Indonesian food-tech firms bet big on delivery platforms for growth

Photo by Chan Walrus from Pexels

Before establishing local rice box brand Dailybox in mid-2018, Kelvin Subowo was astonished by the fascinating growth of food delivery services, driven by Southeast Asia’s largest ride-hailing players, Gojek and Grab.

Having garnered experience in a hot pot restaurant in Jakarta since 2011, Subowo reminisces his key learning in the F&B sector rather early in the profession: Restaurants, without famous brands, typically need to change their concept every two years, which in turn requires a lot of upfront investment.

These two factors coupled with each other perhaps explain his quick foray into the food delivery market in 2018, months after launching DailyBox.

DailyBox, however, is not the only one to be betting big on the food delivery business to jack up revenue. Albeit a different approach but multi-brand F&B company Hangry, too, claims to have seized ‘millions’ of users through food delivery apps.

“Grabbing the food delivery market is the fastest way for us, to achieve our goal – expanding fast across Indonesia,” said Hangry co-founder and CEO Abraham Viktor. Hangry operates as many as 48 outlets in big cities in the archipelago such as Greater Jakarta and Bandung (West Java). Had it not been through food delivery apps, the startup would have struggled through the city streets trying to reach out to its customers.

In 2020, the COVID-19 pandemic had a harsh impact on the F&B sector when the government stipulated large-scale social restrictions in Indonesia from March-end to June, pulling breaks on traditional dining outlets.

That, in turn, increased demand for food delivery services as people had no option but to rely on them even more for their daily necessities. According to a joint study conducted by Google, Temasek, Bain & Co, the food delivery market in the region surged 20 per cent in 2020 from $5-6 billion in 2019. The study reveals the market will stay above the pre-COVID level and achieve the $25 billion mark by 2025.

Spotting growth in the industry, investors too are evincing renewed interest in startups looking to expand operations. As many as eight companies secured new investment in 2020, bagging a total amount of $132 million, a threefold jump from $42.3 million in 2019.

Expand Table

Indonesia food-tech startups funding in 2020

Company Funding amount (in $)SeriesInvestors
Hangry2 millionseedSurge by Sequoia
Kopi Kenangan109 millionSeries B roundVerlinvest, Sofina, Sequoia Capital India, KUNLUN,
Horizons Ventures, GIC, B Capital Group, Alpha JWC Ventures
Wahyoo5 millionSeries A roundIntudo Ventures, Kinesys group, Amatil X, Arkblu Capital, Indogen Capital,
Selera Kapital, Gratyo Universal Indonesia and Isenta Hioe.
Daily Boxundisclosedseed Kinesys group
Yummy Corp12 millionSeries B roundSovereign's Capital, Softbank Ventures Asia, Quest Ventures, Palm Drive Capital, Intudo Ventures, AppWorks, Amatil X Ventures
Haus!2 millionSeries A roundBRI Ventures
Mangkokku2 millionseedAlpha JWC Ventures
GreenlyundisclosedseedEast Ventures
Total funding132 million

Expand Table

Indonesia food-tech startups funding in 2019

Company Funding amountSeriesInvestors
Goola5 millionseedAlpha JWC Ventures
Kopi Kenangan20 millionSeries A roundSequoia Capital India, Serena Ventures, Arrive, Jonathan Neman, Caris LeVert
Fore Coffee9.5 million
Series A roundSMDV, Pavilion Capital, Insignia Ventures Partners, East Ventures, Agaeti Venture Capital, MSA Capital
Yummy Corp7.8 millionSeries A roundSMDV, Intudo Ventures, Sovereign's Capital,
Selera Kapitalis a FnB Ventures from Sour Sally Group, Prasetia Dwidharma, Agaeti Venture Capital
Wahyooundisclosedseed
SMDV,Rentracks, Kinesys, East Ventures, Chapter One Ventures, Agaeti Venture Capital
Total funding42.3 million

Two giant ride-hailing apps Gojek and Grab, too, witnessed superior growth in their food delivery business, which also create opportunities for cloud kitchen firms.

