5 powerful shifts that will redefine the world of F&B after Covid-19
Subscription Kitchens. New Menus ‘dropped’ like Hypebeast collabs. Your day’s meals and groceries in a neighborhood mobile van. Here’s a rundown of the changes that could redefine how we eat forever, from an insider’s POV.
‘The landscape is going to be forever changed. It’s going to be a whole new world.’ — David Chang, Momofuku
A few days ago, Momofuku announced that it would close restaurants in NYC and Washington D.C. This was an important moment not just for Momofuku Group, but a watershed moment of reflection for F&Bs. After all, if a brand with their international clout and deep pockets needed to rethink their model, what does this mean for the rest of us?
Very few restaurants will be prepared for something like the Covid-19 Crisis. Even in a developed digital economy like Singapore, close to 60% of restaurants said that they are not equipped to deal with the impact on their operations, while 57% expect a revenue loss of 50% in the coming months.
Majority are playing catch-up and paying the costs of delayed digitization. Without a strong brand or existing scale advantages, everything from getting sufficient visibility online to sorting out the right delivery logistics will continue to be an uphill struggle.
Post-Covid-19, how will the embattled foodservice industry meet the needs of a new generation of more delivery savvy, cost-conscious diners? Will we need to say goodbye to our favourite local eats?
As the Head of Digital and Growth Platforms for Unilever Food Solutions, the foodservice arm of Unilever, one of the things that keeps me on my toes is the opportunity to stay in constant conversation with industry partners and disruptors to reimagine foodservice.
Here’s a peek on the watercooler conversations now happening in this space.
1. From Food to Fad — Applying Hype culture to foodservice
As people continue to shift more of their meal occasions from dine-in to delivery, this means that restaurant competition just went from brands within walking distance, to brands within delivery distance. it’s the equivalent of training for Nationals only to wake up and find yourself in the Olympics.
In such a competitive climate, having insights into what diners will crave becomes more important than ever. In China, 69% are spending more on in-home food and 49% are spending less on eating out post-crisis. The initial health and nutrition trend will continue, but not without creating an offshoot of pleasure-seeking behavior for richer and more unique taste experiences.
After all, if delivery is the new dine-in, then it’s the rabbit hole we go down to seek restaurant-quality taste experiences that cannot be easily replicated at home. For the rest of our dishes, we have Google.
How can restaurants successfully leverage such hype-seeking behavior in delivery? One can look to street fashion for inspiration. Fast fashion and social media has completely upended the rules of marketing by creating an entire consumer culture around the latest ‘drops’.
A drop is a limited release of merchandise, often as a marketing technique by streetwear fashion brands. These are usually iconic collaborations and usually get sold out in just days or even hours from launch.
The scarcity is a deliberate rouse that turns the products (and by association, everything else the brand sells) from commonplace to covetable.
Food has all the preconditions for hype. Instagrammable? Check. Novelty seeking behavior? Check. The relative accessibility of food prices, coupled with many bored people at home, suggests a good torque on this flywheel.
The Unilever Food Solutions team in Indonesia generated hype in Indonesia by partnering with popular coffee chains like Ali Kopi and Kopi Ketje for the well-loved Bango sweet soy sauce brand. Durian, local coffee, and Bango — what other combination could be more representative of Southeast Asian food sin?
This went viral with Millennial and Gen Z diners, who went on to replicate their own versions at home. This was great for both B2B and B2C revenues, but importantly, also gave Bango fresh relevance in a fast growing, foodie community.
2. From Out-of-Home to In-your-Home — Hello, branded meal kits
Covid-19 did what many of mothers could not, inspire a whole new generation to start cooking. Many are cooking more, and expect to continue post pandemic. Great news for grocers, not-so-much for restaurants hoping for a V shaped recovery.
F&B brands have pivoted and are responding to this shift. Non-traditional sources for good meat and seafood have emerged. Steakhouses and sushi bars are offering up their ingredients for home orders. Din Tai Fung launched a frozen dim sum menu for consumers to enjoy teatime at home.
We also see the rise of the Meal Kit, a set of pre-portioned and sometimes partially-prepared food ingredients and recipes sent to consumers to help them prepare a homecooked meal.
From the DIY Bubble Tea Kit by Singaporean brand Liho to F&Bs like Ajhumma Korean and Open Farm Community offerings, Meal Kits are a new additional revenue stream that we will continue to see post-covid.
