“Kitchen on the District” launches sale of non-food products

The emergence of non-core players in the ready-to-eat food delivery market is forcing existing operators to expand their range. Thus, the “Kitchen in the District” service is launching the sale of non-food products. This will allow the company to increase the average purchase price, experts say, but they warn that it will be difficult for Kitchen on the District to compete with online retailers who have more opportunities for wholesale purchases.

“Kitchen in the District” has launched a new business line – the sale of non-food products, the company told Kommersant. The service application already has a separate section with non-food products of daily demand. There are currently 200 product items on the service’s online showcase. The company says that it plans to more than double the range of products in this category, including through parallel imports, as well as cooperation with federal and local manufacturers.

The reporting for 2022 of the service manager LocalKitchen LLC indicates that 84.7% of the company belongs to O2O Holding, the remaining share is distributed among the founders of the service. Local Kitchen’s revenue at the end of 2022 amounted to 2.7 billion rubles, the loss was 1.39 billion rubles.

The trend to expand the assortment is typical for the online sales market in general and e-grocery in particular, says Mikhail Burmistrov, general director of Infoline-Analytics. According to him, this allows services to increase the average bill, thereby improving the economy and reducing unit costs for the labor of collectors and couriers. Executive Director of Oborot.ru Ivan Kurguzov considers the decision of Kitchen on the District to add a simple and popular assortment from the category of non-food products justified, noting that at one time other online delivery services followed this path.

Cross Insights partner Boris Ovchinnikov considers it logical to adapt existing local Kitchens on the District points into small warehouses or dark stores and use the existing delivery system, including for additional assortment. At the same time, the expert points out, the potential of the project may be limited by the fact that in the eyes of the consumer, “Kitchen on the District” is perceived exclusively as a service for delivering ready-made food.

According to Mr. Burmistrov, Kitchen on the District should focus on developing its core product range and closer cooperation with Samokat, through which the service also sells its products. As an example, he cites the partnership between the X5 Group-owned delivery operator Mnogo Salmon and the Perekrestok chain, whose supermarkets sell ready-made food from the service.

In general, the prepared food market in Russia is growing, and competition between its players is intensifying. According to Rosselkhozbank analysts, sales turnover in the segment at the end of 2022 increased by 4.7% year-on-year and reached 2.3 trillion rubles.

For players specializing exclusively in food delivery, it is not economically feasible to compete with universal delivery operators, as well as marketplaces, since they have more opportunities for wholesale purchases of non-food products, which allows them to be more flexible in pricing, believes Mikhail Burmistrov. According to him, there are also risks for Kitchen in the District to lose market share in an environment where competition between ready-to-eat food delivery services is intensifying and the segment is attracting new players – in particular, retail chains that are sharply increasing culinary sales.

Alina Savitskaya