Market Research

Presented to Canterbury Christ Church University

&
Westford University College

MBA International
Student Name: Sarfaraz Nawaz
Student Id no: 100033293
Tutor's Name: Mr. Tausif Mulla
Module: Market Research
Assessment no: 2
Submission date: 15th July, 2021

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 Table of Contents

1. Executive summary…………………………………………………………..............3

2. Market research………………………………………….……………………………3

 The Importance of Market Research……………………………………….….3

 The Aim of this Research Paper……………………………………………….3

3. Key trends, issues and challenges in cloud kitchen segment…………………….…...4

3.1 Key Trends…………….…….….…………………………….………..................4

3.2 India - As the next international market for Kitopi……………………………….5
4. Factors to consider in selection of the market…….….…………………….…………6

5. Elements of international marketing segmentation (IMS)….…….….……………….7

6. Entry modes………………………………….….….….….…….………....................9

7. 4P’s of Marketing Mix………………………………………….……...…………….10

8. Conclusion…………………………………………………………………………...12

9. References……………………………….……………….….….….….….………….13

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1. Executive summary

Even though the global pandemic devastated the global economy, some sectors profited. The unique
circumstances benefited the story of the cloud kitchen expansion. The food service industry is being
transformed by Cloud Kitchens. They enable food and beverage companies to try out new concepts, create
virtual brands, and expand at a low cost. The MENA region has a $3 billion online food delivery market,
according to Statista, and we can't talk about cloud kitchens in the region without mentioning Kitopi (OSCAR).

In 2018, Kitopi, the world's leading managed cloud kitchen platform, started its mission to serve meals on
demand. Kitopi handles everything from sourcing ingredients to packing and delivery. Kitopi, which has 60+
kitchens, is a one-stop shop for groceries and other food items that delivers in Dubai within 60 minutes.

This research study offers an in-depth examination of the key trends, issues, and challenges in the cloud kitchen
industry, including where Kitopi should activate its next cloud kitchen. We will also go over the elements of
international marketing segmentation (IMS), what Kitopi's entry mode should be, and what the best marketing
strategy based on the marketing mix (4Ps) might be, as well as strategic recommendations.

2. Market Research
Market research is the process of establishing the viability of a new service or product. Customers' opinions and
other customer feedback about a certain product or service can be gathered through market research. In-house
or third-party market research firms can conduct surveys, product testing, and focus groups. Product samples
and/or a small stipend are usually given to test subjects. Market research is an important part of the R&D
process for new products and services (Ashley, 2019).

The Importance of Market Research

The purpose of market research is to assess how an audience will react to a certain product or service. Market
segmentation and product differentiation data can be used to modify advertising efforts or determine which
characteristics are most essential to end consumers. A company's market research phase requires a range of
duties. It must collect market-specific data. The company must evaluate and understand the resultant data to
find patterns and relevant data points for decision-making.

The Aim of this Research Paper

To anticipate success or failure in the early stages of internationalization, we will look closely at important
trends, concerns, and obstacles in the cloud kitchen segment. Aside from geography, we will learn about
political aspects, local competition, trade restrictions, and cultural/psychic distance to India. Finally, we will
assess the marketing mix (4Ps) for this scenario as well as highlight crucial marketing recommendations.

3. Key trends, issues, and challenges in cloud kitchen segment

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We now utilize the cloud to store our images, stream movies, and even manage our businesses on the internet.
Eating out is increasingly being done online. A cloud kitchen can be anything from a proactive delivery-only
brand to a purpose-built corner store kitchen holding many brands. Wealthy millennials seeking digital, mobile-
friendly solutions are fueling the trend. It will only get worse as the next generation of internet and smartphone
users emerges. Automation, delivery drones, and the constant rise of the digital economy look to be giving
cloud kitchens a competitive edge by further reducing prices.

3.1 Key Trends:

 Real estate prices in urban areas

Rising urban housing prices benefit 'virtual' kitchens. Kitopi, for example, focuses on light urban areas
that are located outside of dense cities but close enough to meet residential demand. Large warehouses
with low rent are ideal locations for shared kitchens. With the help of delivery app data, they can better
serve communities.

 Increase in delivery demand

Food delivery is expected to grow to a $200B industry by 2025 because of changing consumer behavior.
With 91M monthly users, Uber Eats is without a doubt the most popular food delivery app. Customers
are highly willing to pay a premium for the comfort factor that comes with having their food delivered to
their door.

