We’ve all heard about the free lunches at Google and some of us (I’m raising my hand in office) have even had the chance to taste the catered lunches there as well. However, did you realise that the global catering services industry was valued at $130B in 2018 and its year-on-year growth rate is estimated at 5.5% of which 45% of the growth is coming from the APAC region.
Yet, when we think about the catering industry in Asia, we don’t exactly think about a billion dollar industry that’s a hotbed for innovation. This goes double for Malaysia, where the catering practices are predominately old-school with no online presence.
We speak to SmartBite‘s new CEO and co-founder, Alessandro Voltolini about the catering industry in the region and how he plans to disrupt it through their platform. You may have heard about SmartBite before, who had created a niche for food delivery in the corporate space, but has since pivoted to focus on catering.
Learn how SmartBite plans to disrupt the food delivery oligopoly in Southeast Asia
Currently the company works with brand such as Zalora, Lazada and General Electric to develop employee meal plan solutions that are flexible, affordable and easy to implement.
Here’s what Alessandro had to share about his role and their plans for the industry.
Congrats on the new role. How has it been helping a startup pivot within the F&B space in Malaysia?
Thank you very much.
I would like to answer this by explaining more on the background story of how the pivot actually came into play.
The pivot had been happening for around 9 months when I joined in April this year, and it was already proving fruitful. SmartBite’s previous business model, namely, serving office staff at certain time slots using their delivery fleet – B2C models, was innovative but lacked a strong market fit. This lack of market fit was actually the motivating factor for the management team to step back and analyze the model to better understand more ways to scale.
By carefully analyzing the office food-related demand, we understood that the problem with the B2C model of SmartBite before the pivot was not the lack of demand but rather the different type of demand that needed to be fulfilled. In fact, offices were more inclined to order food via contract catering rather than employees single orders. This happened for many reasons, including the time of food arrival, variety of food, payment methods and payment terms, and these elements are now at the foundation of our B2B revenue stream.
The pivot started sometime in April or May last year with the support of a bridge fundraise round from current investors together with a set of KPIs to meet by Q4 2019. The KPIs set were not only met but overachieved, hence, the new direction proved to be promising.
After my arrival, we did not only continue with the B2B corporate catering business but we also had to take some strong actions to counteract the net negative effects of COVID-19. It may sound strange but I actually consider COVID-19 a friend in disguise. This unpredictable event certainly reduced our top lines from the office-related catering services in March but it also made us realize that the food industry will only thrive with digitization and also that it is not represented by just one type of demand– it is actually a vast and traditional industry.
One of the most interesting aspects of the pivot is the fact that it was carried out naturally rather than being forced from top-down into the market, which is the case with most business models in Southeast Asia currently. On the contrary, we are merely following what the market and data are telling us. We are focused on continuously developing a set of easy to use tech tools that enable caterers to go online and capitalize this broad and growing demand.
In two words, this pivoting experience to me is thrilling and ambitious.
Are you implementing any processes or solutions from your time at HappyFresh into SmartBite?
It would be totally unwise if I would not translate the previous experiences into the new ones. Having been at HappyFresh for more than 3 years and having managed data monetization and advertising division across the region, I certainly bring some advantage that I can apply when managing and improving SmartBite processes.
During my time at HappyFresh, I learnt the importance of creating the right set of KPIs and indicators to allow quick and controllable scalability on multiple platforms and countries. At SmartBite, during these first four months as CEO, I have mostly focused on creating a more defined structure among our divisions and teams to capacitate the company in growing revenues while maintaining the highest quality for our customers. We are currently a team of 13 and looking to hire aggressively moving forward; we are growing revenue at an average of 20% month on month, and hence, the necessity for agility and stability is preeminent.
Catering is quite a traditional industry in Southeast Asia, including Malaysia, so how do you plan to break into this large growth market?
