Culinary zeitgeist: Food businesses look for a slice in the Rs15b home-delivery market

New trend encourages growth of food portals that take orders directly from customers.

KARACHI:

The Pakistani appetite for food, which spurred the growth of restaurant and food business in recent years, is now taking this hyper-competitive market to the next level as many of the new entrants have customised their business models to tap what has now become a Rs15 billion a year food-ordering market.

During the last three years, industry sources say there has been an amazing growth in restaurants and food businesses dealing exclusively in take-away and home delivery. Operating a kitchen-based business with an online presence seems to be the latest trend in the food business, they say.

Take for example some of the new players that entered the market in the last three or so years. Broadway Pizza, 14th Street Pizza, New York Pizza, Chairman Mao, Golden Dragon, Burger Shack, Burger Factory and Burger Lab to name a few are only kitchen-based businesses dealing in take-away and home delivery, said Nauman Sikandar Mirza, CEO of EatOye!, an online food delivery and restaurant reservation service.



The food-ordering market has grown to Rs15 billion a year, according to Mirza, the estimated figure comes from an analysis of the 700 restaurants across Pakistan that EatOye, formerly Food Connection Pakistan, has been working with for the last three years.

“Operating a kitchen-driven business is relatively easy to manage,” Mirza said. “It gives you a leverage to focus exclusively on building a great product without having to worry about the ambience of your restaurant.”

The demand for home delivery is not only giving a boost to the restaurant business but is also helping in the growth of home-based establishments providing personalised cakes and health foods, he said.

Food-delivery websites

Moreover, this trend has also spurred the growth of food-delivery websites, like Urbanite.pk, KhaoPiyo.pk, Foodpanda.pk and EatOye.pk, he said. All of these food portals are vying for a slice of the food-ordering space as none has achieved the position of market leader so far.

About 95% restaurants in Pakistan do not have their own call centres and the ones that do, have to rely on outsourced human resources and the service quality suffers as a result, according to Mirza.



It is perhaps this gap or an additional layer between the customers and restaurant owners that has created a business opportunity for food-delivery websites that are now taking orders directly from the customers.

EatOye is one example of how online food portals are aiming to get some business out of this changing trend. It recently marked a transition from online food guide Food Connection Pakistan (FCP) to EatOye!

Explaining the reasons behind this change of business model, Mirza said FCP was a marketing-based model while EatOye is a transaction-based model. FCP used to help businesses advertise and market their products (food) and customers had to do the actual transaction at the restaurants. But with EatOye they are involved in the transaction, which can be done through this platform.

Long way to go

While the progress is impressive, the food-ordering market has a long way to go for it represents a very small chunk of the country’s overall restaurant business. Pakistanis easily spend more than $1 billion a year on food outlets and restaurants, according to another study by EatOye.

The study, which covered 25,000 restaurants in different cities of Pakistan, was based on the minimum revenue required to sustain a restaurant business month-on-month basis, Mirza explained.

Also, there are signs that this niche market is giving old restaurants a run for their money.

The food-ordering market is responding very well that’s why these kitchen-based businesses are growing, he said.

“During the last six months – since we launched EatOye – there has been 100% growth in the number of transactions month-on-month,” he said. “In the same period, we served between 35,000 and 40,000 customers and had a customer retention rate of 40%.”

Published in The Expres Tribune, February 17^th, 2014.

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