 New technologies reduce delivery costs

The use of automated kitchens and drone delivery is growing. Tech-savvy shared kitchens will benefit
the most. As a result, they have an advantage over physical restaurants.

Issues & Challenges

With any new technologies, there are bound to be some drawbacks. Some of the challenges of running a cloud
kitchen include:

 Using on-demand employees

Hiring on-demand staff can help better control margins however, it has flaws as it can be more like a
factory job with little client interaction or tips. On-demand staffing poses risks to food safety and
consistency.

 Relying on third-party delivery apps

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 Relying on a single source of clients is never a good business strategy. As a solution, could kitchens
must have their own delivery service; however, it will increase their marketing costs and add additional
complexities in large shared kitchens where multiple brands can coexist.

 Licensing and regulation at the regional level

Regulatory agencies are still unaware of the existence of cloud kitchens. A HACCP plan may be
implemented as well as other operations planning to ensure food is properly made. Cloud Kitchens must
go above and beyond to be on the good side of regulators.

3.2 India - The next international market for Kitopi

India is one of the world's most untapped markets for quick-service restaurants and is a high-growth, high-
potential market for cloud kitchens. With its large youth population, India is an ideal consumer market. Indians
are mostly away from home and rely heavily on online food ordering and India's 500 million smartphone users
have elevated the profile of online meal ordering.

Kitopi's consideration in India for global marketing could be effective as millennials highly value accessibility
and over 60% of millennials eat out at least once a month, also Indian internet meal ordering service is expected
to be worth $5 billion by the end of 2023.

 Customer analysis:
Cloud kitchen players may target locals in India according to the table below which outlines the customer
analysis:

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 Source: Indian statistics 2019

India's food service market is worth $48 billion, with profits from online food delivery growing at a rate of 9.1
% as of 2021.

4. Factors to consider

• Ranking of world markets: As the world's third largest middle-class consumer market, India was expected
to overtake China and the US by 2020. Over US$13 trillion is expected to be spent by India by 2030. Indian
middle-class growth is driving demand for top infrastructure and high-quality health care (Deloitte, 2020).

• Political: India is a federal republic and the world's largest democracy. The political situation is influenced by
government policies and politician interests. As a result, political factors have an impact on India's corporate
environment. The Union Government imposes various taxes, including income tax, service tax, etc.

The Indian economy's most dynamic sector is services. It accounts for 49.3% of the country's GDP but just
32.3% of its workers. Kitopi may consider establishing a presence in India only if the company's primary means
of connection with partners/clients is through cutting-edge technology (Santander, 2021).

• Local competition: Cloud kitchens are not new in India. India already had 5,000+ cloud kitchens in 2019.
Cloud kitchens in India are expected to increase at a 50%-60% yearly rate, according to Redseer. By 2021, more
restaurants are looking into the cloud kitchen concept to optimize revenue, but this may be more difficult for
small F&B’s. Below are a few current top local cloud culinary competitions in India (Monika, 2021).

 Faasos (2011, Pune, $177M): Chain of restaurants and cloud kitchen

 Curefit (2016, Bangalore, $170M): Integrated health and fitness platform
 Box8 (2011, Mumbai, $27M): Web & Mobile-based cloud kitchen restaurant
 The Bohri Kitchen (2014, Mumbai, Undisclosed): Internet first restaurant delivering Bohri food
 Calorie Care (2012, Mumbai, Undisclosed): Internet first restaurant for healthy food

• Trade barriers: In general, trade obstacles stifle international trade and stifle Customers may accept lower
quality to save money. Based on comparative advantage, trade barriers reduce economic efficiency. Prices have
been reduced since the early 1990s, but many hurdles remain. Trade-open India's export and import to GDP
ratio has risen dramatically, now matching China. This will help Kipoti gain recognition in the Indian market.
Kipoti would have an edge in India because of the service industry's low trade restrictions (Lumen, 2021).

• Cultural/psychic distance: With over a 1.3B population, Kitopi sees great potential in India. A diversified and
multilingual country, India will be among the world's top three economies in the next decade (IBEF, 2021).
Working in India may depend on labor availability and pricing. Furthermore, the middle class is growing, with
enough spare income to purchase food online instead of preparing it (M, 2021).

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5. Elements of international marketing segmentation (IMS)

Market segmentation allows firms to gain insight of their customers' wants, enabling them to customize
campaigns to the customer groups most likely to purchase products. Marketers have become more aware of the
fact that their buyers have a range of needs. As a result, marketers have improved their ability to section
customers into 5 categories: 1) Demographics; 2) Geographics; 3) Psychographics; 4) Behaviorals; and/or 5)
Product-Related Factors.

