Deliveroo Moving in on Food Procurement

The news that Deliveroo is offering restaurants a procurement service is fascinating. ‘Food Procurement,’ claims to offer big savings on raw ingredients, as well as on cleaning materials and other non-food items that restaurants use. Following a year-long UK trial of the scheme, Deliveroo is making the new service available to all restaurants in the UAE this summer. The programme will be live in the UK, Spain, France and the UAE by the end of 2019, the firm says.

So Deliveroo is looking at supporting restaurants on both sides of the end-to-end supply chain – working on the supply of raw materials in, and then managing delivery of finished product out. Of course, collaborative buying is not new to this industry. Compass, the worlds largest catering firm, has its own procurement business, Foodbuy, which supplies the UK National Health service amongst many others. Pelican is another procurement outsourcing organisation which is successful in that particular sector.

But this is a bold and innovative move for Deliveroo, and there are some potential benefits here for clients, as well as some drawbacks or risks of course. Lets look at those in more detail.

Benefits

Economies of scale – the obvious benefit is the potential for lower prices through economies of scale which Deliveroo can presumably achieve. One might expect these to grow as more sign up to the service.

Expertise – just as importantly, Deliveroo can develop real and deep “category management” expertise in the key spend areas. The firm claims their service will provide “fresher, cheaper and more reliably sourced” ingredients.  Deliveroo’s ‘Food Procurement’ has saved restaurants nearly 40% on the cost of individual ingredients, such as avocados, in the trial, according to the firm.

Focus – buying is not the core skill of most chefs, certainly, and probably that is true even for restaurant managers. If the chef doesn’t have to spend hours doing the buying, she or he will have more time to spend coming up with and cooking amazing dishes, we might hope. That should be good news.

Fraud and corruption are issues in the restaurant industry, as it is in most others. Chefs have been known to favour certain suppliers in return for personal benefits – this service takes that possibility out of the equation.

Social value – Deliveroo, if it acts in the right way, might prove to be a positive force in terms of issues such as provenance, human rights in the supply chain, food adulteration and so on.

Issues

Economies of scale can be over-rated. If you are buying huge quantities of a commodity, you can’t “play the market” or take advantage of buying marginal volume from suppliers. If you buy every avocado in the world, for example, you will pay the average price, by definition!

Quality – some of the very best providers of top-quality fresh meat, fish, fruit and vegetables, cheese, olive oil etc just don’t produce very much. They’re not going to be on Deliveroo’s radar, and may have no desire to deal with the firm, so the end user could get materials from larger, reliable but perhaps not the very top-quality producers.

Positioning and credibility – linked to that, it is hard to see how a Michelin-starred top-quality restaurant can position itself as using the finest ingredients, fresh from the supplier that morning, if customers see the Deliveroo van outside. The top chefs will want to work with “their” suppliers, we suspect, and see sourcing as part of their role.

So, in summary, we don’t see the top restaurants being too disrupted by this service. Equally, the bigger chains - the pizza and burger giants, Zizzi’s, Bill’s, Wetherspoons and so on – presumably have their own professional buying teams.

But that still leaves tens of thousands of individual units and small chains - restaurants, hotels, take-aways and pubs - where the chef or proprietor (which may be the same person) is working all hours, doing the buying, the cooking, the marketing, the admin and everything else. For those people, this might prove to be a very useful service, saving time and money. And it is another example of buying activity moving away from non-professionals into what no doubt will be a very professional, CIPS-accredited team at Deliveroo.

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