Let ghost and cloud kitchens thrive

Such kitchens became increasingly popular during Covid-induced lockdowns

KARACHI:

While glancing through your Facebook newsfeed, you must have seen posts about home-made food items that may be delivered to you, should you order on phone or WhatsApp – or on their Facebook pages.

These posts are actually the modern version of traditional kitchen services that have existed for a long time. You don’t know the kitchens where the food items of your choice are prepared but you get them and pay on delivery.

These are “ghost kitchens” in the true sense of the word – and are technically not exactly the same as “cloud kitchens” that the world came to know about post-Covid.

However, the two have now become inseparable, and look destined to rise together in future with greater penetration of the internet in Pakistan’s 220 million population and increased support of more direct person-to-person modes of payments.

Ghost kitchens became increasingly popular amidst the lockdowns following the first wave of Covid-19 in Pakistan in February 2020. But even before that such kitchens existed, though they were not known as ghost kitchens.

Before Covid-19, such kitchens were primarily offering their services to the workers of factories or mills or delivering home-made food in bulk to shopkeepers in a market or to offices located in multi-storey business centres.

Women used to cook food in sub-urban areas of big cities like Karachi and Lahore and their male family members – or in some cases hired male staff – used to strike a monthly deal with the potential clients.

In the industrial areas of SITE, North Karachi, Landhi/ Korangi, in numerous markets in Saddar and in business centres on Tariq Road, this service has remained available for decades and keeps expanding.

Comes February 2020 and we see a sudden rise of such services. Amidst lockdowns, the scope of this service expanded rapidly and alongside home kitchens that offered these services, outsourcing of food preparations by small and mid-sized restaurants began.

Home kitchens that took up the responsibility of providing prepared food to such restaurants became known as cloud kitchens. Hotpod was the first to introduce this service in Pakistan in the second half of 2020.

Later, some other cloud kitchens sprang up and they, along with a number of ghost kitchens, got themselves registered with Foodpanda. Needless to say their business multiplied instantly.

Cloud kitchens deliver home-made food not only to mills, factories, markets and offices, they also make deliveries at home gatherings or small parties and for individuals on their doorstep.

Orders are made through mobile apps, websites or Facebook pages. They also advertise their products aggressively on social media at a low cost and price them keeping in view their targeted customers.

Now, this service industry is expanding too fast. There is not a single neighbourhood in Karachi where you cannot find a number of ghost or cloud kitchens operating.

Jobless young professionals and employed young men and women desiring to supplement their income continue to open new and trendier kitchens.

Smart and business-savvy among them are making enough money and look confident to stick to this line of business. But those lacking in marketing skills and business strategies are opting out.

Contribution to overall economy

A few years from now this category of service is expected to become mature enough, and sizable enough, to contribute to the growth of overall services sector of Pakistan’s economy.

The global cloud kitchen market is projected to expand to $118.5 billion by 2027 with annual compound average growth rate of 13.5% between 2021 and 2027, according to news reports in the international media.

The possibility of such high growth rate is lucrative enough for new entrants into this segment of services industry.

What is more encouraging for Pakistani cloud kitchens (and ghost kitchens) is that based on 2020 data, Asia led the new wave of establishment of cloud kitchens, accounting for 20% of the total market size.

As for the potential size of cloud kitchens (and ghost kitchens) market in Pakistan, it is difficult to come up with reliable estimates due to low levels of documentation of the economy.

But even the most conservative estimates should run in tens of billions of rupees with the potential to hit Rs100 billion shortly – if it has not reached this level, already.

Low-cost financing and training

An important question is: what can be done to ensure the future growth of cloud kitchens and ghost kitchens in line with the international trend.

Digital retail banks being set up under the recently introduced regulations by the State Bank of Pakistan should offer them low-cost financing.

The introduction of Raast – a SBP-developed person-to-person transfer of payments – could be very helpful in this regard.

Besides, vocational training institutes should start paying enhanced attention to imparting training to the jobless men and women not only in cooking but also in online marketing.

The best help that the federal/ provincial governments could provide to this sunrise industry is to assure the cloud kitchens/ ghost kitchens that they would not be taxed at least till 2027.

Chambers of commerce and industry can do a lot to promote this services industry by constituting sub-committees on cloud and ghost kitchens and providing them with opportunities for networking with other businesses.

For example, the Karachi Chamber of Commerce and Industry (KCCI) –the premier chamber of the country – can invite people in the business of cloud and ghost kitchens to set up a sub-committee, which can reach out to the representatives of dairy, meat and chicken merchants as well as wheat, rice and spices traders.

This upstream networking would enable the majority of ghost and cloud kitchens to get food raw material at cheaper rates.

The KCCI can also help them in downstream networking, ie it can connect them to the KCCI’s member associations of trade and industry and business centres where they can offer home-made food at reasonable rates.

The writer is an electronic engineer and pursuing Master’s degree

 

Published in The Express Tribune, February 28^th, 2022.

Like Business on Facebook, follow @TribuneBiz on Twitter to stay informed and join in the conversation.