Cloud Kitchens South Africa 2.0

‘Don’t be too proud of this technological terror you’ve constructed. The ability to destroy a planet is insignificant next to the power of the Force’ — Star Wars IV: A new hope

Credit: Darth Kitchens Facebook

I find myself revisiting this topic from time to time. Since the last time I wrote about the concept of Cloud Kitchens as a concept in South Africa, VC Silvertree Holdings — South Africa’s DTC Rocket Internet (2 of the founders come from the German super incubator) — has funded the first (known) cloud/dark/ghost kitchen in South Africa; Darth Kitchen. A fascinating name I must say.

Credit Silvertree holdings

Darth Kitchens is a startup created by a co-founder of food delivery company Orderin and a bunch of executives at restaurant group Bootleggers. The Experienced restauranteurs have built a 400sqms kitchen in Cape Town with the idea of making food for delivery only. The model they plan to use is to build brands themselves by partnering with chefs instead of renting out space to existing restaurants and fast-food chains; smart given the economy of the food industry in South Africa is in dire stress and value chain control is imperative in this market.

This is no longer a concept rather a reality and a reality that makes sense. After my first article a few people we quite intrigued about how it can happen. My opinion is the major cost in figuring the unit economics of the business is the ability to acquire customers at a reasonable price, so marketing and sales admin would essentially be the highest cost but the agility that comes from not having a physical presence besides the 400sqm kitchen, will allow them to scale high performing brands and kill non-performers very quickly.

Credit: Facebook

I was able to find 3 brands that Darth Kitchens currently runs; Fluent bowls and burger co’s ABC and buddy’s burger in Cape Town.

My obsession around this topic comes from how under the radar it’s flying and how Travis Kalanick the founder of Uber recently raised $400m for his new startup, there might be something here. I recently got my hands on a report by British media company Sifted on the future of food delivery, the report gave me insights on a couple of European startups that are tackling this; for this article, I’ll mention 2 that I find interesting. The first one is Keatz, a German Cloud Kitchen startup founded in 2016, it currently operates 6 brands in 10 markets across Europe and has raised over €19 million in funding. Keatz delivers across all major delivery platforms, distribution has been solved for them all they need to do is deploy an effective customer acquisition strategy and doing this by catering to a variety of different segments. The second one is Taster, a French startup that was founded in 2017 and has raised $13.1 million to date, Taster, like Keatz operates by creating several delivery-only brands. Taster is positioning itself as a lifestyle food company very millennial-focused.

I wanted to visit this topic again, since its a reality in South Africa to put my thoughts on paper for my intellectual curiosity more than anything. Currently, Darth Kitchens is only in Cape Town and to scale they will have to naturally open another 400sqm kitchen and most probably in Johannesburg. But you see Johannesburg and Cape Town have totally different cultures when it comes to food and dining. Johannesburg is more fast-paced bring me my food now and Cape Town is if it’s not vegan enough it’s not good enough culture, so salad bowls won’t fly in Johannesburg. Now the problem is that South Africa is a big-small country, high diverse (extremely unequally) but there are interesting business models that can be explored with this. What about traditional food? what about demand in remote areas? can there be a great chicken brand in the middle of nowhere like there is KFC?. What about the agricultural sector? can this type of business add value to smallholder farmers? does this now create a new marketplace? because small kitchens could only work if they have a constant supply of quality inputs.

The model can be tackled from different angles, from rental only kitchens to dark kitchen brands to aggregating supply the of inputs and demand. There are 4 different types of businesses right there in the value chain that can be explored. Last year Uber eats released its first SA cravings reports and the insights derived from the data are quite informative; for instance, South Africans are willing to pay extra for pap and tomatoes are the most removed condiment (bro are they a fruit or vegetable, they need to pick a side), South African still love chicken — chicken sandwich being is the number one most order food(everywhere). Giving people what they want through data-informed strategies is something new to the food industry, putting the power of choice in the hands of the customer and delivering a service tailor-made for them while remaining agile and adaptive to market realities.

Taking a topdown approach to how big the market opportunity is in South Africa by looking at the numbers. According to Statista South Africans spent R13 billion ($870m) ordering food online in 2019 (most of that probably went to McDonalds) on a +22% YoY growth, so the market is growing by over a 1 billion rands a year. The 2 big delivery platforms; Mr D and UberEats have 2m app downloads and 2.1m downloads respectively in the AppStore and play store, granted most of those overlap, together they have 80–90% of all the market. Mr D claims to have 700 000 monthly active food users and also claim to hit highs of 10 000 requests per minute. My brain is being dribbled by numbers at the moment but this seems like its a lot (no?).

I’m sure the guys at Silvertree looked these number and signed the check immediately; but I’m quite interested to see how this evolves, I will certainly be paying attention to it.

Darth Kitchen Brands:

Anvil Burger Co

Credit: Facebook

Buddy’s Burger

Credit Facebook

Ububele is no longer a business school student but still has no right writing articles on medium for anyone to read especially the compulsive coverage of cloud kitchens. He is neither qualified nor intelligent enough to comment on these type of things.

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