UAE's dark kitchen business to double off back of coronavirus pandemic

Share of online food orders to reach 16% of total food services in the UAE by 2023, accounting for $3bn in spend

Dark kitchens have shown the fastest recovery in the pandemic period, primarily due to a sudden rush in online orders.

The UAE is set to see a doubling of growth in dark kitchens  – also known as cloud kitchens or satellite kitchens – to $100 million this year from 2019, riding on the back of a coronavirus pandemic-induced surge for online ordering of food, a research report has revealed.

Significantly, the huge jump in the dark kitchen-serviced online food business comes amidst a projected 40 percent fall in the overall food services sector in the country in 2020 to $9 billion from $15bn last year.

“The post-pandemic period is witnessing a significant increase in online food delivery orders in the UAE, and we expect 16 percent of the total food services to be driven by online food orders by 2023, accounting for $3bn in spend,” it said in the latest Redseer Consulting report on the sector, made exclusively available to Arabian Business.

The report by the global consultancy major also said dark kitchens showed the fastest recovery in the pandemic period, primarily due to a sudden rush in online orders.

“This has also allowed new food concepts to be tested quickly and further boosted by the fact that about 42 percent of consumers were open to trying out new restaurants,” the report said.

The report said dark kitchens were meeting the twin objectives of catering to the increasing consumer demand for great taste and variety, while also providing alternative expansion options to chained restaurants, allowing them to be closer to their customer base.

Sandeep Ganediwalla, managing partner, RedSeer Consulting

“Our research shows that more than 80 percent of UAE households have already ordered food online this year and the majority of them plan to continue to do so,” Sandeep Ganediwalla, managing partner, RedSeer Consulting, told Arabian Business.

“The restaurant and food delivery aggregators have catered to a latent demand in the market for quick delivery of a variety of cuisines at consumer’s fingertips,” he added.

On the supply side, Ganediwalla said online food delivery sales were important for restaurants as it contributes 20-40 percent to the total chained restaurant sales, primarily driven by QSRs (quick service restaurants).

“Given the importance of this channel to both consumers and restaurants, we expect this segment to continue to grow faster than the dine-in segment,” Ganediwalla said, adding that he expected a three hundred percent growth in the dark kitchen segment in the coming three years.

According to the Redseer report, the main drivers of the fall in the food services market in the UAE this year were the drastic decline in dine-in orders for restaurants as consumers stayed indoors, especially during the lockdown, as well as the lower tourist flow.

Tourists are estimated to contribute about 10 percent to the total food service sector in the UAE.

“Cloud kitchens have emerged as winners from this year’s Black Swan event, impacting the world in ways like never before. The consumers have had no option of stepping out of their homes due to safety concerns, making food deliveries the biggest game changers for years to come,” Ajay Jain, country head – UAE, Rebel Foods, told Arabian Business.

“Businesses that could not sustain opening have now seen conversion into cloud kitchens as that helps them with reaching their consumer, without a store face, saving up on the costs for rentals and operational expenses,” Jain said, adding that “the factors driving the market would be quality of meals delivered, variety offered by the chain and the factor of convenience to place an order at click of a button”.

Jain also pointed out that the world was already seeing a rise in food delivery and Covid-19 acted as an accelerator in growth for the business.

The Redseer report said four types of dark kitchen models have emerged – virtual brands, virtual restaurants, satellite kitchens and integrated ones – which vary by asset ownership, primary target segment and the operational value chain.

The report has also revealed a strong investor appetite in the dark kitchen segment.

“The space is already competitive with 380 brands serving from 70-plus dark kitchen locations in the UAE. The sector has seen more than $200 million in funding in the region,” it said.


Kiptopi, which is the largest satellite kitchen operator based out of the UAE, has recently raised over $100m in funding. It has also expanded into ancillary services such as e-grocery through dark stores.

Food delivery platforms such as Deliveroo and Delivery Hero have also entered the space through Deliveroo Editions and SweetHeart Kitchen, the report said.

India-based Rebel Foods, one of the world’s largest virtual restaurant companies which has secured over $300m in funding, entered the UAE last year.

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