The food industry is experiencing rapid technological advancement. As a consumer increasingly seeks convenience and customization, food tech startups are rising to meet these evolving demands. However, some innovations risk compromising the very qualities that make food enjoyable – taste, texture and tradition. As with any disruption, both opportunities and challenges exist. This report examines the current landscape and provides perspective on how the industry can maximize benefits while mitigating potential drawbacks. According to recent surveys, more than 60% of consumers now see science and technology as tools that can be used to address problems like environmental degradation and promote better health through enhanced agricultural and industrial practices.
Rising Demand for Personalized Nutrition and Digital Solutions
Demand for personalized nutrition and digital solutions is fueling interest in food tech. Apps that track diets and deliver customized meal plans are gaining popularity. Younger consumers in particular expect the same level of customization and convenience from food brands as from other retailers. Technologies like 3D food printing hold appeal as novel ways to reimagine the dining experience. Methods like precision fermentation, cellular agriculture, and controlled-environment farming have the potential to produce food in a more secure and sustainable manner.
Exploring Novel Technologies in Food Tech
While open to new ideas, consumers still prioritize flavor over functionality. Research shows taste is the primary driver of food choices. No matter how advanced the technology, food that doesn’t taste good will struggle to gain widespread acceptance.
Flavor Trumps Functionality in Consumer Choices
Instead of simply stating that a product uses cutting-edge methods, brands need to justify and detail how the technology has been utilized to achieve sustainability objectives, improve nutrition, or accomplish other goals that align with consumer values pertaining to taste, health, and the environment. Terms like “food tech” and “lab-grown” risk undermining an industry built on tradition, artisanal processes and emotional connections to food. Brands must consider how innovations are positioned to avoid seeming overly industrial or processed.
Challenges in Branding
The path forward requires balancing consumer interests in both technology and taste. Brands can leverage food tech to enhance rather than replace core product attributes valued by customers. Urban shrimp farming is one startup that steers clear of creation claims and concentrates on sustainable solutions for problems like contaminants and freshness within established seafood categories. Partnerships between food tech startups and established brands offer opportunities to scale new solutions while maintaining standards of quality and taste. Tradition need not impede progress when both are respected.
Navigating the Path Forward with Food Tech
With care and moderation, food technology can extend variety, accessibility and sustainability – all priorities that complement, not compete with, taste. The future of food is experiential as much as operational. As industries change, trust must be retained through transparency regarding applications and goals, even as availability to new food technologies increases.
Conclusion
The food industry is being pushed and pulled by conflicting trends of innovation and tradition. Success will depend on recognizing consumers want food tech that enhances rather than replaces engaging qualities of food. With nuanced integration of the new and old, opportunities abound for brands that satisfy evolving appetites without compromising what makes food enjoyable.
Ruskin Felix Consulting LLC partnered with Black Orchard Farming to prepare a comprehensive valuation report. The report highlights the financial viability of the project by laying emphasis on the business risk, credit risk, competition risk while also analyzing the projections. The infrastructure outlay forms a significant part of the report. To understand how financially viable the project is, we have highlighted the revenue segmentation, projected revenue, operational expenses and revenue expenses. The financial metrics further helps to understand the NPV and IRR, payback period and the capital that is required to be raised.
Some of the key risks associated with this type of business are as follows:
Scalability of farms and cost of acquisition
Yield maximization practices
Distribution Network – Self or franchise Model
There will be a credit risk that Black Orchard Farming will be exposed to as well if some parts of the operations are funded through debt. In such a case the assumed WACC of 10% may also change.
Even with higher demand and opportunity in the market, businesses that have focus on food products run the risk of depreciation or obsoletion of output produced in case of long-term storage. This increases the cost of warehousing as well as the need for assured demand for the output. With various players against Black Orchard Farming in the field, the sudden increase in competition might affect the long-term view of the business as product differentiation and distribution will be key to the operational success.
