Food Deliveries

The Rise of the Appy Meal

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Dinner is just a click away.
  • Why it matters

    Why it matters

    If the home meal delivery sector takes off in Germany, it could begin to compete with traditional grocers and restaurants.

  • Facts

    Facts

    • According to Ernst & Young, online food delivery in Germany was worth €500 million in 2013, less than 1 percent of the grocery market.
    • The German online food segment is projected to grow to 10 percent of the market, and be worth about €20 billion, by 2020.
    • Rocket Internet, a Berlin start-up incubator, is investing heavily in tech-driven food providers to build a “global online takeaway group.”
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    Audio

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Getting what you want, and getting it fast with a few clicks, is big business these days. Buying music, e-books, booking a share-car, and reserving a holiday apartment can all happen within seconds.

But until recently, food and grocery delivery in Germany had remained stubbornly analogue. Consumers had mostly two options – go to a supermarket or have a kid on a scooter deliver a soggy pizza.

A handful of German entrepreneurs are trying to change the way people eat at home – from planning to shopping to even cooking our meals. Their goal is to banish the bewildering, the time-consuming, the wasteful or the just plain boring from our daily eating routines.

The start-ups want to do for the kitchen what Uber, Homejoy and Zalando did for taxis, housekeeping and shoes, respectively.

“Uber fixes transportation, Homejoy fixes cleaning. Marley Spoon brings cooking to you,” Fabian Siegel, the co-founder of Marley Spoon, an online meal delivery service based in Berlin, told Handelsblatt Global Edition.

This is not Mr. Siegel’s first foray into the take-away business – he was a co-founder and co-CEO of Delivery Hero, a company founded in Berlin in 2011 that received a $586 million investment from Rocket Internet, a Berlin-based start-up incubator that raised €1.4 billion in its initial public offering last October.

Mr. Siegel is not longer associated with Delivery Hero, which operates in 24 markets across five continents and currently delivers from a network of over 90,000 restaurants.

He and his partner, Till Neatby, launched Marley Spoon in Berlin last August.

The concept behind Marley Spoon is simple. The customer joins up online, clicks to order a pre-set meal, and chooses a delivery time. The ingredients then arrive punctually in fresh, exact portions with instructions on how to cook them.

“One of the things that characterizes millennials is that they’re very food-aware, because they’ve always had a great deal of choice, but they are not very good cooks.”

Sven Arn, Managing Director, Happy Thinking People

“We are a tech company by DNA, not a food company – 30 to 40 percent of our employees are software engineers,” said Mr. Siegel. The company recently launched its food service in Britain and the Netherlands too.

“The players, like Amazon and Zalando, that dominate these online spaces are not legacy retailers, they are software companies, and our vision is to redefine how people will eat, and get groceries home,” he added.

Online grocery delivery is still in its infancy in Germany. According to Ernst & Young, the sector was worth about €500 million in 2013, less than 1 percent of the overall grocery market.

Internet grocery shopping is more popular elsewhere in Europe, accounting for 4 to 5 percent of the market in Britain and France in the same year.

Digital food purchases in Germany are projected to reach 10 percent of the market, and be worth about €20 billion, by 2020.

marley
Marley Spoon founders Till Neatby and Florian Siegel. Source: Marley Spoon.

 

Rocket Internet, Germany’s voracious start-up incubator, certainly believes that the online food business is ripe with potential. The company announced last month that it had invested in nine food delivery start-ups in Asia and Europe, saying it would bundle all of their web food companies into a “global online takeaway group.”

One is Shopwings, a Berlin-based service that delivers within two hours fresh produce and groceries from a range of retailers; HelloFresh, founded in London, which delivers portioned meal ingredients to your door; and Foodpanda, based in Berlin, which now operates in 40 countries.

But are consumers ready for a behavioral change that flies in the face of the way they have interacted with buying and cooking food for generations?

According to Sven Arn, managing director and partner at Happy Thinking People, a leading independent research and consulting company for brands and consumers, ordering food online resonates well with millennials, a term referring to 15- to 35-year-olds.