Such concepts like have existed for a while in American markets, though these are driven by horizontal players like Blue Apron and Home Chef peddling unbranded, standard meal options. These have been plagued by high acquisition and logistics cost.
However, there are some changed conditions from this crisis that may yet make this viable.
One — more F&Bs are investing in ready to eat/heat/cook production capabilities as many see a need for risk diversification. This means a growing supply of pre-packaged ingredients/sauces, potentially branded meal kits that come with existing supply chains and a loyal customer pool.
Two — many online marketplaces have pivoted during the crisis to create more porous food categories that include not just groceries, but also F&B listings (Lazada, Shopee, Carousell). This not only gives them larger scale effects in reach and logistics, plus a potential new revenue stream.
The same players could easily extend their F&B listings to include branded F&B meal kits. Those with pre-existing cold chain capabilities, like Lazada’s Redmart will enjoy a further advantage.
Delivery players like Grab or Gojek can also tap into their existing customer base to launch the meal kits through their grocery verticals like Grabmart orGofresh. Meal + Kit combinations for lunch and dinner can help better delivery cost ratios.
It’s a win-win as the online partners’ reach, logistics muscle and offer depth, makes buying meal kits more intuitive and attractive to consumers. The platforms in turn benefit from reduced acquisition cost due to ability to springboard off the F&B’s loyal customer base.
3. From Foodservice, to Food-as-a-Service — A Tale of Two Kitchens
We will emerge from the crisis with less F&B establishments than we had in January 2020. While heartbreaking to watch, hopefully this will address some latent inefficiencies. A better matching of what and how diners want to consume with the margins F&B operators need to make will allow the industry to emerge stronger.
Two very different models of Food Service will be created as Living-to-eat and Eating-to-live become distinct needs.
First, Eating-to-Live. Chain restaurants who have better unit economics and deeper pockets are better placed than independents to weather the storm. For these chains, thriving in the new normal still means being able to cater to a more cost-conscious consumer base.
This, coupled with the rent trauma will turn some to explore ghost kitchen models to serve a wider customer base without the proportionate increase in overheads.
The decoupling of reach and rent is not new. Grab and Gojek now have 70 ghost kitchens across SEA, and new players like Smart City Kitchens also provide virtual kitchen solutions. Most chains already have their own central kitchens and are now considering the virtual tradition. Covid-19 will accelerate these decisions.
While the impetus to open ghost kitchens is undoubtedly to bring down the costs of expansion, such centralized digitization of meal production means that there is potential for a more data-driven and personalized approach to creating meals.
Keto, paleo, vegan, gluten-free. As more consumers become more exacting about what they put into their bodies, a good dish for Jane is no longer the same as a good dish for Agus. Depending on one’s functional eating goals, be it weight loss, bulking up or pregnancy, biohacking through food is a big movement. However it is also one that sorely lacks affordable, convenient and tasty options.
A subscription to a central kitchen, or Spotify for Meals, that offers a variety of food with customizable diet options, delivered to their current location (office, home, or even the gym) can help to deliver food variety without compromising diet outcomes.
For the Kitchen, this gives volume and demand stability; way better than having to chase after every new meal order.
Let’s also look at Living-to-Eat, or experiential eating occasions, where indulgence is the pursuit.
As central kitchens allow people to get cheap and convenient meals from delivery, dining out will become special occasions where unique dining experiences, or #foodtainment are actively sought after.
What will these new Food Disneylands look like? Restaurants like Nox or Noma that offer more than just good food, but unique sensory and purposeful experiences gives us a glimpse into the future.
My bets are on farm and table experiences — provenance tours, where hyperlocal ingredients meet globally inspired cooking. Experiences that allow diners to not just eat the food, but to see, touch and smell the process.
4. From Hyperglobal to Hyperlocal — Lessons from the Karang Guni man.
One outcome from the crisis is the realization that we are not just a global network of individuals, but a global network of communities.
Social distancing and lockdowns have created a developed a new sense of place, as access to essential services become limited to what’s nearby. In a matter of months, our world has shrunk from as far as a plane can fly us, to as far as our legs can carry us.
Such a time has seen a lot of non-profit and commercial activities providing hyperlocal services and goods spring up. For example. Voluntary shopping on behalf for vulnerable elderly, initiatives to support nearby F&Bs, and even mobile supermarkets.
