GrabKitchen falls victim to super app’s profitability push

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Hello reader,

I haven’t ordered food from a cloud kitchen before. My beef with food delivery services is the overwhelming number of options. Wouldn’t life be simpler if you were only given two choices?

Ok, so maybe I’m not in the customer segment these companies target – One reason food delivery services run cloud kitchens is to close cuisine gaps on their platforms – this was why Grab (GRAB, NDAQ) started its cloud kitchen business four years ago.

Now, GrabKitchen is shutting its operations in Indonesia, where the super app has over 40 cloud kitchens. In this week’s big story, my colleague, Samreen, covers the reasons for this and the implications for the sector as a whole.

Current market conditions have forced tech companies to cut costs – just this week, Meta (META, NDAQ) announced layoffs for the first time in its history. At least Meta is profitable. Companies like Grab that have yet to turn a profit – let alone generate free cash flow – are under even greater pressure from investors to get into the black.

One way to do so is to focus on a company’s core businesses and jettison non-core segments. The decision to close GrabKitchen should be seen in that light rather than as an indictment of the sector as a whole.

Grab’s exit from the market may actually benefit the remaining players, who will have to deal with one less competitor. Grab may also choose to partner with one of the existing players, which may allow it to retain some of the benefits of GrabKitchen without having to own the assets.

For many tech platforms, focusing on core businesses involves recognizing that their key advantage goes back to the basics of a platform – asset light and gains from network effects.

— Simon

THE BIG STORY

Image credit: Timmy Loen

Making sense of Grab’s closure of cloud kitchens in Indonesia
The shutdown is unlikely to be an obituary for the whole industry.

See also: Indonesia’s Wahyoo eyes series B raise to bake in cloud kitchen ambition

3 Trends to keep an eye on

Hot stocks, earnings reports, restructuring, pressure from activist investors, and more.

2 Eye-popping facts

The one you didn’t see coming