The overall valuation of Black Orchard Farming is based on 3 valuation methods and is computed based on the
weighted average of the valuation methods. The overall valuation of the company is $16.67 Million on a 5 Year forwards basis. The methods used to compute the value of the company are:
PE multiple of FCFF cash flows
Overall Project NPV Valuation – DCF Valuation
Terminal Value Method
The range of valuation for the business is computed at: $14.1 Million to $19.2 Million
It is to be noted that this value is based on the projections and assumptions made for the valuation and may significantly differ during real operations due to the overall business and industry risk.
For an investment of $800,000, the investor should get 4.17% – 5.6% of the overall company at the above-mentioned valuation range.
Black Orchard Farming is a viable investment due to its assured structured cash flows and growth potential at a valuation of $16.67 Million and the investor should invest $800,000 at a Share value of 4-6% Equity in the company.
Ruskin Felix Consulting LLC partnered and created a comprehensive business plan to understand the fruit processing industry in order to set up a fruit processing plant. We assisted them in understanding the global industry, regional industry and the market size. We gave them a brief of the market dynamics, growth drivers, industry challenges, industry opportunities, demand analysis, and the financial viability of the plant by providing them with the cost, revenue, and summary projections.
The main objective of the business is to set up a fruit processing plan with a target focus on Ghana in West Africa. The plan analyses the opportunities and challenges in setting up the plant. Ghana is a commercial producer of tropical fruits, with the Ashanti Region producing the majority of the country’s citrus. The United Kingdom alone imports nearly 2,000 tons of fruits from Ghana each year, according to estimates. Ghana produced 829,554 tons of citrus fruit in 2019. Ghana’s citrus fruit production climbed from 155,417 tons in 1970 to 829,554 tons in 2019, expanding at a 9.14 percent yearly rate. In Ghana, oranges are the most common citrus fruit, but limes, lemons, and tangerines are also grown. The Late Valencia orange type is the most widespread, accounting for 85–90 percent of all citrus orchards. Late Valencia, Sweet Mediterranean, and the local variety are the three most popular cultivars for processing, and they are collected twice a year in the peak and minor seasons. This allows for the introduction of early varieties onto the market.
Fruit juice intake is highly common in Ghana. This is primarily due to the rise of a health-conscious middle class. According to the “Reviving a Dying Industry Report,” Ghanaians consume 10.4 million liters of fruit juice each year. Imports are now meeting most of this demand. Local production to round out the picture Blue Skies Limited and Papso Ghana Limited are two of Ghana’s largest fruit processing producers. The temperature and soil composition of Ghana is conducive to the cultivation of tropical fruits. Mangoes, pineapples, citrus fruits, and coconuts are just a few of the fruits grown in the country.
The fruit processing project has a NPV of $638K over the first 5 years and an IRR of 89.7% throughout the cashflows of the project. The overall valuation of the business on a Post money 5-year Multiple is $3.64 Million. With a 10% range deviation, the valuation range is $3.27 million – $4 million. The overall funds needed for the business are $790k. This fund will be applied in the setup cost and initial operational costs.
With a business having lesser capital outlay and good visibility, the fruit processing project is a feasible project both in terms of its projected performance and its overall cash flows and IRR. The upfront cost will be mostly utilized for setup and working capital expenses of the company. With a 5 Year Forward, Post money Valuation of $3.64 Million, the business is viable and profitable for all investors coming on board.
A Cloud Kitchen is also known as a ghost kitchen, virtual kitchens, commissary kitchens, or dark kitchen uses a commercial kitchen with no dining customers to prepare food only to be supplied or taken away.
Restaurants may extend the current restaurant or launch the virtual brand at a minimum cost via the cloud kitchens. This allows restaurants to scale, explore new markets, or test new ideas. Many restaurants use cloud kitchens for the testing of new concepts and optimize their staff and inventory.
The restaurant owners use their own staff and produce, but a third party owns room and equipment. Several companies may use the common kitchen area to plan dining at home without a restaurant overhead.
A dedicated cloud kitchen space model is the space that a brand rents (or buys) for its own use only. You can choose to use one or more different ideas at the site, but other brands do not.