According to Gojek chief food officer Catherine Hindra Sutjahyo, GoFood merchants witnessed an average 70 per cent growth in transactions ever since they joined Dapur Bersama (GoFood’s cloud kitchen service) in May 2020. Gojek runs 27 cloud kitchens in three cities across Indonesia. In total, around 900,000 food merchants are registered on its platform, an 80 per cent increase in number compared to 500,000 merchants in 2019.

Meanwhile, Grabfood head of marketing Hadi Surya Koe said the company witnessed a 153 per cent growth in new merchants between July and August 2020. Its cloud kitchen service Grabkitchen also saw more than 45 per cent increase in sales between March and October 2020. It currently has operations in 49 locations in seven cities.

Meanwhile, Yummykitchen – a cloud kitchen provider under Yummy Corp, claims to have been busier across all its 65 cloud kitchen locations across Jakarta, Bandung (West Java), and Medan. Its co-founder and CEO Mario Suntanu believes the company has room for expansion as demand for food delivery services in big cities is higher than last year.

Relevance of big data in food-tech sector

Even as food delivery has been driving business for the food tech industry in Indonesia, big data has a crucial role to play in helping startups understand the exact areas of expansion. As more and more food merchants adopt the digital wave, they need insights and big data that support them to locate their businesses close to customers said BRI Ventures chief investment officer William Gozali.

“F&B players are frequently provided with insights and big data from online delivery. They (food delivery apps) can map which areas have high demands of certain foods or high demands but lack supply,” Gozali said.

Echoing the same sentiment, Dailybox’s Subowo revealed how the collaboration with cloud kitchen operators has helped the firm gain data insights, including customers’ data retention rate and the interest in each location. Currently, Dailybox has 55 outlets that work with cloud kitchen providers, and 12 outlets are operated by themselves.

However, for tech-enabled coffee chain Kopi Kenangan, big data provided by cloud kitchen operators do have not enough to cater to the company’s need recently.

“Lack of data becomes the biggest challenge for F&B players, as it is yet to be available to the mass market. Despite some of the cloud kitchen operators have provided some insights, data does not have enough to support the growth of F&B merchants. Hence, it poses a challenge to new rising food and beverage or someone who wants to build the business from scratch,” said Kopi Kenangan co-founder and CEO Edward Tirtanata.

The firm secured $109 million from Sequoia Capital India and some global investors in its Series B round in May 2020. This year, the firm is building a ‘heat map technology’ to support its decision in locating stores near its customers.

Heat map refers to a data analysis software that enables companies to make quick and appropriate decisions.

“Revenue will always go higher in our stores, as we are utilizing our heat map technology. We can locate stores that contribute more revenue than the third party which owns cloud kitchens,” Tirtanata added. Kopi Kenangan plans to close its five stores, which mostly operate through cloud kitchen providers. Going forward, the company plans to double the number of its store to around 450 by January 2021.

Challenges amid growing competition

With a growing middle class, rising disposable income in the hands of people, and changes in lifestyle, there is enough room for the food sector to grow.

According to a World Bank report, Indonesia’s middle-class population grew from 7 per cent to 20 per cent over the past 15 years, with 52 million Indonesians currently belonging to this group.

However, that does not mean the sector is devoid of challenges. Food-tech startups often stare at challenges on how to navigate the way forward amidst growing competition.

“It is not easy for new food brands to navigate the brand and make it sustainable. They need to change the concept or add more products or brands. Make a differentiation between others, and it will take a long period,” said MDI Ventures vice president Aldi Adrian Hartanto.

Hence, it often becomes important for companies to increase their spending to invest more in marketing strategy to navigate their brands.  Hangry, for example, plans to invest a part of its next funding to spruce up marketing activities. The company, that has five F&B brands from fried chicken to coffee, is currently in talks to raise $10-15 million in its Series A round.

Daily Box also plans to keep aside a part of its corpus for marketing campaigns and collaboration with big brands and other public figures in 2021.

MDI Ventures’s Hartanto highlighted another challenge for cloud kitchen players who rely on commission fees from merchants. There is a chance that their revenue gets affected as new players emerge in the market.

“Cloud kitchens should have a different unique selling point for having a sustainable business. Otherwise, they will have to depend on limited commission or revenue sharing, as they have to compete with their peers. Cloud kitchens that generate their own revenue are more sustainable,” Hartanto said.

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.