Gen.T honouree Max von Poelnitz, founder and CEO of Spoonful and Nosh, on the future of food delivery in Southeast Asia
In the Ask An Honouree series, we ask experts from the Gen.T List to share insights into their industry. First up: Max von Poelnitz, CEO of Hong Kong-based food delivery company Spoonful, on his industry's rapid expansion in the region.
The startup investment landscape is littered with hype, false promises and massive consumer-facing discounts. Its winner takes all mentality has been particularly strong in food delivery, both in Asia and further afield, much like the similar rush towards expansion during the dotcom era of the early 2000s.
According to technology market intelligence group CB Insights, in 2014 venture capital invested $1.46 billion in on-demand food startups, including restaurant platforms and prepared meal players. In 2019, the Southeast Asia and India markets are heating up; we have seen a flurry of large investments in food and logistics startups such as GrabFood, Go-Jek and Rebel Foods. Amazon’s $575m investment in UK on-demand restaurant delivery platform Deliveroo in Q2 2019 is now also being investigated by the UK regulatory authorities over possible competition irregularities.
Why is food delivery attractive to investors?
It turns out the unit economics in food delivery are better than standard logistics or ride hailing. With ride hailing, companies typically need to price at the same level as incumbents such as taxis, which does not allow much room for admin, service or delivery fees. In food delivery, the platform collects both a delivery fee from the consumer and a 20-30 percent commission from the restaurant partner.
This doesn’t make for high gross margins, but it does make for better ones. In mature markets, you might see a larger basket size so the commission from a restaurant can be substantial, while in developing markets a lower basket size is the norm but logistics costs can be lower. In addition, food delivery allows for batching, where a single driver collects numerous orders from a single restaurant.
And demand is growing fast. In 2015, for the first-time people in the US spent more money at restaurants than grocery stores, primarily driven by food delivery. In Asia things are even more extreme, with some restaurants already realising 40 percent of their revenue from delivery-only.
As platforms such as Deliveroo, Foodpanda, GrabFood and Uber Eats continue to expand, they are looking to drive down their costs and increase their margins. One way they’re doing this is with cloud kitchens.
Some restaurants in Asia are already realising 40 percent of their revenue from delivery-only