It is truly a vast, varied and traditional industry, and in fact an industry in which we see big potential in terms of innovation. Moreover, lately, a lot of movement is happening worldwide within the same space. The overall catering Industry (corporate and private) is worth more than 150 billion USD worldwide growing at an estimated 6% per year. In Southeast Asia, the market is estimated to be above 10 billion USD (Malaysia alone is more than 1 billion USD). However, the technological innovation going towards this industry has been almost non-existent in the region for the past decades. On the contrary, around the world, many big companies have been trying to capture market shares.
The online segment is growing much faster than the offline market. We see enormous potential in allowing caterers and customers to have their catering searched, found and bought online. The key idea is really to innovate and digitize such a traditional industry.
Theoretically speaking, the bigger and more traditional the industry is better for our service to scale up quickly and create real value to caterers and to the customers as a direct consequence.
How do you differentiate from the traditional caterers?
We are not an actual caterer and that is the biggest difference. We are a tech solution that allows caterers to digitize, hence, catching the growing catering demand online. We intend to be the largest food catering marketplace in Southeast Asia and to do so, we are dedicated to continuously provide professional caterers with the best easy to use tech tools for them to satisfy the catering needs, which are massively moving online around the world.
We want to allow them to focus on doing what they do best, which is cooking. While the other aspects, such as order, payment management and delivery are taken care of via a set of tech solutions caterers get from us free of cost.
We are not creating demand but we are optimizing it and exposing the caterers’ offer to more people.
What has the impact of COVID-19 had on the industry? How do you foresee corporate culture around food evolving?
Considering that catering mostly consists of food consumed off-premises by a group of people, COVID-19 certainly impacted the industry directly. However, such dramatic events are demand disruptors that usually come with a positive side.
In this context, I believe that caterers have the opportunity to understand the importance of being online and more tech-oriented than ever before. This as a consequence has allowed us to increase the number of caterers on the platform at a faster pace. Nonetheless, for any vendor, simply being available online would not have been sufficient to contrast the changes in consumer behaviour arising from COVID-19, therefore, we experienced fast and responsive menu adaptations. This led to the creation of ad hoc hygienic meal boxes and improvements in the family-oriented SKUs for tackling residential orders given the more time spent by families at home during this lockdown.
The SmartBite vendor team job is divided into onboarding and helping caterers to sell and function more efficiently. With data collection, we were able to track and analyse trends and that is how we supported our caterers with suggestions, ideas and marketing plans to foster their product offering and maintain cash flow to keep operating their kitchens amidst the pandemic.
When it comes to corporate catering, we are seeing two emerging trends:
- Employees and employers are willing to go back to the office especially if food is provided in a safe manner, such as sealed hygienic bento boxes.
- Food benefits are not plainly linked to workspaces but rather they stand as a connection between the company and the employees, regardless of their location.
These two trends translated for SmartBite, luckily, in increased revenue during COVID-19 from B2B. However, stronger growth came from residential catering orders.
What are some of the challenges that you will face when you look to scale the business?
Challenges, as I explained in the expansion related question, for our company won’t arise from a spike in fixed costs or geographical expansion related difficulty, but they will stem more from our in-house ability or inability, rather, to create continuously what caterers find useful and easy to use. One of our mistakes in the past quarters, before COVID-19, was to create and provide caterers with software that lacked efficient and smooth usability. Currently, we are extremely oriented towards developing what caterers really need and can use efficiently in order to sell more and sustain.
Scaling up our operations we will have to maintain a customer-first approach for both our vendors and customers, by never forgetting that we are trying to disrupt a food services industry, therefore, service quality is and will always be paramount.
What are your expansion plans for SmartBite?
Currently, we are operating in Malaysia and the Philippines but we plan to expand throughout the region. Our business model enables us to scale quickly without a heavy increase in overhead costs. We can onboard caterers in big or small cities and at the same time, we can onboard caterers that operate in remote villages. The interesting thing about this industry and our business model resides in the fact that caterers exist everywhere and in all sizes, and so far, they have been neglected by the mainstream on-demand services, for clear mismatch of value proposition and modus operandi. Hence, we have enough scope, opportunity and potential for growth in valuation as well as geographically.