Egypt’s economic woes seem to have bypassed one particular sector - restaurants. The past few years have seen the establishment of multiple dining districts scattered across the country, with more currently in the process of development.
The sector has demonstrated significant growth, marked by the increased penetration of local and international brands. In terms of revenues, according to official data, the restaurant industry generates an annualised turnover of sales worth $22 billion with a growth rate of 16.8 per cent, making it the second-fastest-growing sector after IT and telecommunications.
On the flip side, opening a restaurant is never an easy undertaking and the chances of survival are often slim, especially for smaller businesses, those that struggle to access suppliers and consequently suffer from a consistent shortfall in products and ingredients due to the industry’s fragmented supply chain.
Having faced this issue as a restaurateur, Tamer Emam launched OneOrder to tackle the lack of availability of products and digitise the procurement supply chain to make it more efficient and streamlined for restaurants.
"I have been working in the restaurant industry for 25 years and I always struggled to secure and source ingredients and products from suppliers on a daily basis," says Emam, founder of OneOrder, a marketplace connecting FMCG manufacturers and suppliers with HORECA (hotels, restaurants, and caering) along with cloud kitchens and a number of airline companies.
“As a HORECA player, you have to invest six to seven per cent of your revenues on non-revenue generating departments like the supply chain. To minimise the impact of a shortage of supplies, restaurants might need to have excess inventory for emergencies which carries the risk of spoilage and waste,” he adds.
Affected by the same issue, Gohar Said, a restaurateur and consultant for food service brands launched Suplyd which also works in the same vertical. Other co-founders include Karim Selima and Ahmed ElMahdy.
“On the first working day at my newest restaurant, the staff went entirely out of stock, causing us to fall into a full panic mode,” says Said, co-founder at Suplyd, which works with 2000 restaurants across Egypt.
“We started communicating with people in our network, and, as it turned out, everyone had the same problem. It did not take us too long to pull the plug and start developing our product.”
Egypt has nearly 400,000 restaurants, 140,00 of which are located in Cairo. However, the majority of them are underserved, not properly stocked, and inaccessible to suppliers. As a result, restaurants tend to source products from retail stores at higher prices and opt for lower food quality to offset the high food costs. This is one of the reasons why smaller restaurants struggle to compete with their larger counterparts.
Both Suplyd and OneOrder aggregate suppliers on their platforms, enabling restaurants to buy large quantities of food products at lower prices, saving them the time and hassle of working with multiple suppliers. This eventually enables restaurants to rein in running expenses and improve their overall bottom line.
Despite the overall growth of the restaurant sector, many of them are feeling the effects of the devaluation of the local currency and ongoing import restrictions. And so the value of procurement marketplaces becomes more and more visible over time.
“There are a lot of materials that no longer exist because they can't be imported anymore, so we offer local alternatives to these products to restaurant partners. Additionally, on the logistics front, restaurants save a huge amount of time and effort by dealing with a unified platform for suppliers. We give them the entire basket size which includes products like poultry, groceries, dairy, seafood, and meat, among others. On average, that saves 10-15 per cent of the restaurant’s bottomline,” says Said.
Not only do procurement marketplaces benefit restaurants, but they also enable suppliers to maximise revenues. Said explains that the reason why suppliers opt out of serving smaller restaurants is that they have limited resources and that the average basket value (ABV) for larger businesses is higher, translating to higher profitability for them.
“The problem with suppliers was that they are unable to fulfill orders, for example, for 30 restaurants a month, they would prefer fulfilling a large number of orders to one restaurant over transporting only one product to multiple restaurants, which adds additional expenses to them. At the end of the day, they want to make profits with the least number of transactions,” he says.
But for Emam, the main culprit behind the broken supply chain is the fact that large FMCG companies have a hard time reaching smaller restaurants because their distributors are not HORECA-specific.
“They probably don't know who they sell products to; are they supermarkets, wholesalers, or restaurants? So essentially, we work to grow their reach as well by getting their product on every shelf possible, and even to the smallest accounts that they never had the chance to deliver to,” says Emam.
Given the newness of the B2B marketplaces in Egypt, there was an issue of lack of trust in the solution offered by such platforms from the side of the suppliers. Emam recounts that they had to initially work with sub-distributors instead of dealing directly with manufacturers and suppliers; accordingly, they were not able to earn adequate profit margins back then.
“We had to relinquish that part of our profit in the beginning until we showed our value in the market. And then we started working as manufacturers, so our margins got much better. Through OneOrder, we are also able to improve cash flow for [manufacturers] because they no longer need to receive payment terms. This is for us to worry about. We pay these manufacturers in cash, and we give the product to the restaurants on a payment basis with our embedded financing feature,” Emam explains.
Since its launch earlier last year, OneOrder has raised a little over $4 million in funding. In an aim to leverage the first mover advantage, OneOrder plans to also launch in the UAE, where it eyes a market of 30,000 restaurants.
“Having reviewed the UAE market, we found that there isn't a model like us there and there's a need for it. We see the same pain points that we do here because it is the same industry. So, we will also work to reduce the restaurants' operational costs through the digital platform and eventually reduce the overhead on the procurement needs,” Emam adds.
While Suplyd also has plans for expansion in the GCC on the back of $1.6 million raised last year, the company says it looks to solely focus on growing its market share in its home market.
“We want, of course, to expand, but there is a lot left to do in Egypt and serve the industry. So that's primarily our focus for the next six months, at least. Egypt is the perfect place to take plenty of learnings from. If you master Egypt, you can master any other market,” Said concludes.