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Why This Venture Capitalist Is Excited About The Digitalization Of Kitchens

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The food tech market is booming.  In 2019, the worldwide food tech market was $220.3 B according to a Statista market research report. The report cites advancing technologies in the food industry and a demand for healthier, less expensive and safer food products to catapult this market upwards of $342B by 2027.

According to Pitchbook data, $18.9B was invested in food tech startups by venture capitalists in 2020. Venture capitalists like Adam Struck, CEO of Struck Capital, are betting millions that food and culinary technology will reach the most old-fashioned corner of the global restaurant industry - kitchens.

Struck believes the digitization of kitchens has completely redefined the way restaurants operate.

"From business model changes like opening up online ordering and delivery, to robotics process automation in the kitchen, to even redesigning physical spaces to accommodate safety, no-contact ordering, and contactless payments, everything is driven by consumer expectations, and businesses will have to meet these new expectations to attract patrons," said Struck.

Struck says that while PostMates, Uber Eats, OpenTable, Resy, and other apps have transformed the operational and customer sides of the restaurant business until recently, the kitchen has remained untouched by tech. 

"Photographers have Photoshop, architects have AutoCad, and musicians have ProTools, but chefs by and large have no purpose-built digital platform or cloud-based collaboration tool," said Struck. "Recipes are stored in Word docs and notebooks, and fragmented systems make staff training incredibly cumbersome."

"Ingredient planning and budgeting nearly impossible for anyone but the head chef," added Struck.

POS Innovation

Struck says that historically, innovation in this space has been focused on the point of sale, with restaurant point of sale (POS) solutions expected to represent a nearly $20B market by 2028. "Yet strong macro tailwinds in the culinary world are forcing restaurants to try and capture value beyond just the point of sale."

"This tailwind has created a spectrum of opportunities for new entrants to create, capture and expand," said Struck. "The pandemic has intensified a sense of urgency to adopt new and transformational technology, while a restaurant labor shortage driven by widespread worker turnover continues to underscore the need to increase the speed and quality of culinary operations."

Struck Capital was one of the earliest investors in PostMates in a Series a preferred round in 2013. Today the firm has five investments worth $10M in food tech startups such as Aquabyte, ZeroCater and Liquiglide.

Struck's newest investment is Meez, a software platform that digitizes all culinary workflows from documenting recipes, sharing recipes, training staff, automating ingredient planning and portioning, cost planning and sourcing.

"Some of the world's top chefs like Jose Andres and Jean-Georges finally went digital and adopted Meez in 2021," added Struck.

In 2021, Square's Future of Commerce report found that 90% of restaurants agree that increased automation for back-of-house operations would allow staff to focus on more critical tasks. And for restaurants with online ordering, an average of 34% of their revenue comes from those channels.

"The "great flippening" has occurred, and when digital channels are driving the core of a physical restaurant's business, the rest of the operation has to follow suit," added Struck. "While the pandemic has accelerated adoption of new technologies in the kitchen, it was already a trend before 2020."

"This is exactly what we look for - opportunities that aren't a result of the pandemic, but rather, are accelerated by the new world we know today," said Struck.

Struck says that when he thinks about future rapid technology adoption, he immediately turns to today's biggest customer or user pain points.

"I firmly believe the restaurant labor shortage and staff turnover is the most pressing point for restaurant operators today," said Struck. "I am very excited by technologies that can solve this problem set - solutions to optimize existing staff, recruit new employees, reduce labor overhead costs - all while maintaining the patron experience."

"Restaurant employee benefits, data solutions to drive worker efficiencies, and back-of-the-house automation tools are all areas I have my eye on," added Struck.

Five food tech trends

From Struck's point of view, he thinks the top five food tech trends in 2022 will be personalization, food waste reduction, virtual brands, QR codes and social food.

"Chatbots will become digital servers, digital reservation maps will enable consumers to book the best seat in the house, and AI will unlock marketing automation for delivery and get orders to the right customers at the right time," said Struck.

Struck says ghost kitchens will continue to grow their footprint and bring new concepts to market when it comes to virtual brands. "It's a great solution for restaurants to drive revenue when demand is low. Celebrities, influencers and creators are also attaching their brands to these ghost kitchens, which incentivizes immediate loyalty and affinity to food operators, something that has historically taken years to build."

But when it comes to Struck's prediction on food waste reduction, he cites California's Senate Bill 1383 that mandates that 20% of edible food that would otherwise be disposed of must be preserved for human consumption by 2025.

"Food waste costs restaurants more than $100 B per year," said Struck. "Meez helps restaurants understand the exact ingredient amounts they need to order from suppliers to serve their customer bases and avoid over-ordering."

But Struck is bullish on the potential of QR codes to drive restaurant efficiencies. "We have just started to scratch the surface of QR Codes to digitize menus and ordering."

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