I was in New York recently, and I think the number of bicycle food delivery people since the last time I was there had ballooned exponentially – they were everywhere. Is no one cooking a home meal anymore in NYC? (Apparently some new condos in the Big Apple are being built with tiny, or even no, kitchens, because they are not getting used much anymore in some quarters). What used to be a thing – ordering a meal through a food delivery platform - is now a very big thing. Indeed, there are even “ghost kitchens” (or “cloud kitchens) now, that are restaurants without the dine in experience, created just to service the food delivery market. And the venture capital money is flowing into the space at a record pace; literally hundreds of millions of dollars, and pounds in the UK, and Euros in the European Union. Interestingly, but also in keeping with how “the next new thing” is financed nowadays, apparently only one such service is making money – the rest are burning through their invested amounts like saganaki at a Greek restaurant (you know, where the server lights the alcohol poured on top of the cheese, a huge flame erupts, but soon things are back to normal).
While you might question the wisdom of how money is made nowadays with a new internet-induced business model, the fact that there is currently a whole new category of food delivery available to consumers is a wonderful thing. Consider just how many options the typical food eater (that would be all of us) has today in a fair-sized city. For those who want to cook (yes, that`s still a thing too, apparently), there is the local farmer’s market, most Saturday mornings during the summer. There’s one down the street from where I live, and it is wonderful. You want to buy local produce that was picked the day before – knock yourself out (I`m not a big chef....OK, I can`t cook for beans, except for the stuffed peppers dish I make in memory of my late mother...she taught me how to make it the week-end before I went away to university.....except precise measurements of ingredients wasn`t her thing....so every time I make it, it tastes differently......but anyway, I still love it: BUT, last week-end I bought at the market a fresh sourdough loaf, and had it with a slice of beefsteak tomato....yowza...!).
I digress. The point is, if you want to cook, there’s the farmer’s market, and of course the standard grocery stores. And then within the latter, there are the branded foods, but also the somewhat cheaper home brands of the grocer – more choice, more competition, a good thing. And if you decide you’re in a hurry, at the grocery store you can also pick up a chicken that`s already roasted instead of one that`s raw, together with one or two sides (and a sushi starter) if you want to eat well at home.
Competitive Disruptors
And now for the disruptors. You want to cook, you actually like to cook (good on you!), but you`re a busy professional or business person, and you don’t have the time to plan a menu, and then go to the grocery store, and then find all the different ingredients in the store, and schlepp it all back home, only to realize you`re out of sea salt, and you have to run back to the grocery store, etc. What you’d really like is for someone to plan that menu, buy all the ingredients, and deliver them to you, so all you have to do is cook a wonderful meal for your partner and yourself. Well, good news, there’s an app for that, and quite a few players in the “meal kit” space, who do exactly that.
The technology really is the not-so-secret sauce of the meal kit companies and the food delivery platforms. Sure, we have been able to order pizzas for years over the phone. But today, the remote order direct-to-home delivery model is an entirely different experience because of the technology that has been deployed by these players. It’s an app – so convenient, so easy, so able to access many choices and options – overall, a very compelling experience.
Then, if you don`t want to cook – either ever again, as in never, nada, not doing it; or you just want a break on a Friday night, you have yet more great choices. Of course you can eat out, and in that sub-market, the choice in a major metropolitan area is quite impressive. In cities like Toronto, Montreal, Vancouver, Calgary, and many others in our food loving land, you can have trouble choosing just between all the Korean places, or all the Mexican places – and if your taste skews towards traditional Italian, you will get a headache just trying to decide – seriously, the range of choice in sit down restaurants is today pretty awesome (which is great for the consumer).
If it’s just lunch, and you just want to grab a quick bite, well, you guessed it, again there is choice galore. And hey, even the fast food segment is getting into disruptive mode. If you want a beef-based burger, there are chains making their patties with nothing but beef. But, if you want to try meatless burgers, there are now several chains carrying those as well, with the different establishments in this space competing with different brand veggie-based patties. And yes, you guessed it, the venture capitalists are plowing millions into meat substitute research at these meatless patty makers, which, again, is a great thing for the consumer. Each one hopes their particular bet will be the Amazon of the hamburger space – the disrupter that changes the market in a fundamental way.
Fighting Disruptors > What about that food truck on the corner, that seems to be competing with the fast food outlets? Yes they are, and evidence of yet more competitive disruption. And just how disruptive? Well, in Chicago the City Council (at the behest of traditional restaurants) passed a by-law prohibiting food trucks from selling their food within 200 feet of bricks and mortar restaurants. The law also required food trucks to be equipped with a GPS device, so their location could be tracked, if necessary. A food truck brought a legal proceeding to quash this new rule on the basis that it was protectionist legislation that unfairly favoured the bricks and mortar incumbents; but the rules were upheld in the Illinois Supreme Court, on the basis that the municipal government had a rational reason for wanting to regulate the new entrants.
It is an old tactic for legacy businesses to fight newly arrived disrupters through restrictive legislation, or through the courts, or both. The folks who operated turnpike roads fought the entry of canals; the folks who ran canals fought the entry of the railroads; the railroads fought the entry of the truckers; the truckers and railroads fought the entry of the airlines; the established airlines fought the entry of the discounter airlines; well, you get the picture. In each instance, the legislature was approached initially by the legacy company (or industry group) pleading for relief from the unfair competition of the new entrant; in turn, the new kid on the block argues that the legacy company is merely seeking “rents”; namely an above market return financially speaking, courtesy of the legislature (and/or the court system) blocking the entry of the new player, thereby eliminating (or at least shutting down) competition. Sometimes legacy businesses are successful at this blocking, but often they are not – especially when the disruptor’s technology model is so novel that it is hard to block, even with some political support from the local government.
A Level Playing Field> What`s the right answer in these circumstances? In my view, overall, and subject to certain exceptions, I believe what drives civilization forward (including the important food/nutrition sector) is indeed competitive disruption; so, my default position is that governments should be very wary of being pulled into a private competitive contest between two commercial rivals, and as a general proposition, competition is a great thing – it’s what keep us all (and I include lawyers and law firms) on our toes.If you believe, as I do, that the world has undergone incredible advancement over the last 250 years (essentially, through the 1800’s and the 1900’s, and now into the 21st century), I believe the people we have the most to thank for that progress is not, actually, politicians, or clerics, but rather the thousands of business people and entrepreneurs who were disrupters (initially small players, but then some of them turned into full on, bonafide market moving competitive disruptors). These are the visionaries who looked into the future, envisaged a better place, and worked hard to achieve it, to the benefit of all of us. And yes, today, when it comes to the food we eat, they are running companies that make meal kits, they manage food delivery services, and they own and operate food trucks. Not only are they offering net new eating experiences, at interesting price points. But as importantly, you have them to thank for the fact that your neighbourhood grocer is improving their store and offering more selection of food options, and why your local restaurant is changing up their menu with greater regularity, and why the fast food outlet you frequent at lunch from time to time has new menu selections that pleasantly surprise you.
Of course every business involved in food preparation and delivery should be required to comply with food safety laws – governments should play no favourites on that score, or award special dispensation to newcomers from the health rules. But when it comes to competition, governments need to remember that it is competition that they should be protecting, and not individual competitors.