Appetizing prospects: the founder of Uber attack at the common kitchen market in South Korea

SEOUL (Reuters) – Chef Youm Jung-phil is planning to shut down his restaurant this month in Seoul's wealthy Gangnam district, which is plagued by rising labor and rent costs. as well as by reducing the number of customers.

Instead, Youm, who has nearly 20 years of experience in the sector, has chosen to sell his avocado burgers and bagels only by delivery, renting a 16.5 square meter kitchen space at CloudKitchens. , co-founder of Uber, Travis Kalanick.

"I am anxious every day. I do not sleep well because it's not something I've done before, "said Youm, who was approached by CloudKitchens.

"But the risks are low and I will have the opportunity to experiment with a variety of low-cost menus," he said, adding that his rent would fall by about two-thirds.

N ° 4 worldwide in online food orders, South Korea far exceeds the size of its population in terms of number of restaurants and spending on food deliveries.

This, coupled with an almost 30% increase in the minimum wage over the last two years, is contributing to a rapid transition to shared kitchens and delivery companies only, industry leaders and investors alike. which threatens the traditional catering industry.

South Korea is the first overseas market based in Los Angeles, CloudKitchens, to penetrate under its own brand, said people knowledgeable about it.

"The fact that Kalanick and other investors are coming to Korea is a testament to its appeal as a cloud kitchen market. It's an important market that is growing faster than the US, "said Jimmy Kim, CEO of investment firm SparkLabs.

Nestled in an alley in Gangnam, CloudKitchens' first South Korean outlet opened in May with more than 20 separate kitchen spaces, sources said, unidentified because they were not allowed to talk to people. media. Ten or more outlets are planned, including six this year, a source added.

CloudKitchens also acquired the local company Simple Kitchen this year, according to four sources close to the topic. Simple Kitchen, which has SparkLabs as an investor, previously announced the creation of 25 branches for 500 restaurants by the end of 2019.

CloudKitchens and Simple Kitchen did not respond to Reuters' requests for comment.

CloudKitchens, which also offers marketing support to restaurant owners, is a unit of the City Storage Systems shared services provider that Kalanick, a scandal, bought for $ 150 million last year after leaving his position as CEO. Uber. Since then, Kalanick has acquired the British commercial foodstars company FoodStars and plans to invest in China.

In South Korea, the local company WECOOK, which has four branches, plans to increase it to 17 this year.

"Investors are investing money in South Korea, which is imposing on the global market for delivery services," said Andy Kim, CEO of WECOOK, adding that he "s investing in South Korea, which is important in the world. expects shared cooking companies to use the lessons learned in Korea and apply them to other Asian markets.

Food for a

While shared kitchens are gaining popularity in many countries, including the United States and China, the South Korean market is considered particularly mature for the development of restaurants offering only deliveries.

Nearly half of South Korea's 51.8 million people live in Seoul and the two surrounding cities, while 95 percent of adults own a smartphone. It also has 127 restaurants per 100,000 inhabitants, compared to 69 in China, 57 in Japan and 21 in the United States, according to research firm Euromonitor.

Its online food delivery and removal market has more than doubled in the last five years, reaching $ 5.9 billion, more than the combined markets of Japan and Germany, followed closely by China, the United States and the United Kingdom, according to Euromonitor data. Euromonitor predicts that the South Korean market will reach $ 9 billion by 2023.

The strong increase in the number of single people living alone is also the driving force behind the boom in food delivery services – a market that pits industry leader Woowa Brothers Corp against competitors such as German Delivery Hero (DHER.DE), Uber Eats and the new e-commerce company backed by SoftBank, Coupang.

One-person households made up 29% of South Korean households in 2018, almost double the level of 2020, as the high cost of living makes marriage and children less popular.

"More and more people living alone are fleeing human interactions. They do not want to have to worry about eating out, "said Youm.

Delivery services have grown explosively. According to Baedal Minjok, operator of the food delivery application, Woowa achieved in 2016 a turnover quadrupled to 319 billion won (217 million pounds sterling) and a profit from operations multiplied by 24 to 58.6 billion won.

Woowa, valued at $ 2.7 billion, includes Goldman Sachs, GIC, Singapore wealth funds and Sequoia Capital.

Delivery Hero, which sold its German business to Takeaway.com in December (TKWY.AS) for a billion dollars, is doubling compared to Korea, which is now its second largest market after Kuwait.

It plans to increase its workforce by 800 people from 500 last year and doubled its marketing budget this year to reach 100 billion won. After a series of investments in local businesses, its turnover in South Korea has more than doubled since 2016 to reach 94.4 million euros ($ 107 million). last year.

Coupang from South Korea is testing food delivery services in some areas of Seoul. His anger angered Woowa, who accused Coupang of offering exclusive contracts in exchange for reducing his commissions, and asked the antitrust regulator to investigate.

Mr. Coupang said that he was in talks with Woowa to resolve the dispute, but declined to comment on his food distribution strategy. The Fair Trade Commission of Korea declined to comment.