⏪ Part 1

✋ Model: Pivoting on the precipice

For a time, Kitopi’s original B2B model worked. But then the cracks began to show.

The economics of operating as a middle layer — squeezed between restaurants and delivery aggregators — grew increasingly fragile. Driving more revenue per square foot turned out to be less scalable than originally hoped.

While physical landlords took a manageable 8% of revenue, the digital landlords of the modern restaurant landscape — platforms like Deliveroo and Talabat — claimed far larger shares, often between 25% and 35%.

A recipe for shrinking margins, if you’ll pardon the pun.

All the while, Kitopi did most of the heavy lifting, running kitchens for over 200 brands and managing more than 10,000 ingredients across multiple markets.

Kitopi owned the infrastructure and managed operations, yet never had a direct relationship with the customer.

The model was broken. Consumers had no clue Kitopi powered their favourite brands.

Aggregators controlled customer relationships, data, and pricing, leaving Kitopi in the shadows.

It was a precarious position, akin to Facebook’s reliance on Apple’s App Store. Just as Apple served as a gatekeeper for Facebook’s user access, delivery platforms held the keys for Kitopi’s growth. The company needed to rethink its role in the value chain.

The question wasn’t just how Kitopi could grow — it was how it could truly own that growth.

Fixing a broken model

The answer? Own the brands outright instead of merely licensing and managing them.

This shift from B2B to B2C was profound.

Ownership delivered full control over brand identity, direct customer relationships, and operational efficiency. It also tackled the complexity of scaling across markets by consolidating operations around fewer, stronger brands.

Kitopi trimmed its roster of 200 partners to focus on 100 owned brands, reshaping itself into a vertically integrated stack.

Executing a pivot of this magnitude wasn’t cheap. Kitopi needed to raise vast amounts of capital (thanks, SoftBank) to embark on an acquisition spree and overhaul its operations.

By 2021, it had secured the funding to launch what it called its “2.0 journey.”

The strategy has two main strands:

1. Acquiring Brands: 

Kitopi built a portfolio of local, regional, and international names.

These include Cloud Restaurants (Go! Greek, Go! Healthy), Leap Nation (Tawook Nation, Luca), Right Bite, Under500, and Ichiban.

Perhaps most notably, it acquired AWJ — the group behind Operation Falafel, Catch 22, and Awani — which, with over 32 outlets across cities like New York and London, added significant scale, credibility, and a loyal customer base.

2. Streamlining Operations: 

By owning the brands, Kitopi was able to simplify processes, align resources, and ensure consistent quality.

Although brands like AWJ have maintained a degree of independence, they now benefit from Kitopi’s infrastructure, striking a balance between autonomy and scalability.

The Kitopi “ecosystem”

However, the pivot wasn’t just about operational efficiency. Kitopi needed to fix its non-existent direct relationship with consumers.

Aggregators had controlled the data and interactions. Now, Kitopi had to flip the script, forging direct consumer relationships. To do this, it adopted a hybrid strategy:

• Still Partnering with Aggregators: Kitopi continues to use platforms like Deliveroo and Talabat, not wanting to alienate those distribution channels.

• Building Its Own Consumer-Facing Presence: At the same time, Kitopi has begun laying the groundwork for its D2C ambitions.

And here’s where it gets confusing — maybe even convoluted.

What’s the strategy?

Simply put, it seems to be “pull back the curtain, and create a network effect”.

Ballout has likened the strategy to an ecosystem: a network of interconnected brands and experiences that cater to every consumer mood and preference.

1. Offline and online

Kitopi isn’t just operating behind the scenes anymore.

In addition to its cloud-based kitchens, the company has established dine-in locations across multiple markets, making its offerings more tangible and experiential.

This shift gives Kitopi a chance to engage directly with customers, gather real-time feedback, and shape a more immersive dining atmosphere.

The strategy is clear – by offering a physical, face-to-face experience — be it through signature dishes on a curated menu or thoughtful interior design — Kitopi can strengthen its brand identity, move closer to end consumers, and begin cultivating the kind of loyalty that arises when diners form lasting memories around a shared table.

Needs must.

2. Personalisation

With the Netflix analogy now discarded, Kitopi has turned to Spotify for inspiration.

Just as listeners curate personalised playlists from countless artists and genres, Kitopi envisions customers mixing and matching their favourite dishes—lasagna from one brand, sushi from another, and perhaps a burger from somewhere else—all delivered together.

Yes, it might feel a bit like another buzzworthy analogy that doesn’t perfectly align with reality. Still, the core idea is clear: personalise the experience for each individual. Don’t like pickles? Kitopi will remember and keep them out of future orders.

At its heart, this approach aims to create a bespoke, frictionless, and deeply satisfying dining experience, one that adapts to each customer’s preferences and whims.

Growing Pains

Kitopi’s future hinges on its distribution strategy.

The company isn’t a last-mile logistics expert nor does it aspire to be a “super app.”

