Deliveroo unveiled a food procurement business last week, which sees it supply raw ingredients to restaurants, and which it claimed can deliver savings of up to 40%. Ajay Lakhwani, VP of new business at Deliveroo, talks to MCA about how the service can deliver savings for big brands as well as small independents, and why its not a change of direction for the delivery platform.

Is this service is aimed primarily at smaller independent restaurants with less buying or procurement experience?

We absolutely want smaller independent restaurants to benefit, but this service is aimed at all stakeholders in the food supply chain, from restaurant to distributor to farmer, all of whom can benefit from increased efficiency and the application of advanced technology to a historically low-tech industry.

Have larger groups trialled this service? Don’t they already have cost-efficient relationships with suppliers?

Restaurants groups of up to several hundred sites have successfully trialled this service. The results have been impressive as they found increased product quality, superior service from suppliers, and more competitive pricing. Increased scale and additional market insight are vital components of supply chain management for restaurant groups of all sizes.

How was the 20%-40% cost saving forecast reached?

Approximately 1,500 restaurants that have successfully worked with the food procurement program to date and have found an average cost-savings of over 20%, while the high-end savings for certain groups has been as high as 40%.

Is this an aggregation-based supply model? Does Deliveroo negotiate the deals, rather than handle the delivery and logistics?

That is correct. Deliveroo negotiates the deals by working with participating distributors to better understand forecasting and see aggregated volume across numerous product lines. In turn, this increased volume and data enable our supplier partners to service restaurants even more efficiently.

Some have reported this as Deliveroo delivering ingredients and us taking a cut from suppliers. That’s not how it works. We understand the ingredient needs of our restaurants and are able to get them great deals through our supplier network.

Does this model depend on Deliveroo being able to enlist large numbers of restaurants, ordering similar things, to make it effective?

Volume is certainly an important component of the equation, but technology and data-management has enabled the food procurement platform to be impactful even from day one, and the proposition will get stronger as the supplier partnerships grow.

How has Deliveroo learned expertise in procurement and how big a part of the business does it anticipate it being?

Deliveroo has developed procurement expertise in a number of ways, including: by working closely with our valued restaurant partners to understand the ways their business work, operating Editions sites, and by recruiting best-in-class talent from many industry leaders.

Isn’t procurement a bit of a pivot and moving away from Deliveroo’s core business?

Not in the slightest. At the heart of our business is to be a strategic partner to our restaurants and to support their business to provide customers with their amazing meals at the right price and quality. We are a three sided marketplace, delivering on what our riders, restaurants and customers want. Delivering for restaurants has always been our fundamental, core objective.

What is your approach to procurement – are you dealing more directly with the source? What are your principles when it comes to sustainability, welfare etc? How can you guarantee produce will be better quality?

Our intention is to work with the best partners in every possible category: both suppliers and farmers, to ensure that our restaurant partners get the absolute best quality ingredients, as efficiently as possible. By creating more efficiency in the supply chain, we’re quite optimistic that we’ll be able to increase efficiencies in all aspects of the food chain: from sustainability, to waste reduction, and even an increase in product food quality for the consumer.

How will the arrangement work for operators – will they be obliged to take a certain amount of supplies from Deliveroo?

Neither suppliers nor restaurants are in anyway obligated to participate in this program, it’s completely up to them. Our pood Procurement efforts are about adding value to an existing relationship with our restaurant partners offering them further support for their business at a time when many have seen cost pressures rise. Every decision we make is driven by the desire to be the best possible partner to our restaurants and customers and riders – to help them all succeed while producing and enjoying phenomenal food. We believe that with food pocurement we can help our restaurant partners run more successful business, and that is the sole intention for launching this program.