are also called ghost kitchens or virtual kitchens. Newton said costs for operators in these facilities can be 30% less than traditional premises, making it easier for brands to start up and manage costs.
Cushman & Wakefield UK Head of Leisure and Restaurants Matt Ashman also predicted dark kitchens will see a long-term pickup in popularity, though he sees the pandemic’s impact on restaurants as complicated.
“The impact of the coronavirus on restaurants and café has been double-edged,” Ashman said. “Yes, demand has increased where possible within restrictions, but we are aware that discretionary spend is down as people prepare for the short-term worst. That said, we do anticipate a likely Lauder ‘lipstick index’ effect, where the delivery of your favourite food is the small luxury people can get in isolation and a worthwhile treat from the monotony.”
The lipstick index was coined by Estee Lauder Chairman Leonard Lauder to explain the uptick in sales of small luxury items as a sign of weakening consumer confidence and a leading indicator of recessions.
For operators, setting up a delivery service where they did not have one before is no easy task.
“I think it will be easier to adapt for those operators who already had a pickup or delivery service in place,” The Shopping Centre Group partner David Firestein said from Manhattan. “That means the fast-casual chains or traditional places that do delivery like pizza restaurants. For full-service restaurants it will be more difficult.”
Higher-end restaurants may also be unwilling to devalue their brand by offering food for delivery. And there are prosaic matters working out the best kind of delivery container for your food if you’ve never done delivery before, and finding out where to source it from.
Data from MCA showed that even after the UK government said that operators could begin to offer takeout without a license, only 19% were planning to do so. There is a division opening up between larger brands and independents or smaller chains: just 16% of branded chains had opted to offer takeout.
“Large brands with large workforces have a lot to think about when it comes to ensuring the safety of their staff,” David Coffer Lyons Director Kate Taylor said from London. “They don’t want to be contributing to large numbers of staff coming in to central London on public transport, or put staff at risk while they are at work. Once one brand does it, it puts pressure on others to do the same, whereas independent restaurants can take a slightly different view.”
There is also the problem of co-ordinating a delivery service from a smaller number of sites than they would usually have open, Taylor added.
There is an additional problem for restaurants: booze. Alcohol makes up a big proportion of profit margins for restaurants, and people are far less likely to order booze when getting takeout, even if the option is available.
The picture is a bit more clear for grocery delivery services, which have gotten a huge spike in interest that operators in the sector big and small have been scrambling to tap into.
“In the past three days, we have seen demand go up 10 times,” Subziwalla co-founder Manav Thaker said.
The Atlanta-based company was set up by Thaker and his friend Sajal Rohatgi as a grocery delivery service specialising in Indian food and ingredients. UK online grocery delivery firm Ocado has reported a similar surge in demand. Thaker said Subziwalla is reaching out to restaurants in its local community to try and deploy laid-off staff in its warehouse facility, as it doesn’t have enough workers to pick and pack orders and fulfil demand.
Looking beyond the current restrictions, restaurants might have to change their physical layout in the immediate aftermath of the coronavirus.
“If you think of somewhere like New York, where high rents mean operators really pack tables in, I think that might have to change,” Firestein said. “I don’t think people will want to sit six inches away from other people, and restaurants might need to give people more space.”
Restaurants also might take longer to get back up and running than other sectors.
“Consumers will still be in tough position, and with a restaurant you can’t just turn the lights on and get going again,” he said. “You need to build up inventory and rehire staff again.”
But people will come back, he argued: We are a social animal, and after months being kept indoors, there will be a desperation to be around other people again.
Experts believe our behaviour will have changed forever, and delivery of food, both from restaurants and grocers, will be a bigger part of our lives going forward.
“The way human psychology works, it is hard for people to believe they need something, but once they realise it, they don’t go back,” Rohatgi said. “Once they are used to getting delivery at home it becomes a habit, and it is very hard for people to break habits.”