The Future of Food Delivery in Europe: Key Drivers for Success

Stefan: Well, of course, you can argue that, of course, the recent years over the COVID crisis period, this was definitely an accelerator when it comes to food delivery and off-premise dining. But logically, this is nothing new. We used to have this in various formats for ages and just recently, referring to some article about the Indian dabbawalas. So delivering food to the, let’s say, workplaces of your family has a 150-130 year old tradition in these countries. 

So there has always been a relation between bringing food to work. You can, for example, look at the traditional examples in England in the later 19th century during the Industrial Revolution, when people had to work in the coal mines and the shafts. So what they already got, they got their food delivered or they took, this was the invention, let’s say invention of the pie. So when people created food, which was easy to transport, easy to take with you, so off-premise dining has always been relevant and well later developed into, let’s say, a brick and mortar stuff, canteens. 

But initially people were depending on getting their food delivered. And this has evolved even five, six, seven years ago. Some markets which actually caught my attention when I was in China at that time ten years ago, it was quite common that you go for a lunch break in a restaurant or in a food shop or some street hawker just to get your food over lunch.

Five, six years ago, it was rarely common anymore. People were simply staying at their offices and food was delivered already. And interestingly, one of the same food driver or pick-up person came 3-4 times to the same office in a row. So there was still some room for improving, let’s say, the logistical aspect. 

But eating off-premise and getting food to where you are is nothing new. But here in Europe, I would say for us, let’s say we got the appetite recently, more or less during the necessity. When there was no opportunity for us to go dine in, both customers and operators had to change their solutions. So many restaurants had to pivot or had to offer additional delivery or pickup options. And technically seen I would say people love convenience, but we were not, let’s say, too familiar with it. If you go to the United States, the UK, even the Middle East, this has a more year long tradition.

I would argue that here in Central Europe, we just really started growing this over the last two, two and a half years at least visible, and the whole media accelerated it. I mean, we read a lot of news about ghost kitchens, off-premise dining, food delivery, a topic which may be ten years ago was not so popular in the news. And I would say there has been a lot of things have happened, but it is became an integral part of our daily life. So I must say.

Carl: I understand and you mentioned quite consciously Central Europe as a region in this. And what is the current situation in Europe in terms of off-premise? Are there any, you know, business models that seem to be working more than others?

Stefan: Yes, definitely. Yes. I won’t dare to say I know them all, but what you can see is recently when the COVID situation was in the most critical phase, many people started experimenting more or less depending on what they already had from brick and mortar to offer food, to deliver food. 

Some coming with a non hospitality background took the opportunity and started their own enterprises, mostly connected to some IT solutions or some delivery platforms. So we have a lot of players coming from the non hospitality sector genuinely, but all these startups and concepts, some of them grow, some of them didn’t make it over the last two years. What you can see at the moment is that there is a trend going back to develop rather some kind of hybrid models, meaning integrating the opportunity, for example, of pickup into the ghost kitchen operation. So it’s not a completely dark or cloudy or hidden area anymore. 

Many operators now start to integrate additional options like a simple pickup, whether it’s from a counter, whether it’s from a food locker to offer both that you can get your food delivered, but also if it’s within your convenience to get the products on site eventually even consume them there or take them home. And this seems to become a popular solution, at least when it comes to central Europe, where, let’s say there might be more benefit for both the customer and for the operator to reduce the costs, to still create a fresh product. And the choice we are now appreciating coming from the virtual brands world.

But also for the operator once again to get more feedback from the customers. So this also will help them to develop, to improve. And an interesting topic, just let me tell you a little example. 

I had a discussion with some restaurateur in Germany recently, and over the
pandemic he started delivering. He had to close the restaurant, but he was quite successfully operating a delivery operation with a somehow, let’s say, limited menu. Now, as there is again the opportunity to have more dine in customers and people are coming back. I asked him, Do you still do the delivery? He said yes, but only until 12 at lunchtime and maybe after 3 p.m. because in the main time I want to focus back again on my customers in house and I don’t have time to do both at the same time. And I said, why is
it? The reason is quite simple. As much as we like the additional business of delivery, we still have the benefit of offering beverages when it goes to the in house dining. And as we all know in the hospitality business, beverage is a very relevant aspect to create the necessary margin. 

Ultimately, because it’s a mix calculation. If you have, let’s say, some cheaper, presumed cheaper items, they may bring you more, ultimately more margin. And that’s why I said no. If it’s in dining time, in house dining time, I focus on my guests, but I still leverage the opportunity in the weaker time periods over the afternoon or in the later morning to create some additional revenue and create nice, let’s say, daypart management.

Carl: Yeah, very interesting topic actually. And maybe the person also, you know, considers the margin that he has to give to the delivery guys into this as well. But I wanted to jump back a little bit before what you said, you mentioned that in this dark kitchen space or the host kitchen/ghost kitchen area, that also a lot of non-hospitality businesses are, you know, joining the party. Let’s say. One thing that I wonder is in the traditional hospitality business what makes the difference is two things. It is the food, but it’s also the concept. It’s the experience you give to people when they come to their restaurant.

Stefan: That’s a very good question. And as you said, retail already has, of course, given by the nature of groceries and products they sell has already a very important position in the whole hospitality segment. Other way around. We talked about challenges before opening a ghost kitchen in a residential area is a big problem. Well, imagine an established retailer. He doesn’t have this problems because he has already the fluctuation of customers. He has already the accessibility by cars and trains and whatever. He already has the parking abilities. So for a retailer like a big supermarket, like the Krogers, Walmart, Aldi’s, whatever of the world, for them, it’s quite easy to implement additional concepts into their existing premises because people are there already. Parking is there already. Giving a ghost kitchen operations with additional pick up solutions. 

Technically seeing the retailers are already made for it and we see more and more companies pairing up with retailers like we see in Canada, Ghost Kitchen Brands. We see Kitchen United. We see in Denmark a new startup, Noah’s. They are starting up with Dagrofa. So there is more and more synergy. But the interesting thing is that the retailers, they understood there is a part of the cake. They want to have the food delivery, which also, if it’s combined with a pickup, gives of course the customers more reason to go into a supermarket. 

And ultimately it’s all about why do I need to go into a supermarket? That’s the main question for them to keep people in store so they buy more. And picking up the food could be a very important point to bring people to come to a Walmart or go to an Aldi or go to a Raven or whatever or to a Carrefour. And therefore, it’s interesting that they understood they need to offer more. And you know, most of the established supermarkets, already have some cafe or bakery in front of the supermarket zone and now adding additional pickup options or additional order and delivery options is just a given. I see more and more of that coming and I’m expecting more and more major retailers to implement such solutions. 

The main question I’m still asking myself is why the retailers don’t do it themselves, why are they not just creating their own brands and their own food? Maybe that’s just the learning curve at the moment. Let’s see what’s happening in the next three, or four years. 

I say in the long run, my feeling is that if you see the whole hospitality battlefield, so the fight for the stomach, in my opinion, the long run, will be won by the retailers because they have the products already and nobody, imagine you buy your sandwich and your burger and you get a soft drink at retail price. This is a pricing no normal restaurant and nobody can compete
with. So from a cost ratio perspective, I could imagine the retailers, they have the power to, let’s say, bring the best value for money in the long run. But they haven’t, let’s say, started their own project yet. It’s just the first phase.