Why Grab is a late arrival to the Singaporean cloud kitchen market

A photo of the front door of the Grab office in SingaporePhoto:Jon Russel

Nearly two years after it made its debut in Indonesia, GrabKitchens has arrived in Singapore. How did the Singapore-based tech giant end up a laggard in its own backyard in a segment that it dominates elsewhere?

By Preetam Kaushik

Singapore’s cloud kitchen scene received its latest arrival in January 2020. GrabKitchen joined the rapidly expanding list of kitchen providers establishing ten new restaurants, including three virtual restaurants, at their cloud kitchen in Hillview in northwest Singapore.

The tech giant joins the likes of Foodpanda, Deliveroo, and Smart City Kitchens (SCK), all of which have established a presence in the Singapore cloud kitchen market. Foodpanda has two kitchen locations, with plans for further expansion. The UK-based Deliveroo has three, while SCK currently operates out of a massive 13,000 sq. ft location in Tampines.

Singapore has been Grab’s home since 2014. How did three other brands steal a march on Grab in its domestic market in food-tech, one of the fastest-growing tech segments? The answer lies across the Straits in nearby Indonesia.

Indonesia is the biggest prize in the region

The Indonesian market holds allure in the ASEAN region—projecting 2020 revenues of US$ 1.7 billion in the food delivery segment alone. With only 35 million of its 195 million smartphone users currently ordering food online, there is plenty of room for expansion.

Indonesia, therefore, looked like the perfect location to test a hitherto untried product. Nearly two years later, that experiment has paid handsome dividends and a refined product offering has put Grab Foods in pole position to dominate the Indonesian food delivery market.

Grab food
Photo Credit: Youtube/Screengrab

It started in September 2018 with the launch of the first Indonesian GrabKitchen. By the end of 2019, Grab had spread across 221 cities (178 of them in Indonesia) and was establishing a presence in five Southeast Asian nations. Its market share in Indonesia hit 50% in 2019, rising from just 15% in the course of a single year.

Grabkitchen is a vital part of the firm’s overall expansion strategy. Spurred by its success in Indonesia, Grab opened its first cloud kitchen in Ho Chi Minh City in Vietnam in 2019. In 2020, the firm plans to open new outlets in Hanoi and Da Nang. In Thailand, the firm opened a cloud kitchen location in the Sam Yan neighbourhood of Bangkok last year. 

Singapore is the next phase of expansion

In addition to expanding its presence in Indonesia, Thailand and Vietnam, Grab’s cloud kitchen 2020 roadmap includes an expansion into Singapore and the Philippines.

Grab’s move into the Singaporean market is part of this next phase of expansion. Though much smaller in comparison to Indonesia, the Singapore market for food delivery packs a punch.

Food delivery cyclist

The number of users may only sit around 2.2 million but Singaporeans spend upwards of S$500 million (US$418 million) per year on online food orders. Singapore customers spend five to ten times more on online food orders than their peers in markets like Indonesia and Vietnam.

Singapore, therefore, remains a key market for Grab both as the richest Southeast Asian nation and host of the company’s headquarters. Grab also enjoys high name recognition in the country. Ever since Uber’s exit, Grab has enjoyed a virtual monopoly in the ride-hailing market in the country.

GrabFood, its food delivery platform, has expanded steadily in its first year in the Lion city, enjoying 25% growth each month. The firm will leverage its vast userbase to drive its cloud kitchen venture.

But name recognition alone will not guarantee success

Unlike traditional restaurants, cloud kitchens are flexible and can rapidly respond to data insights. Grab is looking to employ a data-centric approach to its kitchen offerings to ensure success in a crowded Singaporean market.

The Hillview location was carefully selected because the surrounding town of Bukit Batok was one of the most underserved locales on the Grab Foods app. Bubble tea, mala, and soup are all on the menu because of their prominence on past orders from the area. 

This data-centric approach can provide a competitive edge as Grab looks to dominate the Singaporean cloud kitchen market. Its super-app and the ecosystem of services offers a vast data pool to draw from. The firm can rapidly harvest vast amounts of data on its Singaporean users and their spending habits.

In Indonesia, it took Grab just six months to increase the number of cloud kitchens in that country by tenfold. Aggressive expansion is ingrained in the Grab DNA and could mean big trouble for the Singaporean incumbents.

Grab also has another weapon up its sleeve, one that has put the company under intense legal scrutiny. Both Grab and Deliveroo are part of an ongoing investigation by the Competition and Consumer Commission in Singapore, for allegedly shutting tenants at rival SCK’s cloud kitchen out of their delivery systems.

Grab has already stated it will cooperate fully with the investigation and has started working with rivals’ tenants. But it with livelihoods at stake, Grab’s excusatory tactics could deter future cloud kitchen tenants from leasing from Grab’s competitors.

The battle lines have been clearly drawn up in the Singapore cloud kitchen market. At stake is one of the richest and most densely populated urban markets in the entire ASEAN region. Grab’s arrival promises to bring big changes, setting 2020 up to be a pivotal year for Singapore’s cloud kitchen and food delivery segments.