The coronavirus has pulled the rug from beneath for any industries including the food and beverage sector. Once considered as plan B for the sector, Cloud-kitchen has acted as a saviour, game changer for the restaurant and food business at the time of the pandemic. According to a report by Allied Market Research, the global cloud kitchen market is estimated to reach NT$2,103 billion (US$71.4 billion) by 2027, almost doubling the amount in 2019. Taiwan-based JustKitchen is one of that startup that rides on the cloud-kitchen boom. Started in February 2020, it currently has 14 kitchens in the country. Excerpts from the interview:
How Cloud-kitchen model is changing the food service game globally?
This is a great question and very pertinent in current times due to COVID. In many countries, take out or delivery for restaurants has converted from 5-20% of their business, to now, 80-100% of their business. And hot food delivery has, in the last 6 months, increased user penetration from 20% to 80% of the population. When you factor in generational demographics, this sort of user shift would normally have taken 10-20 years to occur. Handling that level of demand increase in such a short amount of time is not an easy feat, especially for restaurants not designed for the significant reversal of demand and distribution channel, from dine-in to take-out / delivery. What was once an optional consideration for the consumer is now exclusively the only choice. And even post-COVID, this new modality will be part of the landscape; just as fast food (QSR) became part of the F&B space.
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Tell us something about JustKitchen and its journey.
With only 10 months of history, we currently have 14 Spoke Kitchens (smaller kitchens where final meal preparation and packaging before delivery takes place) and one large Hub Kitchen (larger commercial kitchen where earlier stage food preparation takes place), and we have already achieved best-in-industry customer loyalty of 75%. We're very fortunate to be at the right place at the right time, and have gained significant traction, even without COVID being a significant part of daily life in Taiwan. As we expand internationally into other countries, where habits and everyday life have been more impacted, we expect to see even greater traction and momentum.
Riding on expectation
We've created a new standard for hot food delivery, just as fast casual restaurants like Panera, Corner Bakery, and Chipotle have done for casual dining. We are able to offer the experience of fast casual dining, built for delivery. Another aspect of our business that sets us apart is our online grocery delivery platform, JustMarket. The global online grocery market is already estimated to be worth around $200 billion, and it is only gaining strength due to the pandemic. We’re also offering pre-packaged, ready-to-cook food items from our proprietary food brands that appeal to certain demographics, such as our “Nutritionist Guided” range, which offers a variety of healthy cook-at-home meals and food items.
It is mentioned that you are getting 40% month on month growth. What are the driving factors?
Yes, that's true. We are very fortunate to be in this position. Part of it is timing, as I mentioned earlier. But with any opportunity, being at the right time and place only allows you to be positioned for the opportunity. It does not allow you to seize the opportunity. We have improved on Mark Zuckerberg’s mantra in the early days of FaceBook: "Move Fast, Break Things", and we have added in "Improve", resulting in "Move Fast, Break Things, Improve". As methodical as we try to be in our creative cycles, we realize that until we go to market, we'll never know what's going to work or not.
Who do you target as your customer?
We have a wide target demographic, mainly because of the new normal that the world is experiencing. Prior to COVID we targeted the main user groups of food delivery, people aged 18-45 who are digitally inclined. However, with COVID, the addressable market has expanded to include the 45-65 year old demographic. Currently we segment our customer base by age, eating preference, and lifestyle, and variations of them all; totaling 9 different customer segments. We have product verticals that are targeted for each segment,resulting in 11 of our own proprietary food brands, plus 5 partnerships with existing established brands such as TGI Friday’s, that together appeal to all segments with a little overlap.
How does Hub and Spoke model work in delivery?
Fundamentally, this model allows for 85% of the food preparation to be completed at economies of scale in the Hub, then distributed to the spokes for final prep, assembly, and delivery. With this model, our preparation time per meal can be as low as 45 seconds. The thesis behind this model is the last-mile delivery for hot foods is the difficult leg of the logistics arm. So we need to get our kitchens deeper into the communities to service those geographies, which is where the Spoke kitchens come into play. We're able to accomplish better economies of scale and get greater breadth of reach because our Spokes are located inside high-density neighborhoods and communities. Currently the Hub is 60% virtual and we've distributed the workload of our Hub to other contracted facilities.
Packaging it right
This is a big part of our focus during menu creation. Each menu item needs to be able to be packaged well, withstand the delivery process, AND unpackage beautifully. But in reality, this is only part of the equation. The food has to be good, then the food has to withstand being in a box for 20 minutes, and finally it has to retain the flavor, temperature, and aesthetic appeal that we intended for it to have when the customer receives, opens, and experiences the food. Potentially this is where other players in this sector have failed, over emphasizing a specific aspect of this entire supply chain, when in reality, it's a total solution. For example, we would never do french fries, unless we've mastered all components of this supply chain from sourcing of potatoes, cutting and preparing, frying, then packaging it correctly to stay crunchy, and to not be damaged by the driver / carrier. There have been restaurants who have figured this out, but it's not an easy task.
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How much do you work on customer surveys and data? How does it help enhance the service?
This is a huge part of our culture and belief system. As much as we work on internal feedback loops and interactions, customer feedback is a huge part of success and accomplishing product market fit. We're proud to state that 30% of our customers provide feedback and 99.5% of it is positive. We have huge customer loyalty and ultimately, they make us the success we are today. In addition, we send out surveys to all customers quarterly to check in and ask for feedback: what do they want to see or eat, how can we make their experience better, to some extent, we crowd source our innovation.
We are also working on incorporating a customer loyalty rewards program into our platform, similar to the way Expedia, Uber and other online platforms have – which will offer our customers promotions and rewards for ordering meals and groceries from us, and help keep them in the JustKitchen “ecosystem”.
You are planning to expand your business not just in Taiwan but other countries. Any plans entering India?
Yes, we have very ambitious expansion plans. We currently have total of15 locations in Taiwan, one Hub kitchen and 14 Spoke kitchens, and plan on having 35 Spokes and two Hubs in Taiwan by the end of 2021. Simultaneously we expect to launch in Hong Kong and Singapore in Q1 of 2021. These two locations are "low hanging" fruit for us to expand into, both because of user behavior, eating preferences, and digital adaption. We have other plans for South East Asia, Asia, and North America. We expect that India will be part of our roll out in Asia, but not until 2022. By the end of 2022 we are aiming to have 80 self-operated locations and 200 licensed locations.