Demand for food delivery services like groceries, meal kits, and restaurant take-outs boomed during the pandemic. Now in 2024, even though we CAN shop in-store again, a lot of us are still choosing not to. This continuing high demand means a market in constant flux, facing both positive and negative pressures. This article takes a deep dive into some of the most important industry trends and data shaping the food delivery market.
Market Trends
- The unstoppable rise of food delivery services
- Meal kit delivery on an upward swing
- Ghost kitchens busted
- Global food tech market ascendant
Tech Trends
- Restaurant management systems attract interest
- Drone deliveries in the food industry — a weighty issue?
- Autonomous last-mile deliveries — roadblocks ahead
Financial news
- Swiggy's return to IPO ambitions
- Instacart's journey to the public market
- GoPuff's strategic shift away from IPO
- VC activity in food tech dives in 2023
Market trend #1: The unstoppable rise of food delivery services
Revenue for online food delivery platforms is expected to grow at nearly 13% per year from 2023 to 2027, with a projected market volume of US$1.65 trillion by 2027.
Grocery delivery leads in the US and China
The grocery delivery sector stands out. It's not just growing; it's thriving. In 2024 alone, Statista predicts delivery revenue growth of 22.2% worldwide, and a whopping 29% in the United States. This is likely to eat into the market share of grocery stores and other food businesses who aren’t able to match the delivery experience of their larger or more digitally agile rivals.
Looking at individual consumers, Americans are spending far more than their international counterparts. Average revenue per user (ARPU) for online grocery deliveries in the US is forecast to reach $1,360 in 2023, compared to $487 in China, $448 in Europe and $449 worldwide.
Growth is much flatter in the meal delivery segment, perhaps because restaurant delivery is already so well entrenched. Globally, 2.5 billion people are expected to have meals delivered in 2027, 1.6 billion of them in Asia.
Third-party food delivery apps are on the rise
These figures make it clear that the growth in demand for food delivery services, whether grocery or meal delivery, is not just a fleeting trend. Food delivery apps like Uber Eats, Grubhub, DoorDash and Just Eat are increasingly an important feature of daily life, not just in high-income countries but around the world. More than 55 million people downloaded the Zomato app in 2022, nearly 47 million downloaded Uber Eats and nearly 35 million downloaded Swiggy. DoorDash leads in the US with 22 million mobile app downloads, but globally it comes in fourth at 27 million.
Market trend #2: Meal kit delivery on an upward swing
The meal kit delivery business has witnessed significant growth in recent years, changing the experience of home cooking in the process. Statista predicts revenues will pass $20bn in 2025 and approach $25 billion by 2027. This represents a growth rate of just over 19% a year since 2020 — not a sudden surge, but a consistent food trend over nearly a decade.
The growing preference for meal kits is easy to understand: consumers love the convenience of pre-portioned ingredients, easy recipes, and reduced food waste.
Competition is stiff:HelloFresh, a meal kit leader, saw its customer base decline slightly. From a post-pandemic peak in Q1 2022, customer numbers fell from 8.5 million to about 7.1 million. Yet it remains dominant, holding a 74% market share in the U.S. in 2022. This overshadowed competitors like Blue Apron, which held around six percent. HelloFresh's growth and market presence highlight its adaptability in a dynamic industry.
Market trend #3: Ghost kitchens busted
Ghost kitchens (also called cloud kitchens, dark kitchens or virtual kitchens), were once touted as the next big thing in the takeaway industry, especially during the COVID-19 pandemic. More recently, they were predicted to reach a value of $1 trillion by 2030.
Now, they may be witnessing a decline in popularity. No US-based ghost kitchen startups have raised a round of funding since 2021. And fast food chain Wendys, which announced plans to open 700 dark kitchens by 2025, is now moving away from that model.
Several factors contribute to this shift. The rise of virtual brands, which operate delivery-only services from existing restaurants, challenges the ghost kitchen model. Many platforms in the food delivery industry also remain unprofitable due to high operational costs and limited automation. T
McKinsey's insights suggest that the economic structure of online food ordering is still in flux. Brand strength, efficiency, and evolving consumer habits play crucial roles. For ghost kitchens, it is difficult to build the customer loyalty that leads to recurring delivery orders.
