The Emergence of Cloud Kitchens post the Covid-19 Pandemic

The food and beverage industry worldwide provides millions of meals on daily basis. Food, which includes all types of cuisines and beverages that include all types of alcoholic and non-alcoholic drinks, promoted the concept of food service. Food is served everywhere in bistros, restaurants, and cafeterias and through delivery channels offline and online (Cousins, Lillicrap, Weekes, 2014). In the food and beverage industry, meeting customers’ expectations is crucial and needs continuous measurement and utmost enhancements to generate customer satisfaction. The competitiveness of products is based on the customers’ satisfaction. Satisfaction is elaborated through the assessment of the customer’s expectations towards a product or service and the experience that they get once the delivery’s happened (Zehrer, 2009). Food products can be identified as either hedonic or utilitarian. The consumers’ perceptions of the quality of food and its service have been essential to accept new innovative food and beverage technologies (Bresciani, S. 2017). For consumers, to find an answer to the typical question:” What’s for lunch?” there have been too many attempts to build planned customer behaviors to affect the consumer decision-making process while ordering food.

Research undertaken in 2015 by Natalia Maehle explained that there were main attributes of food products when it comes to a consumer’s selections. These are prices, taste, environmental friendliness, healthfulness, etc. Customers want multiple choices when it comes to ordering food. customers have expectations of utilitarian food to be natural, clean, fresh, and healthy. They also expect their hedonic meals to be delicious and enjoyable (Antonides, 2011). In this internet age, all the facilities are ordered online. Speaking of the food and beverage industry which serves a primary physiological need, a few food terms gained huge attention. In this paper, a demonstration of consumers' perception of the food and beverage industry is put on the table, and the cloud kitchens concept is picked as an innovative choice and examined on how it affected the consumers’ decision-making process.

As mentioned earlier, the food and beverage industry requires many enhancements and innovations to meet the customer’s expectations. While innovation is vital for all food service providers, most of the innovations in the industry fail to sell commercially. An estimated 75% (Buisson, 1995) to 90% (Traill and Grunert, 1997) of innovations face a failure in their first year and a huge amount of resources turn to waste. The main reasons for the Grocery Manufacturers Association in 2009 were consumers not finding unique value propositions (71%) and the failure of products to meet their needs (61%). The main direction to successful innovation is to remain responsive to the needs and desires of consumers. This is named Consumer-Driven food and beverage innovations. An example of consumer-driven food and beverage innovations is cloud kitchens.

Cloud kitchens – also referred to as virtual and dark kitchens, are virtual restaurants that operate through digital channels with no direct customer interaction or a specific storefront and it usually operates in commercial kitchens that rent out spaces that are shared or private and use them for food business (Brazil). Cloud kitchens are online operating kitchens that don’t have a physical presence and they have witnessed massive growth in the past decade, especially after the covid-19 pandemic. They operate through Food Delivery Apps (FDAs) such as Deliveroo, Zomato, Uber Eats, and Talabat which help them reach consumers (Chhabra, Rana, 2021).

Dark kitchens are considered a quick alternative to typical restaurants as they have lower operating costs and depend on online channels to operate, specifically after the covid-19 pandemic. Dark kitchens are becoming more in demand and prevalent as it builds consumer confidence. Cai, Leung, and Chi explained in their study (2022) the benefits of dark kitchens and how they affect behavior intention positively. Their study aimed at examining consumers’ benefits such as taste, quality, and value for money and also some social benefits like the effect on public health, local economy, and workers' well-being. Also, the study by Kulshreshtha and Sharma (2022) showed how consumers perceive dark kitchens by examining the food quality, multiple options, staff attention, ongoing promotions, fast delivery, and feedback. Cloud kitchens such as Kaykroo, Faasos, Fresh Menu, and SWHK were able to support food demands and deal with fluctuations in demand and supply and they were able to establish themselves in the production and delivery of food service fields. Cloud kitchens are a better choice for food service providers as per oracle’s essential guide to cloud kitchens: “incredible flexibility is unprecedented in the industry and could be its most profitable ally. It allows businesses to diversify while cutting back their two biggest operational cost barriers – rent and labor. No servers, no uniforms, no furniture, soft furnishings, or expensive décor just straight food service for a group of chefs and cooks delivering to their customers”

The reasons behind the rise of cloud kitchens are (1) the stiff competition in the industry the big food companies are turning to cloud kitchens, which brings the small companies to follow as well. (2) consumers’ preferences are always changing, especially for the younger generations, millennials, and gen-Z. (3) The decrease in the operational costs, can lead to a reduction of around 25% of the operational costs. (4) Adding value to the food experience may lead to an increase in the food quality. (5) The personal disposal income increases as younger generations are most likely to invest in health solutions with a percentage of 11% (Choudhary, 2019).

