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Food delivery business becomes 'more spicy'
The food delivery business is poised to grow as the urban population, characterized by above-average income and consumption, is projected to increase from 55 percent of the total population in 2016 to 68 percent by 2025.
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A Grab driver (left) and Go-Jek driver (right) pick up orders from a popular spicy fried chicken restaurant in West Jakarta. (JP/Norman Harsono)
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ublicly listed PT Sarimelati Kencana became the first-ever corporation to focus on food delivery in Indonesia when it opened its flagship Pizza Hut Delivery (PHD) outlet in North Jakarta in 2007.
The small, red-and-black outlet is designed for fast delivery. It uses most of its space for kitchen instead of a seating area, has half the menu of a restaurant and a fleet of motorcycles parked outside.
PHD outlets are an example of the now trending online delivery services called “delivery-only kitchens”, which are designated spaces where popular eateries can open branches closer to neighborhoods with high demand and, thus, reduce delivery times especially in heavy-traffic cities.
Sarimelati Kencana itself described PHD outlets as a “defensive strategy to erect barriers of entry for competitors”, which initially proved effective, as PHD held a 64.6 percent market share of pizza delivery in 2016.
The PHD barrier was breached when ride-hailing service Go-Jek launched its food delivery service Go-Food in 2015, followed by rival Grab with GrabFood in 2016.
These online food delivery services tighten competition in the food service industry by giving small and medium eateries equal access to a citywide market.
“Online aggregators also have the potential to control the delivery prices of eateries in the near future,” says Sarimelati Kencana in its prospectus. “Unless we properly manage these issues, they may result in losses related to our business, finances, revenue and future prospects.”