Kitopi must keep record of customer preferences and conduct market segments wisely as it enters the Indian
market. The overall goal is to identify the most profitable segment of the Indian market for Kitopi.

 Demographic:
The target audience will be divided into groups based on age, gender, occupation, education, etc.
Because India is such a diverse country, it can be difficult to determine demographics.

 Geographic:
Despite being the most basic form of market segmentation, it will be extremely effective in India.
Geographic variables are influenced by climate, population size, landscape, and natural resources.
 Psychographic:
Segmenting the Indian markets based on personality traits, values, lifestyle choices, and interests. This
section can assist Kitopi in assessing where it can make its investment worthwhile.

 Behavioral:
Kitopi's target audience will be divided based on their behavioral trends, allowing them to enact
marketing campaigns such as sending special emails/messages about their favorite cuisine, discounts,
etc.

Segmentation, Targeting and Positioning

Geographic and demographic segmentation are required since cloud kitchen must choose which places to target
for clients. The cloud kitchen concept is gaining traction mostly in urban India.

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Cloud Kitchen charges based on user benefits (time, parking, and cost). Customers want to avoid long lines and
commutes and are willing to pay a premium for cloud kitchen dishes.

 Positioning: Factors to consider while deciding on a location for cloud kitchen:

• Accessible for target delivery areas – Because all orders will be delivered only, it's critical that the
location of the kitchen is close to the desirable delivery areas.

• Affordability - The major reason for starting a cloud kitchen is to save money on rent and other real
estate expenditures.

• Windows and breathing room — Cloud kitchens are typically built-in rooms, garages, or small
complexes. With frenetic cooking going on all day, it is even more crucial to ensure that the room has
windows and enough breathing space for your cooks and staff.

• Safety-checked – Safety should always be of top consideration; double-checking all of the health,
electric, and other problems before signing up for the space (Niharika, 2018).

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6 Entry modes

Kitopi recently announced a $415M series C funding round led by SoftBank (9984.T) and other investors. This
demonstrates Kitopi's ability to raise new funds and look into entering a new market like India.

Kitopi can access the Indian market via a collaborative venture with a small yet potential local cloud kitchen
startup. Investing in a joint venture can allow Kitopi to learn from its partner's experience with government
regulations, corporate culture, and consumer marketing.

7. 4P’s of Marketing Mix:

 Product: Kitopi appears to be a candidate for “Kitchen as a Service,” also known as KaaS. Kitopi's
"managed cloud kitchen" concept goes beyond simply providing kitchen and facilities for restaurant
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 owners to provide a higher level of service akin to a "restaurant as a service." Kitopi keeps roughly 85 %
of the brand's earnings and pays royalties ranging from 10% to 13%. Also, Kitopi provides a monthly
marketing budget to the restaurant or brand in order to keep orders stable (Triska, 2021).

 Price: Pricing is a broad topic; heavily influenced by the marketing's other three Ps: product, place, and
promotion. Conceptually perceived value in the given competitive context is the highest price a
customer is willing to pay for Kitopi's food prepared in the cloud kitchen.

Understanding operations "Fixed Cost" and "Variable Cost" is critical. Knowing operating costs before
investing money in a business allows for a well-structured plan.

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  Place: Cloud kitchens are low-cost due of the high cost of real estate. Choosing a location based on
customers' demographics and cuisine is important. It is important to create a comprehensive restaurant
location selection checklist that includes market research, front location, size, access & parking, and
building amenities (POSist, 2021).

 Promotion: Kitopi's promotion strategy is diverse. Advertising, social media presence and customer
retention are some examples. Kitopi can use all five communication platforms to convince clients of the
cloud kitchen's existence, as well as the pricing of food, service features, and location. Virtual kitchen
marketing is a great way to reach customers, especially, Instagram and Facebook. (Deliverect, 2019).

8. Conclusion: To compete in the Indian market, any company, including Kitopi, must adapt Indian ways of
conducting operations such as marketing, finance, planning, and strategy. Kitopi will benefit from working with
a local cloud kitchen startup in India.

Here are a few recommendations to increase the efficiency of Kitopi’s operations:

1) Optimal space utilization through immaculate kitchen design that considers the smooth flow of work
from production to packaging. Once kitchen space is streamlined, Kitopi will incur lower rental costs,
which will directly impact their profitability.

