A Requiem for the Kitchen?

30.07.2020

5 min read

Nearly a century ago, the cost of buying pre-made clothes in now-developed countries was so high that many resorted to making their own. But with the advent of industrialisation, production costs fell and so did retail prices.

And now, in 2020, we’re seeing many of the same trends with food and its delivery: production costs are going down and new food-making alternatives are presenting themselves. Below we discuss the different household scenarios, the ways in which current food retailers will be able to adapt, and the food eating norms we could see replace the kitchen in the next 10 years.

The three scenarios

In 2018, Union Bank of Switzerland (UBS) outlined three potential scenarios for the future of food based on growing trends in the market (1). Interestingly, the study found that that consumer spending is shifting away from food prepared at home and that, in the US, there has been more than a 30% increase (2) in food eaten away from home since 1929. Not only this, but more people are downloading food delivery apps, with the amount going from 125,000 downloads per week to almost 5 million downloads per week (3). It seems as though, for younger customers at least, ordering food is a way to reduce time wasted on preparation and to maximise time spent on productive activities. So, bearing this in mind, UBS’s three scenarios show how big the potential of alternative food can be and who the biggest winners and losers would be.

Base Case

The way we’re going now, UBS predicts that the market for online food delivery will be worth around $365 billion and revenue for food services will rise by 8% by 2030. In such a case online food delivery companies and evolving restaurants will be the main beneficiaries of this upward growing trend (1).

Kitchen is Dead

 If the changes we are currently seeing accelerate then UBS estimates that the online food delivery market could be worth around $815 billion with a 21% increase in revenues from food services by 2030. But where food delivery companies and restaurants will be the winners in this scenario, food producers and retailers will not be so fortunate (1).

Long Live the Kitchen

However, if the predictions made by UBS are not realised then the online food delivery market could only be worth $85 billion by 2030 and have only a minor growth in overall revenue. Unlike the situation where the kitchen no longer seems to be important, this reality will mean that food retailers and producers will still dominate the food market (1).

Outsourcing of food services is not new. As the UBS report stated, delivery of food has been around since the ancient Greeks. But in the 21^st century, the internet has done a large part to shift food delivery online and to make it easier for people to get food from the comfort of their own homes at an increasingly lower cost. Convenience, technological innovation, and a decrease in cost are all factors that have stimulated demand alternative food delivery methods. But what are the specific categories for food delivery?

Grocery delivery

In the US, for example, the value of the online grocery market has grown from $12 billion in 2016 to $26 billion in 2018.

There is certainly a lot of room to grow given the whole grocery market was worth around $632 billion in 2018. Online grocery delivery is already quite popular and there is more room for growth! (2,3)
Examples: Ocado (UK), Amazon, Instacart (US)

Meal - kit delivery

According MarketWatch, the meal-kit delivery services market with register a14.8% compounded annual growth ratein terms of revenue in the next five years. The market is already worth around $7 billion and is expected almost double by 2024 (4)

Examples: HelloFresh, Blue Apron (US)

What’s the market going to look like in 2030?

Deliveroo charges £2.50 per order at the moment and UBS expects average delivery fee for food to decline below £1 per order in the UK (1). Given that demand for food delivery is strong and increasing and many retailers are evolving to cash in on this developing market, the next decade could be a good one for alternative food providers.

By 2030, UBS estimates that the food delivery market will be worth around $365 billion, resulting from a 20% compounded annual growth rate (1). In this, UBS assumes that online marketplaces for food delivery (aggregators like Just Eat) will still remain key.

Sources