Appetite for cloud kitchens on the rise in Saudi food sector

Saudi Arabia’s food sector is seeing a growing number of cloud kitchens – commercial kitchens that prepare food exclusively for online delivery orders, without providing dine-in services.

Saudi Arabia is set to see a huge surge in cloud kitchens as the region’s food sector grows and in anticipation of the hosting of numerous global events, which will lead to an influx of tourists and is likely to lead to more opportunities for growth. That is according to a survey of cloud kitchen companies in Saudi Arabia conducted by Qoot, a subsidiary of management consulting firm Mukatafa.

The global delivery industry is projected to reach the $154 billion mark by next year, with on-demand food a big part of that rise. This industry growth is likely to be good news for cloud kitchens, a new business model in the industry that is gaining traction.

When it comes to food and beverage (F&B) technologies, a majority of respondents said that they considered themselves ‘tech-savvy’, with another 39% saying they have an intermediate level of familiarity. Indeed, online ordering and apps are an essential part of the cloud kitchen model, allowing customers to more easily make orders.

There are pros and cons with the cloud kitchen business model. While most respondents noted that their cloud kitchen businesses had lower operation costs than a normal restaurant, sales were also lower. 56% said they saw fewer sales than a normal restaurant business, with only 17% reporting more sales.

But though cloud kitchens might see less sales, slightly more respondents (39%) said they saw better profits than their brick-and-mortar counterparts, likely because of their greatly reduced overhead costs. But then also 33% said they saw less profit. As a result, the researchers from Mukatafa highlighted that there is significant variation in how successful these companies are in Saudi Arabia.

The survey also asked respondents about their dependence on delivery services, which was a bit more of a mixed bag. 49% reported being “moderately dependent” on delivery services, with 29% said that more than half of their sales were dependent on delivery services.

The on-demand food industry is witnessing significant growth thanks, in part, to delivery apps and a digital drive that was initially driven by the global pandemic. Food delivery apps have been exploding in popularity around the world, with the overall market size projected to grow to over $667 billion by 2032, according to one estimate.

The growing phenomenon of cloud kitchens has also extended to the UAE. Cloud kitchens emerged rapidly during the pandemic when local restaurants changed their business models to go online, offering expanded delivery services.