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Today, at London Tech week, Deliveroo founder Will Shu will give a speech about growth and ambition. About the fact that his British company is engaged in a global battle to revolutionise the way we buy food and eat, a battle that could see kitchens disappear from restaurants, even from our own homes, and that strikes at the heart of the supermarket business model.
It is a battle of logistics and infrastructure as much as cooking. And if you trust Jeff Bezos, the man who transformed shopping with the same methods, Shu may well be right. Bezos, after all, has just invested $575m in Deliveroo, valuing it at around $4bn and fanning the flames of a market that is every bit as contested, and prized, as ride-sharing.
Uber, through UberEats, is again a big player - with around 5,700 restaurants signed up in the UK, according to the data company Thinkum). Shu’s Deliveroo has 16,300 or so, and the third big player Just Eat some 29,500.
But that is just on these isles. In America, Grubhub (with 32pc of sales, according to a recent report by analysts Second Measure), Doordash (29pc) and Uber Eats (22pc) are the dominant triumvirate, slugging it out while their heels are constantly nipped by upstart rivals like Postmates (10pc).
Other markets have their own giants, among them Delivery Hero in Scandinavia, Asia and South America; Takeaway.com in Central and Eastern Europe; Meituan Dianping in China.
It is like Fortnite for food, a winner-takes-all battle royale driven by the prospect that the last company standing can dominate a market that has only begun to grow.
Delivery riders may seem ubiquitous in the world’s big cities but McKinsey data from 2016 suggests they have cornered just 4pc of the restaurant and take-out food market and 1pc of an overall food market worth an annual $830bn. So there is plenty of room for expansion.
Uber’s chief executive Dara Khosrowshahi has certainly made his company’s strategy clear: “We will not shy away from making short-term financial sacrifices where we see clear long-term benefits,” he wrote in a letter to prospective investors before the company’s stock market flotation last month.
Which is why, when he’s done talking about global domination, Shu today may well trot out his founding story. Every founder of a tech company has to have one.
It something they literally teach at start-up school, or “accelerators” as they’re known in the jargon. It’s not enough simply to have a business plan and a ruthless desire to execute it, founders need narrative too. Origin myths, if you will, whose rooting in fact can be as flexible as you like.
At Deliveroo this is the tale of Shu pedalling around London in 2013 as the food firm’s very first “delivery guy”. He has told it so many times even he can’t remember exactly how it goes.
Sometimes he took to the streets because he was counting cash (“I funded it with my own money in the beginning, so you just do everything”); sometimes even though he wasn’t (I was the first delivery guy… not because I really needed to for money’s sake but because I really wanted to understand what the customer went through.”) Sometimes his delivery stint lasted eight months, sometimes it involved, as he told me last year, "riding out every day for the first year”.
Either way his story serves a cold hard purpose. To his financial backers - like Bezos - it shows Shu is totally committed and knows the details of his multi-billion dollar business from the ground up. To restaurants, which delivery services fight fiercely to sign up, it shows he knows the value of that relationship. To delivery riders, who have often complained about their treatment in the gig economy, it shows Shu is on their side. And to customers, it shows he cares passionately about the quality of the food they eat. No wonder he continues to declare that he does deliveries “once every two weeks”. Or week. Whatever.
'A relentless focus'
But however much Shu’s founding story tells about him, it reveals more about the cut-throat nature of the sector he trades in. For while it may have a slightly rackety image of a bloke with a sky-blue box strapped on to a clapped out scooter, the delivery game, as Shu told me, is "super, super fast paced. There is no complacency. You have to be hyper vigilant. The level of competition gives you relentless focus.”
The result is heaven for customers, who benefit from dog-eat-dog price cutting, and also for restaurants, which expand their reach. But it means stress for founders like Shu, who know that profits are slim to non-existent and size is no barrier to oblivion. SpoonRocket and Munchery (these names are not made up) are just two well-funded ventures to have gone to the wall.
