MAGNiTT's 2019 F&B MENA Venture Investment Report found that the region's Food & Beverage startups raised a total of $43M in funding in 2019. The industry ranked 3rd by the number of deals (54) and ranked 6th by total funding received in full-year 2019.
Whilst not all of the funding can be attributed to Cloud Kitchen's, the industry seems to be headed on an upwards slope, particularly in the past year, where 5 deals have taken place in the MENA and emerging markets ecosystem. Contrarily, 2019 only saw 2 closures of funding rounds in the industry, marking an increase of over 50% as of November 2020.
The UAE, in particular, has become a central hub for Cloud Kitchen startups; of the 3 recently funded startups, all are based in the country.
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A Cloud Kitchen is in simple terms, a restaurant that accepts delivery only orders and provides no in-dining facilities. Instead, users have to place online orders via the restaurant's website/app or directly through a food aggregator app, and thus beginning in the traditional kitchen but becoming a hybrid of a technology-enabled, remote 'cloud' function. Such a format provides these startups with the freedom and availability to use the same single kitchen to operate within several restaurants and brands. It also can be viewed as being low risk and allows saving on the cost of infrastructure (which is why standard brick and mortar restaurants may be struggling with high rent prices), thus allowing higher profit.
Commenting on the use of tech in the industry, Sweetheart Kitchen's Founder Peter Schatzberg told MAGNiTT, "In any industry where the supply chain is involved (where there is a physical product and manufacturing processes) tech is crucial, but it will not alone make the company a success. We are not seeing tech innovation in F&B today but rather the application of technology from mature manufacturing industries applied to F&B." It's interesting to note that tech is more of an application here rather than an innovation.
Additionally, it's important to note that the COVID-19 pandemic would have undoubtedly had an effect on the industry's demand as well as how it is perceived by first-time users.
"There is no doubt that COVID-19 has re-emphasized the importance of food delivery and the convenience that it brings to businesses and consumers. Moreover, existing restaurant groups are seeing decreased dine-in demand because of COVID-19 and higher dependency on delivery sales. The traditional F&B retail model is experiencing significant disruption as consumers are increasingly pivoting from dining in to constantly having their food delivered on-demand. The COVID-19 pandemic has accelerated the food delivery market growth." iKcon's Founders Khalid Baareh and Kareem Abughazaleh told us earlier this year.
To that effect, meet the 3 recently funded Cloud Kitchen startups in the MENA entrepreneurial ecosystem:
Sweetheart Kitchen is a private label multi-brand virtual kitchen that uses advanced cooking techniques, technology backed manufacturing processes, and a LEAN six sigma data-driven approach to develop and produce high quality, fresh and tasty delivery only food that can be delivered to customers in a matter of minutes. They create (and own) all bySWHK brands and do not work with external restaurants or chefs looking to outsource their delivery volume.
Sweetheart Kitchen last month announced a $17.7M Series C funding round to fuel the company's vision and its ability to leverage the best technologies to optimize the food delivery supply chain.
Kaykroo has successfully developed and independently operated six original concepts, bringing international flavours to the local community. The data-driven ‘brick & click’ platform is the crossroads where technology meets nourishment, modern meets traditional, creativity meets efficiency, and scalability meets profitability. The company currently offers ten unique food experiences as part of its brand portfolio, with many more currently being developed by the creative minds behind kaykroo's menus.
They also last month secured a $4M Pre-Series A investment round to further develop the company’s proprietary technology and fuel expansion in the GCC.
iKcon (Innovative Kitchen Concepts) is a UAE-based tech-enabled cloud kitchen operator that procures, cooks, and delivers food on behalf of restaurants and brand owners, utilizing their networks of satellite kitchens in prime locations to quickly bring to market F&B brands from existing chains to new concepts. It provides a kitchen-as-a-service platform, driven by operational excellence and technology, to empower partners to rapidly expand their geographical and customer reach.
Back in July of this year, iKcon similarly successfully raised a $5M Pre-Series A funding round, with plans to begin operations in Saudi Arabia and other countries in the region throughout 2021.
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