Food delivery giant Deliveroo ceased operations at its last two cloud kitchen locations in Singapore, citing high operating costs and decreasing restaurant demand.
The company’s spokesperson revealed that cloud kitchen expenses, particularly rent and utilities, have “risen significantly” in recent years, The Business Times reported. Moreover, restaurant partners are scaling back their expansion plans in response to economic pressure, including food inflation and increasing wages.
As a result, the company has chosen not to renew leases for its delivery-only kitchen concepts, Deliveroo Editions, sites in Singapore, located at Alice@Mediapolis and Tanjong Katong. It has notified restaurant merchants and assisted in supporting their transition.
Despite this setback, the spokesperson affirmed, “Deliveroo Singapore will continue to focus on growth in our delivery business and remains steadfastly committed to working closely with our restaurant and grocery partners to market and grow their pickup and delivery business.”
This move follows earlier signs of struggle in Deliveroo’s cloud kitchen business, including the closure of its Lavender Street site in June 2021. According to the company’s regulatory filings in Singapore, Deliveroo’s profits declined from S$842,978 (about $655) in 2022 to S$612,961 (about $477) in 2023, with revenue dropping from S$82.5 million (about $6.42 million) to S$56.7 million (about $4.41 million).
The closure aligns with a broader trend of stagnating food delivery sales in Southeast Asia post-pandemic. In Indonesia, Grab fully withdrew from this vertical in December 2022, after expanding to 24 outlets since 2018.
A Momentum Works report indicates that the region’s food delivery platforms’ gross merchandise value grew by 5% in 2023, reaching $17.1 billion.
However, Deliveroo’s performance in its home market in the UK shows signs of improvement. It reported its first profit in the first half of 2024, earning 1.3 million pounds ($1.73 million) after a loss 82.9 million pounds ($110.86 million) in the previous year. The revenue slightly increased to 1.03 billion pounds, with 60% coming from UK and Ireland operations.
Despite showing signs of recovery, the company’s international operations continue to face higher operating costs compared to its home market. The UK and Ireland posted a gross profit margin of 11% in H1 2024. Meanwhile, the international market posted a gross profit margin of 9.5% for the same period.
