CCCS says competition in virtual kitchen sector remains 'dynamic'

SINGAPORE'S competition watchdog on Wednesday said it has concluded an investigation into the online food delivery and virtual kitchen sectors, noting that the competition in the latter remains "dynamic", with players entering and competing for market share.

THE Competition and Consumer Commission of Singapore (CCCS) had commenced the investigation in September 2019, amid tension among some industry players.

CCCS told The Business Times last year that the investigation was focused on two types of conduct.

One involves exclusive agreements which prevent food and beverage (F&B) tenants of virtual kitchens from using the online food delivery services of competitors. The other involves the refusal to supply online food delivery services to F&B tenants of virtual kitchens either run, or owned by competitors.

In a press statement on Wednesday, CCCS said "the conduct which involved the refusal to supply online delivery services to competing virtual kitchens has ceased". As such, the competition panel has decided to stop its investigation, but will continue to monitor market players in these sectors.

Virtual kitchens, or cloud kitchens, are integrated commercial kitchen spaces provided to F&B operators for food preparation, predominantly for online food delivery services. These provide another channel for F&B operators to start small and gradually expand their business through online food deliveries, without the costs associated with running a dine-in restaurant, CCCS noted.

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It added that virtual kitchens also allow consumers to enjoy a wider and better choice of food for delivery.

"In recent years, three main online food delivery providers in Singapore - Deliveroo, foodpanda and GrabFood - have started to provide virtual kitchens as an additional service to the F&B operators, who are able to access their respective online food delivery services," CCCS said.

Smart City Kitchens (SCK), an independent cloud kitchen operator linked to former Uber chief executive Travis Kalanick, competes to provide virtual kitchens to various F&B operators, but does not operate any online food delivery service. This means that it would need to rely on the main online food delivery service providers to fulfill deliveries for F&B operators that operate out of its virtual kitchens.

In July last year, SCK filed a competition complaint against GrabFood and Deliveroo, alleging that these two platforms shut out SCK tenants.

Following CCCS's investigation, GrabFood and Deliveroo have started supplying their online food delivery services to F&B operators in SCK's virtual kitchens, which already have access to foodpanda's online food delivery service, the competition panel said.

"As a result, F&B operators using SCK's virtual kitchens now have the choice of using multiple online food delivery providers to expand their consumer reach," CCCS noted.

Earlier in January this year, GrabFood launched its first cloud kitchen in Singapore, joining rivals foodpanda, Deliveroo and SCK in an increasingly competitive vertical.