Pre-COVID context on the dark kitchens market in UAE and the developments post COVID
The food services industry in UAE had been growing on the back of rising disposable income among the working population supplemented by a continuous increase in the region’s tourism. The estimated $35Bn food and beverages market of the country was growing roughly 6.5% year on year pre-COVID and the food services sector constituted roughly 45% of it by 2019. From the supply end, online food delivery held an 8.3% penetration with the tech-enabled dark kitchens being the fastest-growing segment, almost doubling in size for the last two years.
Post the pandemic, the overall food services sector suffered considerably and is expected to register a loss in earnings of almost 40% by year-end compared to the previous year. However, the disruption has led to a net positive impact on the online channels of food delivery. While on one end the dine-ins lost around 80% of their sales post the implementation of lockdowns, online food delivery dealt with an ever-increasing number of orders as consumers grappled with the craving for food from their favorite restaurants. Dark kitchens showed the fastest recovery with increasing attention from the restaurant owners who shifted their immediate focus towards online and were looking for order fulfillment at a lower cost, a crucial need for sustenance post the restrictions of dine-in operations.
Multiple business models currently exist in the dark kitchen space in UAE - virtual brands, virtual restaurants, satellite kitchens/kitchen-as-a-service, and integrated. Each model varies in terms of asset ownership, primary target segment (types of brands and restaurants they cater to), and the operational value chain they command.
COVID has led to a new normal creating lasting changes in the supply side partnerships as well as business operations. The changing consumer sentiments reflect a heightened need for hygiene and quality of packaging, however, sentiments like delivery speed and variety of food are expected to gain prominence in the long run.
The landscape for dark kitchens is becoming increasingly competitive with more than 380 brands and over 70 kitchens present in the region. No one model can be viewed as a dominant model as each of them have their own sets of value propositions and challenges. Apart from the adoption by the restaurants, the sustainability of these dark kitchen models depends on the right investments and business capabilities. Going forwards the competition is expected to further intensify as the overall sector deals with the aftermath of COVID.
We have formed the report basis our existing IP on the food-tech sector in the MEA region, consumer research conducted at key intervals to observe the changing sentiments, expert inputs and the study of leading dark kitchen players in the market including - SWHK, Kaykroo, Rebel Foods, Kitopi, Food To Go, Deliveroo Editions, Krush Brands, etc.
This report includes the Pre-COVID context on the dark kitchens market in UAE and the developments post COVID along with segregation of business models and long term implications that establish the use case for dark kitchens.
This report will help the reader answer the following questions:
The food services industry in UAE had been growing on the back of rising disposable income among the working population supplemented by a continuous increase in the region’s tourism. The estimated $35Bn food and beverages market of the country was growing roughly 6.5% year on year pre-COVID and the food services sector constituted roughly 45% of it by 2019. From the supply end, online food delivery held an 8.3% penetration with the tech-enabled dark kitchens being the fastest-growing segment, almost doubling in size for the last two years.
Post the pandemic, the overall food services sector suffered considerably and is expected to register a loss in earnings of almost 40% by year-end compared to the previous year. However, the disruption has led to a net positive impact on the online channels of food delivery. While on one end the dine-ins lost around 80% of their sales post the implementation of lockdowns, online food delivery dealt with an ever-increasing number of orders as consumers grappled with the craving for food from their favorite restaurants. Dark kitchens showed the fastest recovery with increasing attention from the restaurant owners who shifted their immediate focus towards online and were looking for order fulfillment at a lower cost, a crucial need for sustenance post the restrictions of dine-in operations.
Multiple business models currently exist in the dark kitchen space in UAE - virtual brands, virtual restaurants, satellite kitchens/kitchen-as-a-service, and integrated. Each model varies in terms of asset ownership, primary target segment (types of brands and restaurants they cater to), and the operational value chain they command.
COVID has led to a new normal creating lasting changes in the supply side partnerships as well as business operations. The changing consumer sentiments reflect a heightened need for hygiene and quality of packaging, however, sentiments like delivery speed and variety of food are expected to gain prominence in the long run.
The landscape for dark kitchens is becoming increasingly competitive with more than 380 brands and over 70 kitchens present in the region. No one model can be viewed as a dominant model as each of them have their own sets of value propositions and challenges. Apart from the adoption by the restaurants, the sustainability of these dark kitchen models depends on the right investments and business capabilities. Going forwards the competition is expected to further intensify as the overall sector deals with the aftermath of COVID.
We have formed the report basis our existing IP on the food-tech sector in the MEA region, consumer research conducted at key intervals to observe the changing sentiments, expert inputs and the study of leading dark kitchen players in the market including - SWHK, Kaykroo, Rebel Foods, Kitopi, Food To Go, Deliveroo Editions, Krush Brands, etc.
This report includes the Pre-COVID context on the dark kitchens market in UAE and the developments post COVID along with segregation of business models and long term implications that establish the use case for dark kitchens.
This report will help the reader answer the following questions:
- What were the market landscape for dark kitchens and food services in general before COVID and its key growth drivers?
- What has been the impact of COVID on the online food delivery market and the changing trends in the supply side that will form the new normal?
- How is the consumer sentiment changing towards consumption of food and its implications for online food delivery?
- How will the food services market recover post-COVID and its impact on online food delivery and dark kitchens segment in the long run?
- What are the opportunities and challenges for each of the dark kitchens business models - Satellite Kitchens, Kitchen-as-a-service, Virtual Brands, Virtual Restaurants, and Integrated models?
Table of Contents
1. The Market Scenario of Food Services in UAE
2. Developments post COVID and rise of online
3. Dark Kitchens business models operating in UAE
4. The way forward for online food delivery and dark kitchens in UAE
5. Sustainability of dark kitchen models
6. Dark kitchen players in UAE
Methodology
1. Primary Research Consumers, stakeholders and industry experts are interviewed to help us validate key trends and market estimations.
While the exact figures may vary for different reports, on average, the publisher conducts:
- ~1,000+ consumer surveys
- ~30+ IDIs (in-depth interviews) with stakeholders (consumers, suppliers, distributors and delivery executives, among others)
- ~25+ detailed discussions with industry experts Depending on the report in question, consumers and stakeholders are distributed across:
- City tiers (Metros, Tier 1, Tier 2, Tier 3 & Tier 4 cities)
- Income levels
- Genders
- Age groups
- Professions
- Internet usage pattern
- Geographies
2. Secondary Research Secondary includes analysis of databases available in public domain. Information sought is cross-referenced and aligned for soundness.
Note: In order to maintain confidentiality, results and analysis of the surveys and expert interviews are presented at level of overall scenario analysis and representation only.
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