The first time I ordered food online was in 2001.
I was living in London and I placed an order on the brand-new Tesco supermarket website from my PC at work. When the order arrived they had given me two of everything for no extra charge, and I was especially pleased to see that there were two six-packs of Red Stripe lager instead of one. Clearly their systems had a few teething problems.
Since those days, online food delivery has become extremely big business. The global online food delivery services market was worth $107.44 billion in 2019 and is expected to reach $154.34 billion in 2023. [https://www.researchandmarkets.com/]
Smartphone usage has played a major role in this, with 1.5 billion people using their devices to order food and this is expected to grow 25% per year for the next five years.
In cities all over the world, streets are filled with food delivery drivers, cyclists, and motorbikes, delivering everything from old classics like pizza to sushi, and new trendy options like Buddha bowls and kombucha. Flamingo Foods, an electric scooter company, even offers food delivery by scooter.
As in many online sectors, we are seeing a few familiar themes play out: what starts out as exciting, innovative ‘disruption’ becomes the norm. The market matures, a small number of dominant platforms emerge and then converge, offering the same features as their rivals.
And as their market power grows they are invariably forced to defend themselves from accusations of price-gouging, exploitation, and negative externalities. For example, Uber Eats, the food delivery arm of Uber, takes a delivery commission of up to 30% on the menu price of restaurant food. The pressure of Covid lockdown saw the hospitality industry push back hard on Uber Eats with a boycott campaign. Prime Minister Jacinda Ardern was even moved to exhort Kiwis to support local businesses that did their own deliveries.
One of the most interesting categories in online food delivery is ‘meal kit’ home delivery services. Companies like Woop!, My Food Bag, and Hello Fresh bridge the gap between grocery delivery and meals. They deliver a box of raw ingredients once a week to people who like to cook, but don’t like (or don’t have time to) plan their meals for the week. The message is usually something like ‘we take the hassle out of cooking meals’.
These companies have rapidly become household names, although in Hello Fresh’s case, not all the publicity has been good. In 2018 Inc.com labelled Hello Fresh “the world’s most ruthless food startup” and at the time of writing, the German company was in the news after it sent messages to its New Zealand customers warning them not to eat its “coconut fish and makrut lime sauce with jasmine rice and crispy shallots” after more than 20 people reported food poisoning!
So what is happening in Hawke’s Bay and who are the good guys in this story? Despite this huge global growth, it doesn’t appear that the average BayBuzz reader has latched onto the food delivery trend. In the most recent BayBuzz reader survey, only 8% said that they order food online once a week or more, and 70% have never ordered food online. Since the Covid lockdown, about half of online food buyers say they now purchase online somewhat more.
In 2016 I interviewed a fledgling meal kit delivery business called On Your Plate, when the company was only 12 weeks old. Started by caterer Kate Lester and butcher Paul Greaney, the company has now been in business for four years, it has moved from Havelock North to the industrial heartland of Napier, Onekawa, and it has weathered the competition. As a digital marketer, I love a good succinct value proposition and On Your Plate’s is simple: “It’s like My Food Bag but with local ingredients”.
Whereas My Food Bag and Hello Fresh deliver overnight from Auckland, On Your Plate source their produce locally and deliver locally. The rationale for this is simple: produce is fresher when it is sourced locally, and portions are bigger because local seasonal vegetables are cheaper. A substantial proportion of people like to support local providers to support the local economy, and minimising food miles is an important consideration for sustainability.
Since its inception, On Your Plate has followed a story arc familiar to many small business owners. Rapid growth, experimentation, the emergence of competitors – both local and international, expansion of staff numbers … then Covid-19.
Paul and Kate found out the hard way that the delivery food business is unforgiving. If you miss out one ingredient, the meal is ruined and the customer will be annoyed, so the founders keep tight control over the day-to-day running of the business. They offer four options, including a family box and a weekend barbecue meat pack for up to ten people, which is delivered on Friday night.
Paul admits that the entry of Hello Fresh into the market in 2018 had a big impact on their business, but they have seen that many of their customers who tried Hello Fresh have since returned. Unlike Hello Fresh, On Your Plate does not offer fish. The fish business is unpredictable and it’s too hard to guarantee freshness. On Your Plate also does not offer vegetarian meals. They have tried a vegetarian menu twice but the demand simply has not been there. Hawke’s Bay is largely a traditional market with traditional tastes, i.e. meat and lots of it, even for the early adopters of services like this.
Couples aged 40 to 60 are their most important customers. In future, they think young people will become a more important demographic for these offerings, especially as they go flatting or go to university and their parents buy them delivery meal kits instead of giving them money that they might spend on alcohol and carousing.
Social media, in particular Facebook, is a very important part of the marketing mix. They use Facebook to keep their community of customers updated with their latest menus and recipes, as well as spotlight ‘local heroes’.
Their website uses a Canadian system called Snipcart which enables anybody to start selling online within minutes. Payment is by credit card via Stripe, a global payment gateway. Both of these modern e-commerce platforms are very accessible, and need almost no technical prowess to set up. Both Stripe and Snipcart charge no setup fees and take a small commission on each purchase (around 2%). It’s a far cry from the days of spending upwards of five figures and months of wrangling developers to start selling online.
The tech stack also extends to the delivery of the meals.
This is probably the most high-tech part of the business. Finding the shortest route between a large number of addresses sounds simple, but it is one of the most difficult problems in computer science. The so-called ‘travelling salesman’ problem has been studied intensively for so long that it has become famous. Let’s say your driver has 50 meal boxes to deliver all over Hawke’s Bay; how do you plan a route that takes the least amount of time and burns the least amount of fuel? You could get a genius like Good Will Hunting to work it out for you on a blackboard, but fortunately there is an app called Road Warrior that Paul uses to optimise the delivery routes.
Despite the questionable behaviour of some of its practitioners, the future of online food delivery seems assured. Unlike its corporate rivals, On Your Plate has a healthy limit to its ambition. Kate and Paul remain focused on servicing the Hawke’s Bay market. They have demonstrated that there is a need for regional local food delivery businesses, but they don’t have an appetite to set up a nationwide network at this stage.
Finally, here are some top tips for ordering hot food deliveries, courtesy of Consumer magazine’s Haydn Green. He says curries are the best to order, because they are easy to reheat if they arrive late. Rice and noodle dishes are next best. The worst are burgers and fish and chips. And fried dumplings are a definite no-no. Once these get cold and soggy, they are almost impossible to revive.