Amazon has just shut down its Amazon Restaurants service. “Boom and bust is the history of tech companies,” Shu said. "You have to be super paranoid and aware of what’s going on - you can never take small competitors for granted. Understanding what’s going on, all the time, is essential.” For a man who got out of investment banking because of the stress and the hours, he didn’t sound all that relaxed.
With good reason. Customers are learning that essential driver of the good deal: fickleness. In America, for example, Second Measure reported that almost 90pc of GrubHub’s customer’s used its service alone in 2017. Just two years on, that has fallen more than a quarter, to 62pc. Only 33pc of Caviar’s customers are faithful. Waitr, with 69pc, does best. But a mere three years ago, McKinsey noted that the average across the whole industry was 80pc.
So how long can delivery companies keep taking the pain while restaurants and faithless customers profit? The answer is that they are already swinging the arithmetic of the market model in their favour.
They see a future with are two options: charge customers more and hope that established market share and exclusive deals with prized restaurant brands sees them through; or make the food cheaper.
It is this last idea that is the new darling of the tech world. Just as information migrated from fixed locations like your home computer's hard disc to remote server hubs known as “the cloud”, so a clutch of well-resourced, highly-experienced founders and investors are betting on food prep moving from the restaurant kitchens to remote, so-called “cloud” kitchens.
Travis Kalanick - also, by no surprise, the founder of Uber - is the most famous face involved. But just as significant is the story Sequoia Capital, perhaps the world’s most influential venture capital firm, tells about a trip its senior executive Doug Leone made to India in 2014.
“The primary job of founders” Leone said, according to a Sequoia blog, “is to find and eliminate the friction in their business.” Jaydeep Barman, owner of an Indian restaurant chain called Faasos, was listening. According to Sequioa's blog, “the biggest friction in Faasos, he realised, was the outlets themselves.”
The emergence of cloud kitchens
It is a founder story - a flash of inspiration - to rival Will Shu’s. To dominate, Barman shut his restaurants, with their high rents, limited menus and meagre economies of scale, and instead opened “cloud kitchens” producing all sorts of grub, from pizza to kebabs to lasagne “with an Indian twist”. He now has more than 160 such kitchens, part of a global “cloud” food market - CloudKitchens and Kitchen United in America, Karma Kitchen in the UK, Keatz in Europe, KitOpi in the Middle East - that is beginning to ape the intense rivalry between the delivery firms they service.
Deliveroo, of course, is involved. It has 18 warehouse sites in the UK called “Editions” each of which house up to 12 kitchens and cost up to £1m to build. There are 12 more around the world. Some, in Hong Kong, are not just take outs but have tables where diners can sit to eat. In Singapore ordering is entirely automated.
Such cloud kitchens have been accused of destroying the highstreet, but Deliveroo insists they actually help restaurants, allowing them to expand into new areas avoiding high costs by cooking in rented Edition space and using Deliveroo’s delivery network. “The restaurant operators who are embracing delivery are the ones really growing,” a spokesman insists. “Most of us go out to eat for the social experience. That won’t change.”
By contrast Shu’s company is sure that cooking at home “will become less a necessity and more of a chore” and that “consumer behaviour is already changing” as a result. Some apartments in Manhattan, they point out at Deliveroo, are already being built without kitchens. In this vision of the future, buying groceries as we do now will be as quaint as weaving our own clothes. Supermarkets, not restaurants, are the big losers.
Indeed, the symbiotic relationship between cloud kitchens and delivery companies is already abundantly clear. Take Anton Soulier. He founded the cloud kitchen Taster in 2017 and used to work at Deliveroo. Perhaps most importantly Taster is based - and has shown it can succeed - in France, the country where gastronomy is prized and where dining tips passed from friend to friend are traditionally known as “une bonne adresse”. Cloud cooking land, however, is no respecter of physical address - or culinary tradition.