Sweetheart Kitchen CEO and Founder, Peter Schatzberg on the future of the F&B industry

Sweetheart Kitchen, the Dubai tech-based multi-brand, delivery-only company, recently announced a $17.7M Series C funding round. The round was backed by strategic investors and led by Sweetheart Kitchen's very own CEO and Founder Peter Schatzberg.

MAGNiTT caught up with Peter to find out more about the Foodtech startup, including what he hopes to see from the industry over the next few years, why tech is crucial for the startup and industry overall, Sweetheart Kitchen's future plans, and why scaling to Kuwait is critical.

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How does Sweetheart Kitchen work?

We are a portfolio of brands available on Talabat and Zomato offering a broad variety of cuisines ranging from mac n‘ cheese, wings and burgers to shawarma, avocado toast, quinoa bowls, and salads.  We produce all our food, sauces, and dressings from scratch in our own kitchen facility and have incorporated LEAN manufacturing and supply chain methodologies and technologies into our business model in order to achieve efficiency, economies of scale, and high quality. Customers order food from one of our brands and the food is delivered by our service provider much the same way as any other virtual kitchen or F&B operator participating on delivery platforms.

You are focused on leveraging the best technologies to optimize the company’s food delivery supply chain. Can you share information about the tech you use and how important tech is to Sweetheart Kitchen and ultimately, the F&B industry?

We built proprietary tech designed especially for our unique "Six Sigma" virtual kitchen model. Our tech stack is essential for our success but is just one component of our story. 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. For decades, software companies have been attempting to drive tech deeper into the kitchen environment (beyond POS) but have failed because every kitchen is unique with respect to cuisine, systems, people, raw materials and process. 

The scale, velocity, and volume of food delivery have finally created the opportunity to apply supply chain methodology and technology to the kitchen environment, but unless processes and cuisines are designed initially with the supply chain in mind, tech will never go deep inside the kitchen vertical. What is unique about SWHK is our ability to remotely monitor and measure every aspect of the kitchen process, much like a large scale manufacturing facility or distribution center. Our tech is very deep and provides us a wealth of information about our performance across inventory management, procurement, and order routing.

What do you expect/hope to see from the region’s Food and Beverage industry over the next few years? Do you think any changes caused by COVID-19 will become the norm?

In the near term, we will see the accelerated opening of "delivery only" virtual kitchens as the model is getting a lot of attention. The general assumption is that the model requires low investment and can turn a profit quickly but most will find that this is incorrect. We will gradually return to the pre-COVID F&B model where operators are multi-channel (a mix of dine-in & delivery). Post-COVID, we will see the QSR/casual dining (cuisine and experience) become increasingly commoditized, consolidated, and tech-driven. COVID caused many small operators to close for good and the rapid maturation of the industry (as a function of COVID and delivery) will create future barriers to entry for smaller operators and entrepreneurs.  Much like any industry that matures, F&B will be dominated by a few large players, particularly in delivery and fast-casual. Fine dining will emerge unscathed with no long term change to the business model as a result of COVID.

You led the investment round in Sweetheart Kitchen, can you provide insight into how this came about/why the decision was made? And is it possible to share who the strategic investors were?

We raised funding in order to expand the business into Kuwait and KSA rapidly. We are an early-stage startup that requires oxygen in the form of cash to continue breathing and growing. Until profitable, a company that scales quickly is going to require funding.

What were you looking for from your strategic investors, beyond capital?

The vision of SWHK was always to prove the benefits of the "Six Sigma" virtual kitchen when inserted into any aggregator supply chain.  We operate independently and without the involvement of our strategic investors. Given that most aggregator tech is built upon legacy systems we are still two years away from achieving supply chain optimization across all verticals of the food delivery supply chain. But once deep integration of the verticals is achieved we will see the benefits of our strategic relationships.

Can you share more of Sweetheart Kitchen's short-term plans for expansion with us? 

In addition to unit expansion, we have been working diligently to improve the quality of our cuisine and on adapting our food to the local market. We are solidifying our tech and building a talented leadership team. Our marketing campaigns will become broader as we expand and we hope to become more involved in the local community, especially supporting the delivery riders who are not our employees but who we salute knowing they have the most difficult job in F&B. We rely upon them and believe we can do more to support their efforts. They are fundamental to the sustainability and success of our business in MENA.

How important is scaling to Kuwait for you, and why?

Kuwait is critical to our success story as it will bring our company to profitability and is a first step towards demonstrating the global scalability of our unique kitchen model. Furthermore, expanding to a 2nd country in just our 18 months of operations is an excellent test of our leadership capabilities, especially during COVID-19. To the team, it is an exciting challenge and opportunity to grow not only the company but ourselves.

What do you foresee as the largest challenges to scaling Sweetheart Kitchen in MENA / beyond?

For any rapidly scaling startup, finding (and developing) talent at all levels of the organization is the greatest challenge. When your business model is innovative, that can be even more of an obstacle as you must find individuals capable of adapting to a startup environment and who are also eager to take on the risks associated with working at a startup. No one walks in the door knowing your business model, product, processes, or technologies and they must possess certain personality traits for the working environment to be a mutually beneficial fit.

Sweetheart Kitchen is just 15 months old. What are your hopes for the future of the company?

We would like to see SWHK scale globally to at least three (3) continents and 15 countries within the next four years. That SWHK becomes a household name in these countries is our company vision and we hope that those making sacrifices and contributions to the company will be rewarded in the future. Most of all, we would like SWHK to have a good reputation in the business community and with our end customer. If we can achieve that, the rest will fall into place.

Finally, what advice would you give to yourself five years ago?

The sensible, simple, and old fashioned values your parents instilled in you growing up will become increasingly relevant as your life gets more complicated. They taught you well so follow their advice and be a man of integrity, discipline, and morality, regardless of how others choose to conduct themselves.

2020 YTD has seen $803M invested in MENA-based startups, matching total funding of full-year 2019. Discover more trends and insights in our Q3 2020 MENA Venture Investment Report.