Three examples are to be considered to showcase the awareness of the cloud kitchen term in specific markets.

1. In the United Kingdom, even before the covid-19 pandemic breakthrough, the takeaway food delivery market made up 8% of the total United Kingdom’s food service sector (Deloitte, 2019). Using Deliveroo and Uber Eats and in London only, restaurants were selling 9 million meals per week right after the pandemic. Dark kitchens have increased by a total of 12% from 2020 to 2021 in the United Kingdom (Magnet, 2022).
2. In India, only 10% of the population uses e-commerce websites and delivery apps (Tandon,2021). Right after the pandemic, more people turned to online food delivery systems (Sufi and Ahmed, 2021). Additionally, Faasos, the Indian leading cloud kitchen, has now opened 175 distribution points throughout India. FreshMenu has around 35 distribution points and they are expanding (Choudhary, 2019).?
3. In Brazil, 27.3% responded to a questionnaire knowing what a dark kitchen is, 46.1% reported hearing the term before and 26.6 reported not knowing it, and 1% fully described the term's meaning in detail (Brazil).

Some mechanisms affect the consumers’ decision-making procedure to hop on a cloud kitchen over a normal restaurant experience.

First, Customer Satisfaction.

Customer satisfaction is essential when it comes to service delivery. Kitchens that tend to gain customer satisfaction have an advantage over their competitors (Yuksel and Rimmingron, 1998). Also, satisfied customers are most likely to promote the food service to others (Rahim, Osman & Ramayah, 2010).

Second, Value for money.

The value for money can be explained by the equity theory which was firstly introduced by Oliver & Desarbo in 1988 when they stated the definition of customers for a perceived value as “what is fair, right or deserved” which can be applied to the food service market as well.

Third, Customer Loyalty.

Loyalty occurs when the consumer exhibits a specific brand or a food product (Uncles, Dowling & Hammond, 2003). It’s a long-term behavior that is accompanied by a consumer’s experience and stimulates commitment.

Fourth, Service Quality.

Service quality has an impact on responding to cloud kitchens and stimulates customer loyalty (Rahim, Osman, and Ramayah, 2010). This can include, the time of delivery, and the quality of the food, it needs to look good, taste delicious, and need to follow strict hygiene standards. The temperature of the food is also essential and it needs to be delivered as fast as possible. These all can be applied by having an innovative tech run and organize the whole procedure from the moment the customer asks for the service until it is delivered to his doorstep. As the CTO of Kaykroo, a Dubai-based cloud kitchen, Junaid Qureshi, mentioned in his Magnitt interview: “And of course, you only have one chance to make a great impression or risk losing the customer forever.”

Fifth: Brand Identification.

Bergami & Bagozzi (2000) explained identification as how a person can relate him or herself with a specific social entity, which can be a cloud kitchen. For some people, it’s a way to associate themselves with a band that reflects their personalities. This can also help in increasing customer spending and customer patronization.

There are more factors to consider in how a cloud kitchen is perceived, like marketing aspects and how digital advertising plays an important role in selling the idea to the customer himself. The automation aspect and how the whole procedure is done so easily just with a few clicks. There are also factors to examine how perception, attention, and decision making is being influenced by a cloud kitchen consumer.

In today’s market, the innovation paradigm has aroused showing interest in the academic and practical world (Chesbrough, 2003). The studies were focused mainly on the tech industry until the tech industry became part of the food and beverage industry (Sarkar and Costa, 2008). However, the changes that happened to the Food and Beverage sector led companies to think out of the box and try to organize innovative activities to delight their consumers and put into consideration the dilemmas that occur occasionally, like the Covid-19 pandemic. In today’s market, consumers’ buying behaviors and the way of their perceptions and decision making is continuously changing. The way consumers focused on online FDAs right after the pandemic explains it all. Therefore, the way the population is increasing changes eating preferences. There’s no room for queues and long waiting times, a home delivery service is becoming a must and digital channels cannot be set aside. There’s a need to always develop innovative solutions in the food and beverage industry. The way cloud kitchens have emerged with their business models in the past few years and how they have overridden traditional restaurants with all these technologies is quite impressive. This paper has included general facts about the food and beverage industry and then digs deeper into the factors that affect the perception, attention, and decision-making process for such an innovative food and beverage solution as the cloud kitchen. It also tried to offer cloud kitchens as an alternative that has been initiated and enforced itself on the consumer. The change that occurred in consumer behavior before and after the pandemic is quite obvious and tells us more about the required food service experience.

Written by: Mahmoud Sami Ramadan (3rd of November, 2022)

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