Cloud kitchens may be used to launch a whole new enterprise or model, often known as virtual or virtual brands. A virtual brand operates in an existing kitchen which allows the company without heavy investments to test new concepts.
There are different kinds of business models in the cloud kitchen.
Cloud Kitchen Models
Standalone/Single Brand Cloud Kitchens
A standalone/single brand cloud kitchen has a consistent theme and design. It usually serves 1-2 cuisines and has a limited menu of 10-15 items. A typical standalone cloud kitchen is around 300 square feet in size.
Virtual Restaurants
A virtual restaurant is a brand that exists inside a physical restaurant. These brands are only available via online food aggregators and use the existing restaurant’s kitchen infrastructure and services but under a different brand name. The virtual brand has a different menu than the main restaurant and can be a great way to try out a new cuisine that is very different from what the existing restaurant is known for.
Multi-brand Cloud Kitchens
The cloud kitchen business model allows restaurateurs to launch several brands while also providing simple avenues for business expansion. A multi-brand cloud kitchen is a vast kitchen system from which several brands of the same organization can work, all while utilizing the same equipment and resources. These are cuisine-specific brands, each satisfying a consumer need and appealing to a different Target Group.
The multi-brand cloud kitchen model allows businesses to appeal to a broader audience while still selling more to current customers. Furthermore, numerous listings on aggregators provide the business with greater audience penetration, allowing them to attract a larger consumer base.
Co-working Kitchen Spaces
A co-working cloud kitchen room, also known as shared kitchen space, commissary kitchen, and so on, is a vast kitchen infrastructure that multiple restaurant brands can rent, occupy, and operate from. Individual kitchen units for each brand are installed in these kitchen spaces, along with the requisite equipment and utilities. These kitchens, once again, are strategically located in areas with high customer demand, especially for specific cuisines.
Aggregator Managed Cloud Kitchens
Aggregator cloud kitchens run by online food aggregators are known as aggregator cloud kitchens. The aggregators invite their top restaurant partners to cook food from these kitchen spaces for delivery-only customers.
Swiggy and Zomato, two major players in the Indian food delivery market, have both dabbled in the cloud kitchen sector with this form of cloud kitchen business model.
Zomato Infrastructure Services was introduced in 2018 to provide restaurant brands with the infrastructure and utilities they need to operate their businesses. While ZIS closed its doors following the failure of its pilot kitchen in Dwarka, the concept of co-working kitchen space has gained traction in the industry and has been adopted by several other players.
Swiggy, the other online food ordering giant, launched Swiggy Access, which allows partner restaurants to set up shop in co-working kitchen spaces. Swiggy Access is now available throughout the country, with plans to add new restaurants in over 30 cities by 2020. Swiggy Access also serves as a home for Swiggy’s private labels The Bowl Company and Homely, which operate on the same infrastructure as the other brands. The company currently has over 600 kitchens, including both private brands and Access kitchens.
Operator Managed Cloud Kitchens
The kitchen operator manages the activities of current or upcoming restaurant brands in an operator-managed cloud kitchen. The brands are classified separately on online food aggregators and can accept orders via the cloud kitchen operator’s central food ordering website/mobile app or call center. The operator handles all operations, from accepting the order online and planning it to delivering it through third-party logistics.
Operator-managed cloud kitchens are like virtual franchising models and one of the most effective ways to grow the cloud kitchen market.
Biryani Blues, a famous biryani chain, has begun operations in Dubai through a partnership with cloud kitchen operator Kitopi. Biryani Blues currently has three locations with Kitopi and operates on a revenue-sharing basis.
Here’s an in-depth look at the various styles of cloud kitchen business models, how they work, whom they’re ideally suited for, and more.
15 Factors to consider before opening a Cloud Kitchen
CAPITAL /BUDGETING
It’s time to build a business plan for your cloud kitchen in a Microsoft Word document or a PowerPoint presentation. This business plan will lay out everything you need to know to start a cloud kitchen. It will reduce the likelihood of overlooking important information. Your talents, weaknesses, opportunities, obstacles, and threats will all be present.