Market trend #4: Global food tech market ascendant
The global food technology market is growing. In 2022, it was valued at $260.07 billion, with predictions it will grow to over $360 billion by 2028. This rise underscores technology's key role in the food industry, as well as consumers' increasing reliance on tech-driven food solutions.
Tech trend #1: Restaurant management systems attract interest
The Q1 2023 Foodtech Report by PitchBook highlights changes in the food tech sector. VC funding for startups hit a low since 2017, but some niches remain strong. Restaurant management systems stand out. They're vital for restaurants to improve operations and customer experience. Despite industry funding issues, these systems show game-changing potential. The report suggests they'll play a key role in the industry's future.
Tech trend #2: Drone deliveries are a weighty issue
The global drone delivery market is growing fast, with significant growth projected from 2022 to 2027. In 2024, drone deliveries could exceed one million. Drones offer benefits like speed and fewer emissions, as well as new contactless delivery options for both foodservice and e-commerce.
There are challenges, however, with a major issue for food delivery being package weight. Most delivery drones can carry between 5 and 25 pounds, limiting larger food orders. Public concerns include noise, privacy, and visual impact. Despite evolving technology and regulations, weight limits put a question mark over drones' efficiency for food delivery.
Tech trend #3: Autonomous last-mile deliveries
The autonomous last-mile delivery market is growing fast, with projections showing a rise from $8.78 billion in 2020 to $51 billion by 2028. This growth is fueled by advancements in aerial delivery drones. However, progress in wheeled vehicles is also on the horizon.
The allure of autonomous deliveries lies in their potential benefits, especially increased efficiency and less need for human intervention. Yet, there are challenges. Developing and rolling out these solutions is costly. The legal framework is also tricky, with concerns around safety regulations and liability.
Big players like Amazon might find it easier to adopt these technologies in the coming years. For delivery companies looking to innovate their business models, autonomous last-mile solutions could be a game-changer.
Financial news #1: Swiggy's return to IPO ambitions
Swiggy, a top food delivery firm backed by Softbank, is eyeing a 2024 IPO. After pausing due to market concerns, they're now discussing valuations with bankers. In 2022, Swiggy was valued at $10.7 billion but had put IPO plans on hold due to funding issues and valuation concerns. With markets stabilizing, Swiggy is back on track, engaging banks like Morgan Stanley and JP Morgan for the IPO. The final valuation and stake sale details are still in the works.
Financial news #2: Instacart's journey to the public market
Instacart is set to go public on the Nasdaq, marking a potential tech IPO market revival. With the ticker "CART," the grocery delivery firm reported a net income of $114 million and a 15% revenue growth from last year. The company has been profitable for five quarters and is focusing on integrating AI and machine learning. CEO Fidji Simo envisions a future blending online and in-store shopping.
Financial news #3: GoPuff's strategic shift away from IPO
Gopuff, a delivery startup, is close to securing $1 billion in funding but is also cutting jobs. This move aims to bolster its financial position and global strategy, steering clear of volatile public markets. The funding, led by Guggenheim Partners, adds to Gopuff's $2 billion reserves. Despite past IPO considerations, current market uncertainties have deterred such plans. Founded in 2013, Gopuff operates in over 1,200 cities and saw a 70% revenue increase in 2021. However, the competitive quick-commerce market raises questions about its long-term profitability.
Financial news #4: VC activity in food tech dives
In Q1 2023, the food tech sector saw a significant change in VC funding. The Q1 2023 Foodtech Report by PitchBook revealed a sharp drop, with VC funding for food tech startups hitting its lowest since 2017. However, some deals stood out against this trend. For instance, YFood, a leading meal replacement provider, secured an investment of $230 million.
While the overall sector faced funding issues, some niches still grew strongly. Fermented protein had an 83.6% growth from the previous quarter. Similarly, kitchentech and robotics sectors combined saw a surge of 99.8%. These stats highlight that specific foodtech segments remain attractive to investors. They show promise for innovation and growth, even with the broader funding challenges.
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