09 November 2018
A few words about food tech and Zume Pizza which has reportedly received $375 million of backing from the tech investment firm SoftBank while being evaluated at $2.5 billion. Zume is a Californian startup which employs robots for kitchen work automation. The company also invented a technology for making pizza on the go in remotely controlled ovens.
I’m sure that the engineers at Zume Pizza are very smart, and I have no doubt that the company has come up with some cool inventions. Still, I’m really surprised by such a high evaluation. As a person deeply involved in the pizza business, I decided to share a few thoughts on the matter.
Dmitriy Grishin, Mail.ru chairman and one of the Zume Pizza investors, commented on the deal thusly: “Instead of 30-minute delivery, there will be a five-minute delivery.”
Such statements might look convincing—but only for people who know nothing about the subject. Let’s plunge ourselves into details. If you make pizza in a car, it doesn’t mean that your customer will get it in five minutes. For a five-minute delivery, the car must be driving pretty close to the building.
How many cars will you need to ensure this five-minute delivery? How will it be possible to meet the demand during rush hours? What CAPEX and OPEX will a pizzeria show if it has to maintain not just one oven in its only locations, but a dozen in each of its cars? All these questions won’t seem meager and unrelated for anyone who ever managed even a tiny pizza shop.
It seems noteworthy that judging by Zume’s reviews on Google Maps, pizzas sometimes are not delivered even in 30–40 minutes.
“…My husband and I were very excited to try this place but will never order from here again. First, the order took 1hr and 10min to get here (so much for fast) and the driver went to the wrong house.”
“…Our pizza took 3.5 hours to arrive. They ran out of the one we selected, so the computer freaked and simply didn’t complete our order. We’d already paid, so I wasn’t going to re-order! I called customer service multiple times and it took 30–45 minutes to get the situation resolved.”
Yes, Zume’s tech is a work in progress. It will become better. But it looks like Zume Pizza has technology, but doesn’t have a working business model.
The same can be said about consumer electronics. Microprocessors don’t define the iPhone’s success. It’s a whole range of factors—from design to software and branding.
Of course, Zume Pizza may become a supplier of robots and start selling them to pizza shops, and they can figure out their business model by themselves. But I doubt that it will be a billion-dollar business. Being Apple is better than being a microprocessor supplier. As soon as Zume comes up with a reliable tech solution, competitors will begin cropping up and start offering the same solutions.
If Zume nevertheless finds a disruptive approach to the pizza business and proceeds to build a global chain, it will take years to see it through. Scaling in a real world is much harder than on the Internet. Again, it will give some time to their competitors and undercut their advantages in the market.
Looking at the business side of it, Zume now is just one pizza shop in Mountain View offering quite an ordinary menu with pretty high prices. I’m sure their pizza is awesome though. Currently, this feels like a story about engineers who decided to re-invent the pizza business, but they lack the understanding of all the aspects of this market in all its complexity.
A disclaimer for those who don’t know much about Dodo Pizza: we’re building a next-level, IT-driven pizza chain, and I’m a huge believer in tech and disruption. But I believe in innovations that arise from practice and from real needs that people have.