No going back to old normal for businesses
More than two years on, the world might finally be turning the corner on the pandemic. Stay-at-home and quarantine orders are either being lightened or lifted completely. Vaccination drives are rolling out in full force.
It looks like we’re going to get through this thing, so what does it mean for venture capitalists in Asean? Given the trends—vaccinated travel lanes, waiving quarantine orders for vaccinated tourists, and so on—we can expect offline businesses to see a growth spurt in the second half of 2022. This is unsurprising: People have been largely cooped up for almost two years and are itching to once again indulge in real-life experiences. Though some might be wary of how long such businesses can stay open, given that cases continue to rack up, it would be wise to temper these fears.
Now that the modern world has a better sense of the ups and downs of a pandemic, smart businesses will be able to better adapt to similar challenges in an agile and responsive manner. These are the businesses that will survive in an era when COVID-19 is endemic, much like the common flu. Without a doubt, the food and beverage (F&B) industry deserve renewed investor attention. Alongside other obvious ones like hospitality and aviation, F&B businesses were the hardest hit by COVID-19, with many restaurants forced to close either temporarily or permanently. As dine-in experiences are now showing signs of life, venture capitalists should keep their eyes on cloud kitchens. Also sometimes called “ghost kitchens,” these are centralized food prep facilities that don’t have a storefront and focus solely on delivery. Not only does this reduce overhead costs—there’s no need for service staff, for example—it also removes the earnings pressure that a prime but pricey physical location would require.
Consumers from the Asia-Pacific region seem to take particularly well to this business model—China and India boast around 7,500 and 3,500 cloud kitchens respectively, whereas the United States only has about 1,500. Though cloud kitchens are not all that new of a concept, the pandemic made them essential for many F&B players. Even after COVID-19, it looks safe to say that cloud kitchens will continue to expand, as they’re well-placed to keep restaurants running in the event that doors must close. This is a hedge that many restaurant owners would want to make, especially as it’s unknown whether we’re going to end up with any more surprise COVID-19 variants. A cloud kitchen would naturally be the best option to keep overhead costs low while continuing restaurant operations if we have to go into lockdown again. Tablet-based software is now letting dine-in customers order and pay without being in close contact with staff, thus reducing the risk of spreading illness. Though such concepts already existed before 2020, the pandemic has now made this tech more valuable by helping alleviate diners’ anxieties about sitting down again at their favorite sushi bar.
The meetings, incentives, conventions, and exhibitions (MICE) space is also seeing a digital kick that we can expect to last beyond COVID-19. Specifically, we’re seeing the rise of hybrid events, in which programs are held simultaneously offline and online. The global exhibitions industry this year is predicted to record revenue figures 106-percent higher than in 2020. In Asia-Pacific, this stat is expected to reach 121 percent. Much of this is due to the increasing prevalence of hybrid events. Though it was initially much more expensive to hold hybrid events at the start of COVID-19 (as it essentially involves running two separate events), costs are now gradually going down, with venues also adapting to offer hybrid studio features.
But even less sophisticated alternatives have seen an uptick. Zoom, for example, arguably the most popular tool for webinars and online gathering, had 191,000 enterprise customers as of Q1 2022. It generated $4 billion in revenue in 2021, a 53-percent increase year-on-year. Overall revenues are poised to increase in the space, as hybrid events allow overseas attendees to participate. Although items such as cameras and screening equipment may add to overhead costs, having more attendees means that the cost per head will be lowered, especially when one can effectively have unlimited ticket sales. The larger potential audience size also makes hybrid events more attractive for sponsorship opportunities. For startups, MICE is a space that has been changed forever in a good way.
There’s no going back. The Jakarta Post/ Asia News Network
Aditya Hadiputra is principal of MDI Ventures, a multistage venture capital arm of PT Telkom.
The Philippine Daily Inquirer is a member of the Asia News Network, an alliance of 23 media titles in the region.
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