F&B industry sinks its teeth into digitization

A rise in contactless transactions. Consumers dine out less and dine in more. And we buy directly from producers.

According to gastropreneur Alan Yau (OBE), the biggest food trends of 2020 may all be related to consumers’ response to the Coronavirus pandemic, but they form part of a move towards digitization that predates COVID-19.

The digital transformation has had an effect on business across industries, but during 2020 it saw a particular surge in the food and beverage (F&B) sector, the market category that touches all of us most directly.

“The Coronavirus will have the biggest impact on the industry in three notable areas,” Yau – the man behind brands such as Wagamama, Hakkasan, Busaba Eathai, Park Chinois and Duck & Rice – said presenting a session titled Future Food during Tanween, the Middle East’s leading creativity and innovation festival. “Firstly, we will turn to cashless payments, whether that be Apple Pay or mobile wallets or even cryptocurrency. Then, the eating out market will shrink in favor of the home segment. Finally, we can expect the creation of micro markets, as the at home segment is connected directly with primary producers for their products.”

The cashless economy has been growing steadily before 2020, but fears – among consumers and employees alike – that the handling of paper currency and coins could spread the Coronavirus has fueled the adoption of digital transactions. Governments the world over are promoting cashless payments in the name of public health, a move endorsed by the United Nations. “Time to swap your coins for payment cards — safer for containing coronavirus,” the New York Times quoted Valdis Dombrovskis, the European Commission vice president for financial services, as Europe imposed quarantines.

Locally, Mastercard data shows 63% of respondents in Saudi Arabia have swapped out their top-of-wallet card for one that offers contactless payment. Amidst the pandemic, eight out of 10 respondents agreed that contactless payment was a cleaner way to pay, while 81% thought it was more convenient than cash. Contactless transactions grew three times as fast as non-contactless transactions in the month of March in the Kingdom alone. Tellingly, the Mastercard study shows contactless is here to stay, with 81% saying they will continue to use contactless post pandemic, pointing to a long-term behavioral shift.

“The Saudi Arabian Monetary Authority’s decision to increase card payment limits, and its instruction that all local bank transfers be free of charge, show strong commitment to the local economy,” said J.K. Khalil, General Manager for Saudi Arabia and Bahrain at Mastercard. “Contactless offers Saudi consumers a safer, cleaner, faster way to pay, as well as better control over human-to-human interaction during this critical phase.”

In his talk at Tanween, held under the theme “The New Next – Creativity is the Way Forward,” Yau outlined three reasons for growth in the home market. Primarily, consumers have been buying more frozen food and ready meals, to cut down on the time spent preparing meals. According to reports, the frozen food market size was valued at $291.8 billion in 2019, and originally estimated to reach $404.8 billion by 2027 – but these pre-COVID figures are likely to end up being much higher.

Then, there has been a distinct rise in cooked food delivery during the pandemic, facilitated by apps such as Uber Eats, Zomato and Deliveroo that have made it easier to enjoy restaurant fare while dining in. In fact, even as earnings from Uber’s ride-hailing platform have been decimated by the coronavirus and global lockdown that kept the public homebound, Uber Eats recorded Q2 2020 revenues of $1.2 billion, according to industry analyst Business of Apps. The service is currently available in 1,000 cities across the world, and supports 500,000 restaurants. Fortune estimates Uber Eats to control 29% of the global food delivery market.

In a marked deviation from the five-star service model they rest their stars on, Michelin-starred restaurants such as Hakkasan Mayfair, industry golden boy Ollie Dabbous’ Hide London and New York-based Alsatian chef Jean-Georges Vongerichten’s The Connaught not only started takeaway menus during the lockdown, but have even partnered with an app – Supper, called the world’s first Michelin delivery service in London.

Others, meanwhile, sought to counter the effect of consumers cooking more and dining out less by offering meal kits – Yau’s third reason. They employ this strategy to meet home cooks where they are while also clawing back some of the revenue lost as government lockdown regulations spread. More savvy outlets even entered the space known for food pictures but overwhelmingly the domain of the fashion industry: Instagram.

It makes sense. Fashion influencers may account for 1-in-4 of sponsored posts on the platform, but among its one billion reported monthly users, food and drink (43%) is listed as the third-highest area of interest. And the most-liked picture – of an egg! – boasts nearly 55 million likes. Beyond that, Business of Apps says the global spend on influencer marketing could grow to $15 billion by 2022. For restaurateurs, however, the more salient figure is 87%: Nearly 9 out of 10 users report taking some kind of action after seeing product details on Instagram, and almost half made a purchase. The app even offers a seamless shopping experience with a built-in checkout feature.

This is an important element that also applies to Yau’s third trend – consumers can now buy directly from primary producers struck with a fall in orders from the reduced restaurant industry. This rise in micro markets is additionally driven by hotel and F&B suppliers finding end customers on apps like Instagram and Facebook.

As if to endorse digitization in the food business, at Tanween Yau explained his migration from food service to food tech, and announced plans to launch in the next six to eight months his app Softchow, described as a “taste aggregation platform.” “It is a food entertainment app based on short-form video content,” he said.

Yet even as our eating habits are increasingly influenced by the digital aspect at home, some features remain unchanged. “Yes, the lockdown unleashed our inner chef, and half of Saudis became home chefs,” Hadeel Almutawa, cofounder of Saudi brand Takya, said in her session with Yau. “But as people, we’re still hungry for the social aspect of eating out.”

Related Blogs

For better web experience, please use the website in portrait mode