A business plan’s major components include capital expenditure, furniture, ingredients, human resources, place, city, costs, licenses, certificates, bank accounts, utensils, equipment, cutlery, and so on. Putting it in black and white would aid in the methodical execution of all steps. Write down all your thoughts and review them for the positive feedback. A productive dialogue can help in mitigating the risks associated with launching a cloud kitchen.
REGISTRATION/ LICENSES
Food Safety and Standard Licenses
Foodservice licenses are provided by your state health department. The health department may also require an in-person visit to obtain your restaurant food service license. They’ll make sure you’re following restaurant food safety requirements and will return to check in regularly. The procedure for obtaining a food service license is straightforward: simply apply online with the name and location of your restaurant.
Sales Tax/VAT/GST
In certain states, a sales tax license is also known as a sales tax permit or registration. It is an arrangement with the state tax office to collect and remit sales tax on goods sold by your company. For a sales tax license, you must collect state and local sales taxes in the state that issued the license and remit the money to the appropriate state or local taxing authority. If you form a sales tax nexus, or bond, with a state that collects sales tax, you must obtain this authorization.
Trade License
Any company, including the cloud kitchen, will need a trade license. This can be achieved by submitting the appropriate paperwork to the local municipal office. Aside from the expense, we could need some additional funds to complete the job. It is a one-time task and a form of legal action.
Fire and Safety License
While it is not necessary to begin with, it is a good idea to save yourself from potential problems. This is required by statute, and fire and human health agreements are required in every workplace.
Trademark registration
It is also essential for the cloud kitchen company because the concept does not enable the consumer to intervene, so the business’s brand name is the customer’s HERO. To protect the brand, the company owner must file trademark applications for the logo, name, and wordmark consisting of various colors and patterns to establish a distinct identity on the market
LOCATION & PROPERTY
Even though the rents are lower in the case of a cloud kitchen, the place and property must be selected with severe caution to succeed. The cloud kitchen can be placed in an obscure location and does not require a lot of foot traffic or visibility. Within a 300 Sq. Ft location, you can easily run a single brand or standalone cloud kitchen. It should, however, be in a region where there is a strong demand for the food you plan to sell.
One important thing to keep in mind while choosing a location is to decide the kind of food you will be selling. if it will fast casual or full-blown meals. Depending on your menu choosing a location closer to a residential or commercial area will be crucial.
KITCHEN EQUIPMENT
The cost of establishing a kitchen depends on the kitchen and food that you sell.
You will save a lot of money if you spend wisely on equipment by purchasing new electronic goods and used equipment such as tables, racks, and storage shelves. The cost can rise due to the use of heavy equipment such as a chimney, deep refrigerators, and burners. If you want to run several brands from the same kitchen, you can use the same kitchen equipment and services for all of them. This will help you save money on supplies. Here is a list of Kitchen equipment you want to consider buying:
Exhaust Hood
Counters
Commercial Reach-In Refrigerators and freezers
Cooking Range
Oven
Commercial Fryer
Sinks
Fire suppression system
Cutting Surfaces
Shelves
Dishwasher
Kitchen Planning
Start kitchen preparation with the menu, since the kitchen has everything you need to prepare the finished dishes from your menu. The trick is to make use of space. If you plan to work in multi-brand kitchens, you can plan various parts of different dishes. Choose the right contractor with the most reliable civil and electrical engineering expertise for storage, drying, exhaust and ventilation preparation before starting your cloud kitchen. Choose clean, high-quality steel kitchen equipment. There are different types of Kitchen Layouts and you can choose the one that fits your menu the best:
Assembly line
This style of layout is common in fast-food restaurants such as Subway and McDonald’s because it allows repeatedly creating the same type of food dish. The assembly line layout features a central row that begins with food preparation and finishes with a finished item that is ready to be served. Typically, the point of service is customer-facing. The assembly line layout is suitable for fast food franchises that have a small menu and use a similar food preparation process. It enables consumers to personalize their meals right in front of their eyes.