“One of the things that characterizes millennials is that they’re very food-aware, because they’ve always had a great deal of choice, but they are not very good cooks and are likely to have grown up with working mothers,” said Mr. Arn.

“They’re more interested in having the finished thing, so all of this ties in really well to that need for immediacy,” he said.

 

Kochhaus_Schoeneberg_Innenansicht1
Kochhaus pioneered the concept of menus to be cooked at home that is now being offered by online companies. Source: Sebastian Heise.

 

Ramin Goo came upon the idea for Kochhaus, a storefront retailer that began in Berlin’s Schöneberg neighborhood, after becoming bored and confused by the homogenous offerings of traditional supermarkets.

Mr. Goo opened the first shop in 2010, introducing people to the concept of complete meals, sorted by recipes and the exact ingredients needed to cook them at home. High-quality visuals and recipe cards take shoppers by the hand through the shopping experience.

“I had this idea for a shop where I myself would like to shop. I don’t like going to classic supermarkets, and always buying the same things,” said Mr. Goo. “I wanted to start a business that was purely dedicated to the theme of cooking.”

His Kochhaus shops, which look like high-end delis, expanded quickly. There are now 12 in Berlin, Munich, Cologne and Frankfurt. Two years ago, he and his business partners introduced franchising.

While Mr. Goo pioneered the concept of “recipe-led” food shopping in Germany, he has done relatively little online marketing and the home-delivery service from Kochhaus accounts for just 10 percent of revenue. He acknowledges that the market in his niche has become more crowded, but believes his in-store shopping experience will set him apart from copycats.

“We focused heavily on firstly building up our retail business, to ensure our brand had a different meaning through its presence in the big cities to ones which are only active online, ” he said.

From his experience with Kochhaus, Mr. Goo believes that once consumers realize how easy it is to prepare meals, they are less likely to go back to deep-frozen pizza.

“Price is still the bottom-line driver for anything in food in Germany. That’s why it’s the birthplace of Aldi and Lidl.”

Sven Arn, Managing Director, Happy Thinking People

Two things that these online retailers have in their favor: More and more people have less time to do everything, and the organic movement is booming.

“Think of convenience products of the ’70s and ’80s, then the microwave meals of the ’90s,” said Mr. Arn. “Now people are looking for more quality, more transparency, more of a sense of things being freshly prepared.”

He does not view online platforms as direct competitors to bricks-and-mortar grocery stores.

“At the moment, the price probably competes more with going to a cheap restaurant than with a supermarket,” he said, referring to Marley Spoon’s €9.50 per-person average cost for one of its meals, including delivery.

“I don’t see a mum doing this for her family for price reasons,” Mr. Arn.

To be sure, it is unclear how quickly the business of online meals will catch on — if it even does.

None of Germany’s supermarket chains are jumping on the bandwagon, even though they possess superior buying power, infrastructure and staff to compete with the likes of Marley Spoon or HelloFresh.

“One thing you have to remember is that price is still the bottom-line driver for anything in food in Germany,”said Mr. Arn, a consumer-behavior specialist, referring to the infamous frugality of Germany’s consumers. “That’s why it’s the birthplace of Aldi and Lidl, (another major German discount supermarket), because people didn’t care what a supermarket looked like, they just wanted it cheap.

“In the mass market, even for people with money, if the pizza or the schnitzel is really big, that’s a good restaurant,” Mr. Arn said. “That’s still very much a part of the German mentality.”

While online retail has taken off in Germany, when it comes to food, consumers still like to go to a shop and feel the fresh produce themselves, a hurdle that may take time to overcome.

The ecological impact of smaller food boxes, however, is undeniable.

With 100 million tons of food thrown away in the European Union every year, and consumers more aware of their environmental footprint, one thing precise-amount delivery companies can guarantee: Less waste.

 

Jill Petzinger is an editor at Handelsblatt Global Edition in Berlin. To contact the author: j.petzinger@vhb.de.

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