Food and restaurant start-ups on the menu

Web-based platforms with a focus on food and dining are experiencing a booming period as this nascent industry catches up with similar innovations made in other segments, such as travel and fashion. Aside from the traditional models of ordering fast food or groceries online, new segments such as restaurant reservation apps, recipe deliveries and diet planners are being swallowed up by eager online consumers, especially health-conscious developed market Internet users and the urban middle classes. This digital dining environment is creating opportunities for business transfer agents as bigger players are increasingly looking for innovative acquisitions in the field, especially if they are able to provide an eye-catching niche and offer mobile platforms. The challenge for the segment lies in spreading beyond urban areas and monetising services.

Demand for online diets and dinner reservations rising

Connectivity is increasingly an important aspect of food-based businesses, as the world’s growing Internet user base is looking to the web to make dining decisions. A mixture of new and older segments are seeing stronger uptake as the online food sector matures:

  • The large dieting market is moving online wholesale, as consumers appreciate the convenience of following eating plans from a digital device. The notification-capability of mobile apps is an especially strong driver of ensuring dieters follow schedules and calculate calorie intake on the go. A total of 1.8 billion mobile Internet subscriptions worldwide in 2013 is ensuring users are app-ready;
  • In a modern world of work-related time constraints and career-focused mums, cooking is a luxury not many are able to afford. Innovative start-ups are capitalising on this by offering the delivery of ingredients for specific recipes online, allowing home cooking without the hassle of grocery shopping. This trend is especially strong among health-conscious, urban middle classes;
  • Following in the footsteps of the hotel and travel industry, online restaurant reservation services are seeing rapid uptake in urban hotspots where clinching a table on a busy night can be key to an aspirational dining experience. Global consumer expenditure on catering has expanded by 10.9% in real terms over 2008-2013, with consumers willing to spend increasingly more when eating out.

Logistics and payments a barrier to greater growth

The world’s rising number of Internet users, set to reach around 2.9 billion in 2014, will be a major driver of growing interest in online food and dining services, with emerging markets set to copycat trends already underway in advanced economies. However, there are some distinct and specific obstacles to the digital dining trade.

In terms of physical goods purchases, such as recipe ingredients, and fast food and grocery orders, the logistics necessary to deliver fresh food can exempt rural areas and second- or third-tier cities from being able to take advantage of online services. Growing urbanisation and the localisation of businesses are potential solutions, but urban areas are set to be the main beneficiaries from the online dining trend.

Virtual services such as diet plans and restaurant booking services can be difficult to monetise, as free offerings online (such as blogs and bookings made directly through a restaurant) provide considerable competition. These services also depend on electronic payments, rather than cash-on-delivery, which can be hard to extract from cash economies predominant in many emerging markets.

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