Zone type
This layout is perfect for large activity areas such as a hotel, restaurant, event catering kitchen, and so on, with a varied food menu and a large staff. The concept behind this design is to divide and lead. Instead of a single head chef overseeing the entire kitchen, this style of kitchen is a symphony of several specialist chefs creating a varied menu from start to finish in a single kitchen. This configuration necessitates a significant amount of room and personnel for the kitchen to run smoothly.
Island style
The island-style kitchen layout begins with a ring layout, with a cooking station in the middle, like an island. Storage cabinets, food prep counters, and the cleaning area are situated along the perimeter, with the cooking equipment in the middle. This layout works best in a square area with plenty of room around the island to allow for smooth movement. With this type of layout, the kitchen chef can easily communicate with and order his or her staff. It ensures that the kitchen runs smoothly.
Galley Layout
This design is suitable for small spaces such as food trucks or small kitchens. All the equipment and workstations are located along the perimeter, i.e. along the walls, in this configuration. The open space in the center allows kitchen workers to move freely while also making it easier to work at several stations. This layout is built around the workflow to help you serve a greater number of customers in the shortest amount of time.
STAFF
Anything can be accomplished alone but working as part of a team makes the process easier. Often begin a cloud kitchen with a team to execute it or, at the very least, a consultant. You may or may not make them your business partners, but their assistance is needed to keep things on track. Time is more critical in the cloud kitchen market because hungry people do not wait. The participation of team members aids in making the right decisions through meetings and discussions.
The workload is often divided and distributed to all participants based on their specializations. A team’s sense of duty and enthusiasm is palpable. A person can lack the zeal to continue working after launching a cloud kitchen, but other team members may inspire. They continue to work and expand.
POINT OF SALE TECHNOLOGY
The entire online food ordering and distribution system is highly reliant on food order acceptance. It is also important to keep track of the number of orders received from different online ordering platforms. Order tracking and accurate monitoring are critical for restaurants to run smoothly. Choose a POS that has been tailored to the needs of the online shopping website.
MANAGING SUPPLIERS
Obtaining the highest quality raw materials is the first step in providing the best food experience. Since food is the only selling point in a delivery-only restaurant, it must be of the highest quality. Choosing the right provider is critical for handling raw material supply.
When you’re running multiple brands from a single kitchen and sourcing products from a variety of vendors, proper vendor management becomes much more important. As a result, be careful with your vendor selection and ensure that the meals are prepared from only the best quality raw materials.
MANAGING INVENTORY
The most difficult task of running a cloud kitchen is thought to be managing the inventory. That isn’t correct. Yes, having several labels under one roof can make inventory management a little tedious, but by creating a system of checks and numbers, you can handle it with ease. With the help of a smart POS device, you can easily handle the stock and inventory requirements of multiple brands. From a single dashboard, you will be able to view and monitor each brand’s daily stock consumption and requirements.
You can easily handle the purchasing of stock products for each brand by raising Purchase Orders based on the requirements.
MENU PLANNING
This will be the most fascinating move because it is all about the delectable dishes that will soon dominate the hearts of the people in town. Please select the dishes that are most popular with the people. Consider first idea positioning in the minds of the target market, taste preferences, age dynamics, region availability, recipe development process, costing SOP’s, flavors and combinations, home delivery packaging, and so on.
PACKAGING
A ghost kitchen’s selling point is food delivery to the customer’s entrance. Packaging is an essential aspect of food distribution. The content, design, consistency, and handling of packaging all play an important role in communicating your brand values to customers. Packaging is important in the food distribution industry because it preserves food quality, avoids product spilling or leakage, reduces food waste, and communicates brand messaging to consumers.
In today’s food distribution industry, the packaging is about more than just practicality; it’s also about having a strategic edge over other competitors. In addition to delivery-only restaurants, QSRs and other restaurant formats are innovating their packaging requirements to differentiate themselves. Cloud kitchen operators are putting more thought and effort into choosing the appropriate container and packaging materials. Famous brands such as Faasos and Box8 use food-grade plastic containers with recyclable, microwave-safe lid wraps to ensure proper presentation.
