“I got our lunch from the ghost kitchen.”
How taken aback would you be if you heard this? But don’t worry, a ghost kitchen or its more user-friendly name, cloud kitchen is anything but an eerie place. As a matter of fact, they are currently thriving thanks to the pandemic. Here’s why.
According to economic analyst Dr Aimi Zulhazmi Abdul Rashid, people were driven to readjust their tastes towards services that were accessible through digital platforms as they aligned with the minimal contact and social distancing behaviours highlighted during lockdowns.
The adaptation and adoption rate to the digital economy or gig economy now has been tremendous by all levels. – Dr Aimi Zulhazmi Abdul Rashid
A big part of the change is in how people are getting their food. Since the start of the pandemic, the majority of the people declared that their usage of online food delivery services had increased tremendously. Thanks to dine-in restrictions, and public fear of contracting the infection by mixing with crowds, and long long lines are grocery stores many people preferred to just order in. It wasn’t long before this became one of the most profitable sectors of Malaysia’s economy.
While the Malaysian foodservice sector is predicted to grow at a CAGR of 4.3% to $24.8 billion by 2023, the pandemic and global lockdowns have driven restaurant owners and new F&B companies to look outside the box in terms of new business models that offer low start-up costs and high revenues. Thus the utilization of cloud kitchens began to kick off.
The Emergence Of Cloud Kitchens
Ghost kitchens or cloud kitchens are commercial kitchens that mostly share cooking facilities that are designed particularly to prepare food for delivery. These commissary kitchens are also referred to as “ghost kitchens,” “shared kitchens,” or “virtual kitchens,” and the delivery-only food brands that operate within them are usually referred to as “virtual restaurants”.
But cloud kitchens are not something new. In 2018, North America accounted for the majority of the global cloud kitchen market with other nations quickly following suit. Grab has dominated the cloud kitchen business in Southeast Asia, with more than 50 locations in countries such as Singapore, Thailand, and Indonesia. Whilst the concept is relatively new in Malaysia, the notion is gathering momentum as many F&B entrepreneurs have been forced to rethink how they wish to operate in the wake of Covid-19’s pending doom.
Domino’s Pizza is the pioneer of the cloud kitchen model by focusing on delivery service rather than dine-in experience. Although Domino’s cloud kitchen model slightly differs from the cloud kitchen model nowadays (by the process developed and handled by Domino’s Pizza itself), a lot of F&B operators started to see the cloud kitchen model as a crisis-proof method in the long run.
Pop Meals, which began as DahMakan and generated USD28 million without having any physical locations and depending primarily on its cloud kitchens, is a perfect example. Epic Food Hall, which has been open for a few years, and My Ghost Kitchen, which is a combination of a food hall and a delivery kitchen, will be among the other businesses.
How Do Cloud Kitchens Work?
There are four main categories of the cloud kitchen market. This includes type, nature, product type, and region. Meanwhile, in Malaysia, it is classified by type, which is divided into brands and enablers.
Overall, cloud kitchens are made up of three components:
- Kitchen space and facilities that can be entirely owned by the business or co-shared kitchens that are rented out,
- The ordering method, which focuses more on the internet, delivery applications, text in WhatsApp and social media, or even phone calls; and
- The delivery service, which can range from an in-house delivery team to an outsourced delivery service or even a third-party delivery service.
The enablers are enterprises like Cookhouse, Kitchen Connect, and GrabKitchen that rent out kitchen spaces and equipment. Apart from the working space, Cookhouse provided its tenants with a variety of services and amenities, including cleaning services and access to all major meal delivery platforms. GrabKitchen also offers full-service catering, from preparation to delivery.
Talking to Muhammad Ibrahim Sa’min, a student of Bachelor of Vocational Education (Catering) at Universiti Tun Hussein Onn Malaysia regarding cloud kitchens and how he viewed the model, he replied thoughtfully.
It was not all about the people directly involved in the cooking. During this pandemic, cloud kitchens open jobs for the delivery personnel, people managing food orders, food suppliers, cooks, cleaners, etc. Everyone is doing their best to survive, right? – Muhammad Ibrahim Sa’min
Though cloud kitchens may lack in terms of the foot traffic, which customers can easily find the business or costly packaging to suit the delivery process, it eliminates the downsides of brick-and-mortar business such as renovations cost, services staff and lease commitments. In a way, cloud kitchens let the business owner be experimental and flexible by allowing them to remove and add concepts or menus to fit the market demands.
An Opportunity For A Different Career In The Midst Of The Pandemic
For Raj Krishnasamy and Siva Sachi, the pandemic may have shut down their restaurant yet it opened another opportunity for them to explore. Looking at the F&B models abroad, they adopted the cloud kitchen concept and KitchenCo – Cloud Kitchen first branch was opened in Bangsar.
With their first branch drawing so many enquiries, they were always looking forward to opening another and contacting the fence-sitters for space to offer whenever it became available.
We want to put new vendors in settings where they can succeed. – Raj Krishnasamy, KitchenCo
He also said that cloud kitchens should ideally offer a variety of services to reduce competition while still providing inexpensive rent.
When the pandemic hit ACE market listed Focus, the company’s entertainment, lifestyle businesses, and wine distributions were all halted. They chose to branch out into cloud kitchens by implementing the smart cloud kitchen concept, which will host 25 separate kitchens. Focus Executive Director Benson Tay said the company is also intending to develop its own raw material supply chain for the cloud kitchen, which all tenants will be required to use. Focus had also named Lambomove as its official delivery partner, selling 22.79 million shares to Lambomove’s controlling company, Lambo Group Berhad, which demonstrated Focus’ commitment to expanding cloud kitchens to locations with strong food delivery demand, accessibility, and affordability.
Get Cooking In The Clouds!
Here is the list of some cloud kitchens in Malaysia that can help to set up your food business:
- Cookhouse provides space and equipment for sharing or personal lease.
- Kitchen Connect is located in one of the affluent neighbourhoods in the country.
- KitchenCo – Cloud Kitchen strives to provide budget-friendly space.
- COOX aims to capitalise on the F&B brands in the immense market.
Written by Nurzati Amani Abdul Aziz and edited by the Wiki Impact team.
Explore Our Sources:
- Kamel, H. (2020). Food delivery services: From odd jobs to the most in-demand. The Malaysian Reserve. Link.
- Agriculture and agri-food Canada. (2020). Foodservice profile – Malaysia. Government of Canada. Link.
- The Food Corridor. (2019, December 6). Everything You Need to Know About Cloud Kitchens (aka. Ghost Kitchens) in 2020. Link.
- YB Editor. (2021, June 24). Cloud Kitchen: The Brands & Enablers in Malaysia. Yellow Bees. Link.
- Tan, J. (2021, May 10). Pros & Cons Of Cloud Kitchens For Different F&B Businesses In Malaysia. Vulcan Post. Link.
- Ariff, I. (2021, March 18). Sky’s the limit for Cloud Kitchen users. Free Malaysia Today. Link.
- Khang Yi, L. (2020, July 26). Growing appetite for food deliveries pushing the rise of cloud kitchens in the Klang Valley. Malaysia. Malay Mail. Link.