2) Each function in Kitopi's operation must have a procedure that must be followed and have standard
operating procedures in place for each operation - such as procurement, production, supply chain
management, and recipe management. Additionally, each of these procedures should be embedded with
technology to minimize human error and ensure quality consistency.

3) Kitopi must expand its already-effective customer ordering system to India in order to assist the
company in streamlining customer order management. With time being of the essence in cloud kitchen
operations, POS is a total game changer. Numerous food aggregators, such as Zomato and Swiggy, can
also be interconnected with the POS, streamlining all orders in one location.

4) Having a structured delivery process would be extremely beneficial to Kitopi. Collaboration with food
aggregators has a number of advantages. One of them is the timely arrival of the delivery driver for the
orders.

5) Kitopi must ensure effective delegation in order to run their cloud kitchen efficiently. They must recruit
skilled personnel, train them, and delegate critical work. Kitopi must instill in its employees not only the
ability to work efficiently, but also the desire to live up to the brand's vision and purpose (Mahua, 2021).
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9. References
 Anshul, G., 2020. Yourstory. [Online]
Available at: https://yourstory.com/2020/10/cloud-kitchen-business-india-opportunities-challenges/amp
[Accessed 7 July 2021].

 Ashley, C., 2019. The Food Corridor. [Online]

Available at: https://www.thefoodcorridor.com/2019/12/05/everything-you-need-to-know-about-cloud-
kitchens-aka-ghost-kitchens-in-2020/
[Accessed 7 July 2021].

 Deliverect, 2019. Deliverect. [Online]

Available at: https://web.deliverect.com/blog/dark-kitchens/10-tips-for-marketing-your-cloud-kitchen-online
[Accessed 7 July 2021].

 Deloitte, 2020. India matters winning in growth markets, New Delhi: Deloitte.

 Hospitality, D., 2020. DNY Hospitality. [Online]

Available at: https://dnyhospitality.com/cloud-kitchen/
[Accessed 7 July 2021].

 Lumen, 2021. Lumen Learning. [Online]

Available at: https://courses.lumenlearning.com/boundless-business/chapter/international-trade-barriers/
[Accessed 7 July 2021].

 Mahua, G., 2021. Restaurant India.In. [Online]

Available at: https://www.restaurantindia.in/article/how-to-make-your-cloud-kitchen-business-operation-
efficient.13804
[Accessed 7 July 2021].

 Monika, G., 2021. Kr Asia. [Online]

Available at: https://kr-asia.com/cloud-kitchens-to-dominate-indias-food-tech-industry
[Accessed 7 July 2021].

 M, R., 2021. Howandwhat. [Online]

Available at: https://howandwhat.net/pestel-analysis-india/
[Accessed 7 July 2021].

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 Niharika, M., 2018. Limetray. [Online]
Available at: https://limetray.com/blog/cloud-kitchen-business-model/
[Accessed 7 July 2021].

 OSCAR, W., 2021. Essential Guide to Cloud Kitchens, CA: Oracle Corporation.

 PESTLEANALYSIS, C., 2014. PESTLE ANALYSIS. [Online]

Available at: https://pestleanalysis.com/pestle-analysis-india/
[Accessed 7 July 2021].

 POSist, 2021. The Restaurant Times. [Online]

Available at: https://www.posist.com/restaurant-times/cloud-kitchen/cloud-kitchen-setup/open-cloud-kitchen-
restaurant.html
[Accessed 7 July 2021].

 Sandeep, S., 2019. Datalabs. [Online]

Available at: https://inc42.com/datalab/indias-booming-cloud-kitchen-opportunity-and-the-market-challenges/
[Accessed 7 July 2021].

 Santander, 2021. Santander. [Online]

Available at: https://santandertrade.com/en/portal/analyse-markets/india/economic-political-outline
[Accessed 7 July 2021].

 Triska, H., 2021. Wamda. [Online]

Available at: https://www.wamda.com/2021/02/look-kitopis-year-journey
[Accessed 7 July 2021].

 Valuates, 2021. Cision PR Newswire. [Online]

Available at: https://www.prnewswire.co.uk/news-releases/cloud-kitchen-market-size-to-reach-usd-71-4-billion-
by-2027-cagr-of-12-0-valuates-reports-897975385.html
[Accessed 7 July 2021].

 Vibhavari, M., 2020. Startup Talky. [Online]

Available at: https://startuptalky.com/future-cloud-kitchen/
[Accessed 7 July 2021].

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