Luukas, what exactly is Huuva’s business model?

Huuva offers a turn-key service for restaurants that want to expand and grow their business. We manage delivery and takeaway-only kitchens which are powered by our own proprietary software and technology. Our partner restaurants pay us a commission fee, already including delivery and rent costs.

This sounds like a shared kitchen?

Partly. In general, the restaurant brands get their own sub-kitchen inside the larger venue. What is being shared is the dispatching part. Huuva provides a shift manager who helps the restaurants in the packaging and dispatching the food to the delivery couriers. This operation is supported by our technology.

Compared to other ghost kitchen companies, what is different about Huuva?

We work to make the food delivery industry more enjoyable, convenient, and profitable for all parties involved: consumers, restaurants, and the delivery partners. For consumers, we bring top restaurants to their favorite food delivery platform. When ordering on a platform – whether it’s UberEats, FoodPanda, or whatever – they are able to combine menu items from different restaurants into a single delivery. You can think of this like having a food court in your pocket. Also, our customers can rely on hot meals and excellent quality, as the kitchens are optimized for delivery. From the restaurant perspective, our model is a low-risk and low-cost way to grow. Huuva doesn’t demand any multi-year rental agreements, we do not require any heavy upfront renovations or other investment cost, and we take care of regulations and bureaucracy that comes with setting up a new kitchen. With us, restaurants can start cooking and serving new neighborhoods in a matter of days. With respect to delivery companies, we are able to improve their KPIs and add quality restaurant offering to their platforms.

When you say that your kitchens are optimized for delivery, what does that mean precisely?

Optimization starts already with site selection. We choose locations that support high volume delivery operations, as they are frequently visited by couriers on bikes and scooters. We also plan a layout that minimizes the number of steps people have to make inside the kitchen. Besides the physical aspects of the kitchen, our software helps the different brands to schedule their cooking under one roof, so that multi-brand orders are getting done at the right time. This way, the cooks don’t have to do any tedious cross-organizing.

How are the restaurants reacting?

Restaurants faced enormous challenges during Covid-19 and the lockdowns. Additionally, we see that consumer demands and trends are changing quickly, especially among younger generations in large cities. Restaurant owners also see that change. As with startups, many restaurant brands don’t live more than 5 years, so you need to innovate constantly and ideally stand out from the crowd. We see that cloud kitchen approach can help the ambitious restaurant owner in tackling all of these challenges and support them with rapid concept development and testing alongside getting most value out of their existing brands.

As head of expansion at Huuva, how do you decide where to move your business next?

We have very ambitious growth plans over the upcoming years. Naturally, we started in our headquarter country Finland, but are already expanding abroad. We want to be present in the fast-paced markets with enough volume in the delivery business already today and an exciting, lively food and restaurant scene. One of the best parts of our job is to learn and immerse ourselves in neighborhoods, city and country-specific consumer trends and plan how Huuva would fit there.

Can you give an example of how these trends differ geographically?

It’s crucial for us to find out how common food delivery is in the specific markets. In the Nordics, a consumer orders a meal delivery twice per month on average. As a contrast, in Greece, the average number is 15. And in Central Europe it’s something in between. And the consumption profiles can differ quite a lot. For example, Indian is super popular in London and the whole UK, it is not as popular in all of the Central European countries. But there are also differences from city to city and even from neighborhood to neighborhood.

 What is your strategy when entering new markets?

We have two approaches: The first one is bringing top quality restaurants to underserved neighborhoods. We believe that the trendiest and hottest restaurants shouldn’t be the privilege of city centers or certain hot spots, so we want to bring them to areas where we see customer demand which is not currently met with the existing restaurant supply. The second approach is to work in these city centers and hotspots by helping the restaurants there to separate their delivery business from their brick-and-mortar kitchen. When the dining hall is full, brick-and-mortar kitchens quickly reach their capacity limit, making them miss out on potential revenue.

 How do you assess the potential of new sites?

We do our own scientific location analysis with Targomo’s platform TargomoLOOP. It provides us with all the relevant sociodemographic data that is key to understanding different possible delivery zones. Combined with its analytics functionalities, the tool allows us to explore geographic areas that are new to us and objectively compare locations. The second step is to then evaluate how the prospective venue supports our layout and operational requirements.

 Where do you see the delivery market moving within the next few years?

