Markets by Grant | Made-to-Deliver Food

5 min readJun 1, 2021

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Welcome to Markets by Grant numero uno: a topic near and dear to my stomach, and a startup idea I had way back when (more on that below).

I’ve decided to start with this relatively light market analysis before I dive into the denser stuff in coming weeks. A few acknowledgements before I begin:

My Mentors: I learned a lot about this space as a VC at TCC and TMV. Thanks to Patrick Lee and Soraya Darabi for the education and exposure.
My Waistline: Like Gandalf and the Balrog, we are locked in eternal battle. Because of you, I no longer fit into the suit I’m sporting in my medium profile pic. But also because of you, I became interested in food as an academic and business topic.
David Chang: No disrespect — I love you (more on that below).

The Market

Size and Growth

Time for some stats:

The Online Food Delivery Market includes both Restaurant-to-Consumer delivery and Platform-to-Consumer delivery. In 2021, the global market size is ~$151.5 B, having experienced 11.1% growth over the past year.
The global market is split roughly equally across the two categories in size ($72B vs $79B), users (820M vs 790M), ARPU ($88 vs $100), and growth (9.5% vs 12.5%) — with a growing advantage for Platform-to-Consumer.
App based orders have been growing at 20%+ CAGR since 2013, and are expected to grow further, at 27.9% through 2023.

Wow, those were some great stats. Now we know that it’s a large, growing market which hasn’t yet reached equilibrium on food production and delivery. Let’s double click on these trends (don’t actually double-click).

Trends

Restaurants are being left in the dust. Delivery has grown 300% faster since 2014. 60% of Americans order in weekly, and 65% have ordered in more since the start of COVID.

…And they’re trying to pivot. By 2022, 67% of restaurants would prefer opening a delivery-only kitchen over a dine-in as their next project.

Restaurant brand still matters. User engagement and ordering is higher when consumers know the restaurant — driving 67% more orders.

…And app brand doesn’t.

The delivery market is crowded and undifferentiated (the average American has >2 delivery apps on their phone).
Loyalty is low (~70% would rather order from a restaurant to save them the fees).
And churn is high (~86% of users stop using food delivery apps within 2 weeks of downloading).

The Bottom Line

With all this in mind, here’s my overall POV:

Startups which capture latent restaurant supply by eliminating barriers to entry for chefs to start made-to-deliver operations

to optimize food production for delivery and capitalize upon loyalty at the restaurant brand level

are poised to capitalize on strong market opportunity within Made-to-Deliver-Food

It’s a nice idea, but it’s not easy…

Many have tried, few have succeeded. Davy Jones’ locker is so full of failed made-to-deliver food businesses, he is considering opening a ghost ghost kitchen to house them.

Made-to-Deliver Food Postmortem

Wow, look at that nice infographic. Someone used to be a consultant. We’ve got arrows, text, numbers, pictures, and multiple appearances from David Chang (I ❤ Ugly Delicious). Everything a growing boy needs. But I digress…

As we can see, this is not an easy market. Plenty of well-capitalized and supported businesses have failed. But in the words of Samwise Gamgee, “a new day will come, and when the sun shines it’ll shine all the clearer”. And although that quote has limited applicability here at best, there are lessons to be learned…

Lessons Learned

…and these lessons yield a new, improved series of market strategies, which remain consistent with my overall market POV. To wrap things up, I’ll raise two of these strategies.

Market Strategies

Strategy 1: Eliminate Barriers for Chefs

Cloud kitchens still aren’t that easy, or economical. Chefs find themselves responsible for their own sourcing, branding, and pay high fees. With the growth in delivery and decline in traditional restaurants, cloud kitchens do not address all use cases.

Downmarket solutions which reduce complexity, cost, or effort for chefs are compelling investment opportunities. Marketplace models can add to the overall value proposition by providing benefits to consumers and property owners.

Challenges of these models:

Chefs sacrifice control for price and convenience, and may also sacrifice quality/selection of equipment.

Strategy 2: Monetize the Home Kitchen

Zooming out beyond commercial kitchens, there’s a massive amount of latent supply. Like Airbnb for restaurants (cue the eye-rolls from the tired comparison), compelling startups rethink supply by empowering great home cooks and aspiring chefs to monetize their own recipes, from their own kitchens.

Use of home kitchens sidesteps traditional restaurant/commercial kitchen cost structures, and enables price competitiveness.

Challenges of this model:

This is a startup idea I had last year, which sparked my interest in this overall market. When I told her my idea, my friend Jane rolled her eyes, sighed, and said, “I don’t buy it. What if someone gets food poisoning?”, to which I replied, “shut up Jane it’s a good idea!” as I wiped the tears from my eyes.
Admittedly, this model faces an uphill battle in food consistency/quality, government regulations (trending positive), and delivery convenience. The model has yet to prove with meaningful traction, but I find it to be fascinating and potentially #disruptive.

I’ll be tracking these businesses in the coming months. Stay tuned for an update!

If you made it this far, you are a saint and are now entitled to roast me in the comments section.

-Grant