The rise of cloud kitchens
Still in its infancy in Malaysia, cloud kitchens are now being viewed as costefficient models for F&B businesses.
IN a seemingly short span of time, food has become a highly digital commodity, buoyed by the incredible popularity of food delivery. In Malaysia alone, research firm Statistica estimates that food delivery will grow annually by 18% in the next few years.
The success of food delivery portals like Grabfood and Foodpanda and the ensuing Covid-19 pandemic and global lockdowns have forced restaurant owners and new F&B players to think outside the box in terms of new business models that offer limited start-up costs and maximum profits, especially in these lean times.
“I have noticed immediately that most F&B operators are moving towards ghost kitchens or cloud kitchens. People were already talking about it before the MCO (movement control order), but I think more restaurant owners are now thinking of collaborating and starting their own shared cooking space,” affirms Joshua Liew, the spokesperson for the Malaysian F&B Operators Alliance, which has over 1,150 eateries in its member database.
What are cloud kitchens?
Cloud kitchens are essentially purpose-built spaces that function as shared cooking facilities. These kitchens typically don’t have store fronts or dine-in options, and are used solely to produce food for delivery. Most cloud kitchens offer integrated services that include everything from cooking space to refrigeration, bulk purchasing deals and opportunities to partner with food delivery portals.
While research indicates that North America accounted for most of the global cloud kitchen share in 2018, the rest of the world is fast catching up. In South-east Asia, Grab has been a dominant force in the cloud kitchen market, opening more than 50 facilities in countries like Singapore, Thailand and Indonesia.
In Malaysia, cloud kitchens are relatively new (although cloud kitchen entities like Epic Food Hall have been around for a couple of years) but the concept is gaining traction, as many F&B operators have been forced to re-think how they want to operate, amidst the spectre of doom cast by Covid-19.
Generally, there are three groups of F&B operators looking to launch their businesses in cloud kitchens – existing restaurant owners with brick-and-mortar eateries; homebased businesses; and aspiring/ newbie F&B business owners.
Huen Su San, the founder of Cookhouse, arguably the Klang Valley’s first co-sharing cloud kitchen, explains why F&B entrepreneurs are looking to climb onboard the cloud kitchen train.
“For new start-ups, they want to start up in a cloud kitchen so that they can actually lower their risk and increase their profit margins (traditional restaurant margins can be as low as 3% to 5%) as well as get to profitability earlier by starting at a much lower cost.
“So over here, with less than RM10,000, they can get an online food business going. If they were to do a traditional brick-and-mortar business, there are hefty costs associated with renovations, staff hires and buying their own equipment,” she says. Start-up costs is at least RM50,000.
Huen also points out that for food businesses operating from home, many quickly outgrow their capacity and are then stuck with the problem of not being able to take on bigger orders – something which a cloud kitchen can quickly solve.
As for established F&B players, cloud kitchens help them by offering a cheaper, faster set-up if they want to penetrate a different market. For example, a restaurant in Sunway might want to open an outlet in Mont Kiara, but that would require rental, renovation costs, front-of-staff hires and a litany of other costs. But with a cloud kitchen, they can get the ball rolling faster and the model allows for higher profit margins too.
At Cookhouse, Huen has designed a large, functional 10,000 square foot space with five private cooking studios, a shared co-cooking space that can facilitate baking as well as Asian and Western cooking and even a large event space. Rental rates for the shared cooking space start as low as RM900 per person, with all utilities included.
The cooking studios meanwhile are priced at RM3,000 but members have to pay for electricity and gas usage, which is metred. The facility also offers refrigerators and chillers that can be rented ad hoc, packing facilities, a loading area and back-end infrastructure like cloud inventory system (by Food Market Hub), delivery partners and even social media and photography assistance. The cloud kitchen can also help businesses buy expensive cooking equipment and lease it back to them, if required.
Most impressive of all, the facility is open 24-hours a day to paying members.
“I wanted to come up with an ecosystem that could support new F&B entrepreneurs so it could shorten their learning curve and make them more profitable. That’s why over here at Cookhouse, we have other supporting partners and apps to help,” she says.
Huen was inspired to come up with a cloud kitchen after realising just how expensive it was to run a restaurant. “I run an event management space called Glasshouse by Seputeh and I also have eight Korean F&B outlets. While I was doing the two central kitchens about two to three years back, I realised that it was a super heavy capital investment that took a long payment period and the cash could have been used for expanding and growing outlets.
“And it dawned on me that if people found value-added benefits when they share co-working spaces, what more if it was for kitchen equipment? So that’s where the idea came about,” she says.
Huen put Cookhouse together in just six months in an industrial area in Taman Medan (which aims to serve the Sunway, Subang and Old Klang Road market) and launched the cloud kitchen service in June, at a time when F&B operators were scrambling to find cost-efficient models to help generate revenue.
“I think I’ve definitely benefited from the MCO. All of a sudden, it made F&B entrepreneurs actually question the traditional model or start looking for better models and more efficient models to sort out the problems they were facing, so it definitely was a blessing in disguise,” she says.
Since its inception, Cookhouse has quickly attracted over 10 F&B entities – a combination of home businesses like Halo Doughnut (which has doubled its sales since starting at the cloud kitchen), experienced chefs like former Hilton Kuala Lumpur chef de cuisine Darius Seitfudem who does five-star frozen ready-to-eat meal deliveries and established F&B eateries like Warung Wok. And this is just the tip of the iceberg as the space can accommodate up to 30 different businesses at the same time.
Huen also has plans to launch more cloud kitchens in areas like central Petaling Jaya, central Kuala Lumpur and Mont Kiara.
Although the F&B industry is struggling right now, Huen is convinced that cloud kitchens are both here to stay and the way forward for most businesses looking to minimise cost. Which is why she thinks these kitchens are very quickly going to be scattered everywhere in Malaysia.
“I think in other countries, cloud kitchens have expanded massively way before the pandemic but the pandemic became the catalyst so it is accelerating things everywhere – even in Malaysia,” she says.