However, to become a fully integrated solution, Kitopi needs customers to prefer its app over those of aggregators like Deliveroo and Talabat.

But is convenience alone — such as mixing dishes from various brands — sufficient, especially when Kitopi can’t match the global brand recognition that consumers trust?

To drive app adoption, Kitopi offers 30% cashback in the form of Kitopi credits. While this incentive has potential, the app feels disappointingly lacklustre.

Nonetheless, Kitopi continues to grow. In 2023, the company achieved over $330 million in revenue and reached EBITDA positivity.

Kitopi’s transformation is ongoing. It remains to be seen whether the company can truly win over consumers and shift their ordering habits. More on this later.

❌ Risks: Feel the squeeze

To assess Kitopi’s curent position, we’ll apply Hamilton Helmer’s “7 Powers” framework, as popularised by Ben Gilbert and David Rosenthal’s Acquired podcast.

Helmer’s framework identifies seven strategic advantages that can yield sustainable, differentiated returns.

This infographic, thankfully, sums it up rather nicely:

For a deeper exploration of these concepts from the man, Helmer, himself, you might find the following podcast insightful:

Let’s see how Kitopi measures up:

1. Scale Economies

By consolidating its portfolio from 200 partner brands to 100 owned brands, Kitopi has pretty effectively harnessed scale economies by paradoxically scaling down.

Vertical integration offers obvious benefits like lowering costs, streamlining logistics, and improving quality.

Likewise, being in a position to control procurement, preparation, and delivery allows for bulk purchasing and efficient asset utilisation.

2. Network Economies

Currently, Kitopi doesn’t display classic network effects; adding more users doesn’t automatically enhance value.

However, its pivot toward a personalised, consumer-facing ecosystem could change this.

If Kitopi can become a “Spotify for food”—enabling customers to curate meals from multiple owned brands and tailor recommendations to individual tastes — each new customer’s data could theoretically enrich the platform, enhancing personalisation and creating a virtuous cycle.

3. Counter-Positioning

Kitopi’s pivot from B2B middleman to B2C brand owner was extremely prescient and puts incumbents — aggregators, independent restaurants, and traditional cloud kitchens — at a structural disadvantage.

Asset-light aggregators can’t easily become asset-heavy operators, independent restaurants lack the scale and tech capabilities, and flexible cloud kitchens can’t flip overnight to full-stack integration.

4. Switching Costs

Once invisible to end-consumers, Kitopi is now staking everything on locking in loyalty directly. The strategy:

• Personalisation: Use data to serve up menu recommendations that match individual preferences.

• Loyalty Programs: Offer meaningful rewards that grow more compelling over time.

• Brand Affinity: Unite acquired brands into a cohesive ecosystem, so customers remain within Kitopi’s universe rather than drifting to a competitor.

5. Branding

Branding poses a colossal challenge for Kitopi. The company has spent much of its existence behind the scenes, powering other brands.

Now, as it curates and owns its own portfolio, Kitopi must persuade consumers that it’s more than just an operator — it’s a lifestyle choice.

Acquiring well-known names like for example, Operation Falafel, provides a solid start, lending credibility and existing followings.

6. Cornered Resource

Kitopi’s proprietary tech stack, including its Smart Kitchen Operating System (SKOS), is a genuine differentiator that facilitates significant operational efficiency gains.

Coupled with its early-mover advantage and foresight to amass substantial cash reserves early, Kitopi has been able to create daylight between itself and some of the chasing pack.

7. Process Power

By streamlining its portfolio, vertically integrating, and fine-tuning operations, Kitopi has demonstrated strong process power. Its hybrid distribution strategy and ecosystem aspirations support efficiency and flexibility.

🔮 Future: With great scale, comes great responsibility

Kitopi’s future feels increasingly uncertain.

Approaching its sixth anniversary, the company finds itself in an uncomfortable spot: too large for an easy acquisition, yet facing a public market with dwindling appetite for new listings.

Its pragmatic focus on scaling through acquisitions and operational efficiencies now seems far from the original, transformative promise of empowering struggling restaurants in a digital world.

In October 2023, at the Future Investment Initiative (FII), CEO Mohamad Ballout suggested Kitopi could be 18 months away from an IPO. Yet timelines have shifted repeatedly, suggesting internal hesitation. Recent market conditions offer little encouragement.

Talabat’s highly anticipated IPO in Dubai on December 10th offered little solace — its shares ended their first day down 7%, dragging parent Delivery Hero’s stock 11% lower in Frankfurt. With six of the eight major IPOs since 2023 failing to sustain gains beyond their initial pop, this precedent does not bode well for Kitopi’s public ambitions.

Although Kitopi has raised substantial capital, how it will justify its valuation in an era of heightened scrutiny and cautious investor sentiment remains unclear.

Whether it can fulfil its scaled-up aspirations — or must pivot yet again — remains to be seen.

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