What if these hyperlocal activities can be optimised to create a local services and goods ecosystem, leveraging on the efforts of neighbourhood residents, that minimises costs and waste outputs?
In China, community group buying platforms are paving the way for a new form of C2B commerce. Tongcheng Life is one such example that allows residents within the same neighborhood to buy fresh produce products and other home supplies.
A less high-tech, but tried and tested model is the Singaporean karang guni. They are form of rag and bone men who collect used items like newspapers for recycling.
Because the karang guni man followed a set route to the neighbourhoods at a specific time at pretty regular intervals, my grandmother would know roughly when to expect him. She would always make time and effort to collect newspapers from our neighbours beforehand on the way back from the market. It didn’t cost her much effort because it was in her usual route, but the few extra bucks made her very happy.
In the vocabulary of distribution, the karang guni man is the hub, and my grandma is the spoke.
Imagine also, if it’s not old newspapers that is being traded, but meals, groceries, or even recyclables.
This could mean new hyperlocal F&B delivery models, like scheduled neighbourhood visits from food cum grocery trucks, optimized for demand surge periods, that can help to make unit economics more sustainable.
This last mile will be further supported by neighbourhood walkers, like grandma, covering the last few meters from truck to door.
5. From Competition to Collaboration- Moving ahead together
F&B digitization is hardly a new topic, but Covid-19 has created both the indisputable rationale and sense of urgency for players to transform. It has also created new norms where foodservice businesses, industry players, public institutions, and even private individuals come together in new Public-Private-People partnerships.
Government initiatives to support the local industry with tech players like the Grow Malaysia initiative or the Food Delivery Booster Package by Enterprise Singapore are all good examples. There have also been many ground-up initiatives like Foodleh in Singapore, or Pa, Deliver Pls! in Philippines with similar objectives.
What this crisis has been is a rallying call for F&B community to work more closely and progress together, not as separate entities, but a dynamic and integrated ecosystem.
This April, our team initiated the #UFSunitesFnB programme, beginning in Singapore, that aims to leverage the industry’s strength in numbers to advance F&B digitization efforts. Registration is free and members get access to group deals from key digitization partners in visibility, logistics and packaging.
The initiative sprung from a simple collaboration with Carousell to provide F&B operators with an affordable visibility option during the social distancing measures. As more partners were inspired by this efforts and approached us, we realized that there was more that UFS could do as a leading food service supplier to help enable and integrate the ecosystem. It’s beginning days yet, but the goal is to connect even more services and content to help F&Bs make the successful transition from great restaurants to even greater brands.
Collaboration and experimentation is necessary moving forward as it is unlikely there is one universally perfect solution for digitization and F&B transformation that works across all concepts and diner profiles.
To give an example, while smaller establishments find Carousell simple to adopt, larger restaurants with multiple outlets may prefer the more sophisticated promotion options offered by Lazada and Shopee. The most advanced F&Bs have their own website and marketing teams that use Google and Facebook tools to promote their restaurant.
A similar, more designed-for-channel approach could be done for other verticals in the ecosystem; such as delivery, payments, ingredients, packaging etc.
Such targeted methods could not only add depth and weight to current offerings, but also better line up diner willingness to pay with F&B costs-to-serve.
The fact that the Big Mac has existed and grown alongside high end burger chains that cost 4X more? Nobody expects the same experience from McDonald’s and Burger Lab, and hence certainly not the same price.
The F&B market is lucrative enough, and consumer preferences and occasions fragmented enough to give everyone a space, if end-to-end design thinking is thoughtfully applied in transformation.
Against these five shifts, the simple message is that the days where F&Bs are simply food production sites bound by the four walls of their kitchen, physically, financially, or conceptually, is officially over.
F&Bs today need to see themselves as an evolving BRAND that guarantees a specific food experience/occasion, and work continuously with partners in the ecosystem to find new ways to delight and deliver.
In such a world, the ones who are able to quickly transform and leverage digital, data and ecosystem partners to make strategic choices around their customer journeys will be able to rise above their competition.
‘The best way to predict the future is to create it. ’ — Peter Drucker, the founder of modern management.
If you found this insightful, or have any of your own perspectives to share, feel free to engage with me in the claps/comments below!
This article was also published on UnileverSGCareers account on 20th May 2020. The views stated here are mine and do not necessarily reflect the views of Unilever Food Solutions.
