‘Hangry’ For More: Starting Up In The Indonesian Cloud Kitchen Market
Despite the presence of major food delivery players, cloud kitchen startup Hangry is fishing for a foothold in the market
By Sharon Lewis
As more hungry customers tap into food delivery options on their mobile phones, the bullish online food delivery market is showing no signs of slowing down.
In fact, the entire food delivery segment in Southeast Asia is expected to grow 400%, from $5.2 billion in 2019 to $20 billion by 2025.
Indonesia, dominated by a massive domestic market and the largest Southeast Asian Internet user base, has an added advantage. Turbocharged by the increased adoption of online transport services, the online food delivery market is worth well over $1 billion.
In the face of rising Internet penetration, growing rental costs, and a shift in consumer inclination towards delivery, cloud kitchens alone are predicted to see rapid transformation from a niche model to a near-billion dollar industry in a matter of a few years.
These ‘dark’, delivery-only, ghost, or virtual kitchens, operate entirely on a delivery-based model, needing only spatial infrastructure to cook and a brand to sell under, bumping up earnings by shedding dine-in and service costs.
One if the newest entrants in the Indonesian cloud kitchen market is Hangry, a Jakarta-based cloud kitchen backed by Sequoia Capital India’s Surge and Indonesia-focused venture firm Alpha JWC.
Launched in November 2019, Hangry uses common kitchens with shared staff and resources to serve up dishes under four brands through 17 kitchens, delivered through GO-FOOD and GrabFood. The startup plans to launch its own app soon.
Jumpstart spoke with Hangry’s CEO Abraham Viktor, COO Andreas Resha and CTO and CMO Robin Tan, all of whom co-founded the startup, about cloud kitchens as the latest disruptors in the Southeast Asian Food and Beverages (F&B) industry.
The market is bullish and the competition is mushrooming. What are the reasons for this boom in the cloud kitchen segment?
For the F&B industry, the business model the last few decades has involved prime real estate that could attract customers. But with greater Internet and mobile penetration, consumer behaviour is changing. Customer traffic doesn’t only come through offline channels, but also through online channels such as food delivery platforms.
When considering online channels, the necessity for prime real estate is suddenly eliminated. Also, people have started rethinking how to better utilize kitchens. One kitchen serving one restaurant is no longer seen as the most efficient way. That’s where the concept of a cloud kitchen comes into play.
Another prominent factor that has proliferated the shift in customer behaviour from dine-in to food delivery would be the numerous promotions being offered by leading food delivery platforms in Indonesia.
Between 2016 to 2019, food delivery platforms such as GO-FOOD and GrabFood invested massive amounts into promotions to encourage people to adopt this new lifestyle of ordering food through mobile apps.
This investment has been very successful and now tens of millions of people are actively involved in the food delivery ecosystem as both customers and delivery drivers.
What does Hangry’s go-to-market strategy look like, and how does its revenue model work?
We are F&B brand owners and to put it simply: we cook and sell food to customers via a multi-brand virtual restaurant. We have four in-house brands, namely San Gyu (Japanese), Bude Sari (Indonesian), Ayam Koplo (Indo-American), and Kopi Dari Pada (Coffee and milk drinks)
Our go to market strategy is creating the best food possible for the categories we enter. We grow our brand equity and reputation from there. Customers typically know us as that 2nd or 3rd brand that serves some of the best food in the space.
What would the key cost drivers in the Indonesian cloud kitchen segment be?
Real estate prices as well as manpower costs are relatively affordable for businesses in Indonesia today. To give more color, the average monthly wage for kitchen staff in Indonesia stands at $200 and a 150 square metre house in downtown Jakarta costs approximately $10,000 per year to rent.
These two are conducive factors that make the cloud kitchen business in Indonesia quite attractive economically.
What advantage does a startup like Hangry have in a market that has a small number of big players, such as the GO-JEK-Rebel Foods partnership?
We are an F&B player and our focus is serving the best food possible to our customers. We do not compete in the business of providing cloud-kitchen services to brands. We are the brand owner that could work with cloud kitchen players, utilizing their infrastructure for our expansion.
Even though we have multiple brands, they are chosen with care. We focus on food items that are popular and fast moving. Our strategy is simply to make sure our food remains the best in the market for our price segment. At the end of the day, we want customers to fall in love with us because of our product quality.
How does a cloud kitchen compete with dine-in?
When we look at food delivery in general vs dine in, the boundary is getting more blurred these days. People who dine in also use food delivery and vice versa. It used to be that only younger people ordered food delivery, but today people across different age groups order online.
The biggest difference between the two is definitely the dining experience and the products which may be offered for dine in vs delivery. It is more challenging to delight customers through delivery vs a dine-in experience. In the former, there’s no ambiance or a chic place to sell. Customers see the product and its blemishes without any distortion from ambiance or other external factors.
What does the future of cloud kitchens look like?
More and more customers will opt for the convenience of time and cost savings offered by food delivery, especially as the world goes more digital. We see cloud kitchens becoming the norm for F&B as it is a cost efficient model compared to traditional ways of running an F&B business.
Header image courtesy of Hangry