McKinsey & Company released a topical and on-point analysis on the food delivery market in September 2021 which highlights the fact that the restaurant industry requires new business and operating models now and in the future. The cloud kitchen space has already seen different models, from virtual restaurant brands, optimizing the use of existing restaurant kitchen space to simple kitchen rental models. At Huuva, we see that you need to consider the challenges of all parties involved in the restaurant and food delivery industry to drive real, sustainable change and growth. Nothing else is certain than change and we are committed at Huuva to delight consumers daily and enable restaurants and food delivery companies to do sustainable business.

Thank you for the interview!

If you want to use TargomoLOOP to expans your location network or create delivery zones, learn more about the location intelligence platform or directly book your demo!

Thanks to the global pandemic, the business of micro-fulfillment is booming. Here, we take an in-depth look at the trend, how it works, how it expanded recently and if it’s possible for those living outside of urban metropolis areas. 

Short answer? According to DHL, ‘Think of it as AirBNB for logistics.’ Long answer? It’s the accelerated last-mile delivery of goods, thanks to the efficient positioning of small-scale distribution warehouses that utilize location intelligence systems to fulfill orders at a fast pace. Shorter distances between retailer and consumer ensure online businesses can operate in a much more productive (and profitable) manner. 

Over the last couple of years, this particular business model has grown exponentially. Take grocery delivery for example—during the pandemic, newcomers like Gorillas, Weezy, Flink and Gopuff gained serious market share, and are now expanding across Europe and the United States. And they’re picking up traction in more ways than one. This year alone, US-based Gopuff acquired British-born Fancy, and Berlin-based Gorillas was valued at over $1 billion. As a result, we expect micro-fulfillment to grow rapidly across other continents as well. 

If you’re wondering how these companies make money, it’s quite simple. Let’s compare it to the traditional grocery store: While the supermarket needs a larger space in an area that is also visible, a micro fulfillment center or dark store can be as small as 300sqm because the product range is limited to mostly premium brands. This leads to lower rents on average for the quick commerce players. 

Of course, there is other overhead to be considered, like riders, pickers and the overall number of dark stores that are needed to serve a city. However, if all these elements are well planned, there is a very high probability to run the business net positive. 

It’s been proven that micro-fulfillment can work seamlessly in urban settings with high population density. That’s where the micro-fulfillment centers can get close access to consumers and retailers can offer faster delivery at a low cost. The key is to actually ensure that a critical number of potential customers can be reached within the promised delivery time. Tools like Targomo Loop help to analyze the areas around the micro-fulfillment centers, and to create an overview of the catchment areas.  

The analyses take demographic data such as population density, household size, purchasing power, and consumer profiles into account, which allow the delivery services to precisely calculate their potential markets. 

By combining location and demographic data, Targomo Loop can visualize not only how far an e-bike can travel from a central micro-fulfillment center in 10 minutes, but how many people it can serve. However, retailers may need to specifically look for certain target groups and identify the cities and regions with the highest target group density. 

In this example, we are targeting people with age between 20 and 50 years and with medium to high income in the city of Berlin. 

As you can see, the people reached by that micro-fulfillment center are 109,138. 

A sufficient number of orders and the size of the shopping cart are crucial to the success of the business model. This is the reason why the service mainly benefits residents of a region with a very high population density. But would this system be successful and profitable in a more rural, less densely populated area? Let’s find another place, far away from the city, where the same target group density can be guaranteed. 

As expected, this isn’t an easy feat. With Targomo Loop we checked the town of Brandenburg an der Havel. The business model of Berlin city would not work, as just 11,208 people could be reached within a 10-minute e-bike ride. If someone wanted to roll out the quick commerce business in this area as well, they would need to adjust the conditions. From a location intelligence point of view, it would be possible if: 1) you swap e-bikes for cars as a mode of transportation, 2) increase the delivery window from 10 to 25 minutes, and 3) extend the target group to other demographics. 

Let’s take a look at the numbers:  

With these adjustments, it’s necessary to rethink the entire model. Swapping e-bikes for cars would significantly increase the overhead for the start-ups. Furthermore, an increase in delivery time from 10 to 25 minutes will lead to riders delivering fewer orders a day. On the other hand, with cars covering larger distances, provided consumers order around the same time, more households could potentially be serviced on the same trip, saving on delivery times and labor costs. 

Our take? The last-mile revolution seems to find its most fertile ground in big urban areas and may not come to rural residents anytime soon. 

What’s clear is that, to work, the micro-fulfillment industry needs precise location analysis. Businesses need to integrate their own data to analyze and predict order volumes. They need to fully customize their catchment areas: select means of transportation, speed and travel time. They need to calculate how many households they will be able to reach from a specific location. They need to anticipate which products will be in high demand in specific areas. And if they have a location network, they need to learn where they should open new centers to serve as many customers as possible.