Article of The Month
Disrupted Markets: Food & Beverage as an Example
By Al Azhar Al Maawali, 19 January 2022
Due to various reasons, disruptive innovations with disruptive technologies being their superstar, have been the talk of the town for a considerable amount of time now. But what does such a term really mean? And are there in place accelerators that pushed for a change in the F&B industry?
Judging by the sentiment in the air, there seems to be a haze about what disruptive innovations mean. According to an academic definition, “Disruptive innovation refers to the innovation that transforms expensive or highly sophisticated products or services—previously accessible to a high-end or more-skilled segment of consumers—to those that are more affordable and accessible to a broader population” (Twin, 2021). However, many innovative models appear to differ with this description.
With that said, the best and earliest example to explain disruptive innovations would be the invention of the car; as it managed to not only render horses, horsemen and their horse-riding skills useless; but also, in-effect, turn horses into liabilities to their owners creating a path for the scalability of cars over the years. The great paradox here is that some activities, services or products that become obsolete after the emergence of an innovative substitute commonly end up as luxuries.
Such concepts have been replicated in various sectors, with the most recent being the uprise of Cloud/Ghost Kitchens in the food and beverage industry. In essence, most cloud kitchens provide for-rent chefs operating at a centralized location for numerous restaurants simultaneously as a service. Through this model, the headache of restaurant operations, labor and overhead costs has been completely outsourced to a qualified third party. Of course, other models do exist e.g., some do provide for-rent kitchen spaces in which a restaurant owner may occupy with staff of his/her own. Likewise, operating at a centralized location allows for access to a larger segment of customers, as well as allowing restaurant owners to redirect much needed funds towards other necessary expenses such as marketing or packaging.
Typically, the adoption of great changes to the market is preceded by the presence of certain socio-economic accelerators. In the case of cloud kitchens in the GCC market, the Covid-19 pandemic lockdowns influenced changes on consumer behaviors represented by an increase in takeout and delivery rather than dining in. In addition, a social accelerator that can be cited is that cultural norms have adjusted to consider dining in to be more of a luxury in the daily hassle of a fast-paced corporate life. Hence, the change in this business model allowed for the creation of a new and unique selling point in an existing market.
And as with the example of the car and horse, the same can be applied to cloud kitchens leading to a scalable industry in the long run. And while the concept and definition of disruptive innovations may be simple and plain as explained earlier, specialized journals, such as the Harvard Business Review do dive deeper as to mention certain parameters as prerequisites to qualification.
For an in-depth read on cloud kitchens, refer to: Cloud Kitchens to Disrupt Food Industry?