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How Deliveroo et al are delivering change as ordering apps serve up the future of food

The Drum 16 Mar 2020 12:00

Ask about the future of food delivery and you’ll be served up everything from driverless cars to robots to drones. Pizza Hut and Toyota are working on a concept autonomous delivery vehicle, Domino’s has forged a partnership with self-driving delivery startup Nuro to pilot robot delivery in Houston, Texas, and last month Uber announced it would begin trial drone deliveries with McDonald’s in San Diego.

These experiments doubtless make headlines and likely hint at the direction food delivery will go at some point, should regulators and governments get on board and city infrastructures support it. But for the vast majority of restaurants, the future of food delivery is less concerned with the techy mode in which food will reach people, and more with how they adapt their businesses in a sustainable way to handle greater numbers of people transacting online.

Ray Reddy was a product manager for Google Shopping before he launched his mobile ordering app, Ritual, in 2014. Since then it’s landed $127m in venture funding and expanded into 50 cities with 15,000 restaurants partners.

“Retailers saw digital as incremental revenue, and that they could generate more revenue by opening a website. Then they realized e-commerce wasn’t an incremental channel but was actually going to be their business. The real question is how restaurants adapt. We will see more of them optimizing for channels and not doing everything. Some things, like delivery, will only be done out of certain stores.”

Retailers made the shift from managing e-commerce orders within local stores to setting up massive fulfillment and distribution centers focused solely on getting goods to digital customers. Restaurants are also moving in this direction, these ‘fulfillment centers’ dubbed ‘dark kitchens’. In disused buildings or shipping containers in derelict spaces, their ‘kitchens’ are cheap extensions of restaurants and prepare food for quick delivery.

For example, a company called Taster operates three online-only restaurant brands out of London, Paris and Madrid. It was founded in 2017 by Anton Soulier, who was one of the first employees at Deliveroo, and recently received $8m in Series A funding. It’s now seeing 30% growth month-on-month and has plans to expand in the coming months.

Subscription services

“Delivery is convenient, but you pay a reasonably high price for that convenience – you have to pay to have that food moved from one part of the city to another,” he says. “It’s an expensive thing to do. But the number of people who do that routinely – every day or week – is small. It’s not a behavior of your average person. If you look at delivery stats from other companies, it’s an occasional use thing for most people.”

In the UK last year, Deliveroo rolled out a service called Deliveroo Plus where, for £7.99 a month, subscribers won’t have to pay its £2.50 delivery on every order. Uber Eats has also been testing a loyalty program that could potentially do away with delivery fees.

But there’s only so many subscriptions the average consumer will buy into. We’ve seen this in the entertainment world, where the likes of Netflix, Hulu, Amazon Prime Video, HBO, CBS, Disney, Apple, NBCUniversal and YouTube Premium have all been battling it out to win subscribers. But, according to research from Deloitte, 47% of US consumers are frustrated by the growing number of subscriptions and services required to watch what they want. It’s been dubbed ‘subscription fatigue’ and threatens the business models these streaming giants have built.

“People are going to divide into food tribes – we’re already seeing that happening. So we’re going to see more pockets of people getting absorbed into companies, and companies finding ways to serve them. I don’t think we’ll see survival of the fittest and insane growth for everyone. It’s more about how you nurture active audiences and brand champions.”

The final challenge facing the future of food delivery is sustainability. There’s a race to deliver food in as short a time as possible, but there’s increasing concern at the environmental damage this can have. Add to that the ongoing attention to plastics, which are still frequently used in takeaways, and it’s little wonder that many delivery businesses are putting focus on how to make their companies more environmentally friendly.

The Allplants founder predicts that, in coming years, we’ll see the demonization of the cardboard and paper bags largely used for delivery, in the same way we’ve seen a conscious effort to reduce the volume of unnecessary plastic that comes with our Friday night takeaways.

“We’ve taken some steps in this area, being the first food delivery company in the UK to introduce a cutlery opt-out option for customers and switching this on by default,” he says. “We’ve also helped our partners by giving away non-plastic straws to restaurants to help them trial making the switch.”

A version of this feature originally featured in The Drum magazine's 'Future of Food' issue in which we considered the changing food industry, and how marketing might change attitudes to food and drink in the future. You can purchase the issue here.

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