BRANDING & DESIGNING
To define a brand strategy, the company should first define its restaurant concept’s “best-at,” in terms of food offering. “Best-at” is the one thing a company provides better than any other competitor. It is now time to begin designing. It will include logo design, staff uniform design, cutlery, and crockery design, food package design, menu design, and so on. Memorization is aided using audio-visual techniques. Creating one-of-a-kind visuals would leave a lasting impression and ensure brand awareness. Creates taglines and advertising messages, as well as guarantees four elements:
Loyalty
Credibility
Recognition
Consistency
Your company’s branding can be enhanced by the use of a logo. Taglines can help to build a picture. Using them on all related items will help it stick in people’s minds.
MARKETING PLAN
If properly developed, a marketing strategy may be the key to success. Make use of photographs of food products that you have prepared. In the retail sector, the concept of ‘‘whatever is seen, is sold” may be applied to the cloud kitchen market as an added benefit. If people are drawn to images of food, they may be tempted to eat them as well. As a result, the marketing strategy must include enough images with relevant taglines.
When launching a cloud kitchen, experiment with various ways to place the brand. For example, dry snacks can be marketed to be eaten at any time of day. This would increase their consumption and, as a result, their benefit levels.
Cloud kitchens benefit greatly from online marketing. The first step is to register your restaurant on restaurant listing and review sites such as Zomato, TripAdvisor, Burrp, and others, and to encourage positive feedback from your regulars. You may also advertise exclusive sales and promotions on Facebook. Budgeting is an important aspect when it comes to creating a marketing plan and specific amounts should be allocated to different marketing avenues depending on your target market.
CHOOSING PLATFORM FOR SALE
Online food aggregators are the most popular source for generating orders since they already have the desired target audience. You must get your cloud kitchen business listed on all the food ordering platforms as they become an additional sales source.
Apart from accepting orders from online food aggregators, you can also have an online-ordering enabled website. The website must be optimized so that customers can easily navigate through the website and place their orders.
Value Proposition for customer and partners if you choose an aggregator:
A customer’s value is determined by time, resources, and confidence.
TIME: Let’s face it, jumping from site to site and comparing rates will take a long time. Customers benefit from aggregator business models because they save time. This not only shortens the search time but also provides the user with an immediate and often customized list of comparable products/services to compare.
EASY USE: It would also be difficult to collate and make sense of all that data. You will need to make tables with features and prices. Aggregators assist consumers in making decisions based on their preferences by using reference tables and filters. As a result, making choices becomes simpler.
TRUST: Aggregators also aggregate ratings from a large number of users or have their rating systems. This offers a wide pool of feedback and assists the consumer in selecting a reliable product or service.
CASH: Customers get the best price vs quality assurance or the best good/supplier for their budget by comparing prices around the market and matching it with feedback.
Partners’ Value Proposition
Partners profit from the ability to acquire consumers without incurring marketing costs. Since most marketing efforts focus on attracting a small number of consumers who then make a purchase, the cost per acquisition is often high.
There are also expenses associated with all of the operations associated with the processes and personnel required to sell a product or service.
HYGIENE MANAGEMENT
The most difficult task in the cloud kitchen industry is preserving hygiene after launching a cloud kitchen. There must be dedicated personnel to clean the platform, the board, the utensils, and everything else regularly. In peak season or while receiving orders continuously, the platform must be cleaned every 15 minutes. It would aid in the prevention of diseases among employees and customers, as well as the prevention of mismanagement. It would also boost the morale of those who work there.
As a result, their productivity will increase. Until you start a cloud kitchen, make up your mind and be determined about hygiene because this is the most difficult challenge in the cloud kitchen market.
Our firm here at RFC work with you closely to help you open your cloud kitchen around the globe. Get in touch with us to discuss how you can open your own cloud kitchen today.
RFC helps clients generate long-term value for all stakeholders. We help clients transform, grow, and operate while fostering trust through assurance with our services and solutions, which are made possible by data and technology.
We balance ESG and risk mitigation in our professional services. Our consulting experts make sustainability a business priority with vision and pragmatism.
You must be logged in to post a comment.