1. The pandemic caused a shift in the way people consume food in SEA with dining out suffering a massive dent

The onset of Covid-19 related lockdowns and movement restrictions across SEA led to a massive decline in demand for dining out. A huge portion of the money that was earlier spent on dining out is now spent on ordering food online, thus resulting in various restaurant businesses running into losses.

While a moderate recovery has been seen in dine-out revenues, it still remains well below Pre COVID levels. People have become used to cooking at home and are possibly re-allocating spend on dining out, to other avenues.

Impact of COVID-19 on dining out and delivery, % of meals consumed per week

Note: Before Covid-19 refers to Q4CY19; During Lockdown refers to period from March to May when lockdowns were imposed across countries; Post Lockdown refers to Q3CY20

Impact of COVID-19 on financials of leading QSR player in Indonesia, Sales indexed to 100 in Q4’19

2. Food Delivery platforms stepped up amidst this, offsetting some of the topline impact for restaurants

Restaurants listed on online food delivery platforms were still serving orders received through apps where they started seeing increased traction progressively, although a large part of their business from dine-in was completely lost. This proved to be a saving grace and not only helped topline but also bottom-line as in-store employee costs and other overheads reduced.

Evolution in Sales of QSR restaurants partnered with food delivery platforms

Note: Before Covid-19 refers to Q4CY19; During Lockdown refers to period from March to May when lockdowns were imposed across countries; Post Lockdown refers to Q3CY20

3. Cloud Kitchens emerged as the new gateway to the industry with significantly better Unit Economics…

With dwindling ROCE (Return on Capital Employed) for dine-in restaurants, the relevance of the Cloud Kitchen model increased manifold as they are a highly cost-effective model for existing restaurants and a gateway for new entrepreneurs. While existing restaurants can use cloud kitchens as a sandbox to test new ideas and concepts before they roll them out, on the other hand, it can help entrepreneurs in building a brand and loyal customer base with substantially low Capex requirements.

Upfront Capex – cloud kitchens v. dine-in restaurants

Note: 1: Upfront capex for dine-in restaurant that does not serve alcohol. For alcohol serving dine-in restaurants alcohol license cost gets added to the upfront capex

EBITDA Margin– cloud kitchens v. dine-in restaurants

4. …and are expected to soar going forward

Cloud kitchens have been gaining traction since pre-Covid times. Grab is operating its Grab Kitchen in multiple locations across SEA partnered with Indonesian Cloud Kitchen startup “Yummy Corp”. Another example is GoJek’s investment in India-based Rebel Foods to open close to 100 cloud kitchens across Indonesia.

2020 saw the rapid onboarding of many new restaurants on food delivery platforms to offset the decline in dine-in revenue and hence Cloud Kitchens didn’t increase significantly within the GMV mix. 2021 could however prove to be a breakthrough year where Cloud Kitchens start realizing their true potential and start figuring more prominently within the mix. The segment could see some strong winners emerge over the next 2-3 years.


  • Rohan Agarwal has been a part of the Redseer Strategy Consultants journey for over six years. He is an expert in digital strategy for traditional corporates and start-ups.