Rethinking food, delivery services and society-INSIDE Korea…

Kim Bong-jin, CEO and founder of Woowa Brothers, poses next to a wall painting of Thomas Burke, an American sprinter, at the company headquarters in Songpa, eastern Seoul. The 18-story building features the legendary sportsman noted for his innovative spirit. Burke is known for pioneering the “crouch start,” which was uncommon during the inaugural modern Olympic Games in Athens in 1896 but is in standard use now. [PARK SAnG-MOON]

The year is 2022 and a small four-wheeled robot is going about its daily business. The box-shaped machine drives itself around town, picking up groceries, medicine and bread and delivering them to its user. It even gets the newspaper and takes out the household’s recycling.

This sci-fi scenario, shown in a video released on YouTube on June 28, is what Baedal Minjok, the country’s No. 1 app-based food delivery service operator, is striving to achieve in the imminent future.

The video highlights how much the start-up has evolved from a simple food delivery company. Having entered the eighth year since its foundation, the Seoul-based firm is trying to move forward with technological innovation and an upgraded brand image.

Sharing his business blueprint, Kim Bong-jin, founder and chief executive officer of Woowa Brothers, the mother company of Baedal Minjok, said in a recent interview with the Korea JoongAng Daily that he wants to both drag down the cost of delivery and ease human labor through the use of robot technology.

The ripple effect will be “immense” – from dining and shopping patterns to the size of refrigerators and even household security, according to the industrial designer-turned entrepreneur. The renowned mentor also warned to fledging start-ups as well as government officials that Korea should scramble to introduce advanced technologies, including the ones his company is working on, so as not to fall behind other economic powerhouses.

Kim wears many hats: a designer who manages, a showy book reader and a progenitor of food tech. The avid networker carries around a Leica digital camera to shoot portrait photographs of the people who inspire him and uploads them on his personal Instagram account. His latest book about the way he reads books has become a best seller.

His fondness for the fun and kitschy naturally led to unique marketing and advertising campaigns that brought him passionate fans among the younger generation and allowed Baedal Minjok to post more than 70 percent year-on-year revenue growth since 2014. The firm swung to profit in 2016 and its operating profit grew nearly eight times in just a year to 21.7 billion won ($19.1 million) in 2017 in this rapidly growing market.

Such an upbeat track record is paving the way for Baedal Minjok’s gallop toward becoming a unicorn, or a billion-dollar start-up. Some investment banking insiders view its value at up to 1.5 trillion won.

The following are edited excerpts from the interview in which Kim shared his vision for the food industry and culture as well as insights as a start-up guru.

Q. Woowa Brothers merged Baedal Minjok with Baemin Riders, a service that delivered non-traditional delivery cuisine, at the end of last year and declared the beginning of Baedal Minjok brand 2.0. What was behind that decision?

A. We concluded at the time that we had reached the stage of being recognized by general consumers, to an extent, on the back of our kitschy and fun promotions. We were asked a lot about our brand identity, which led us to deliberate on the next stage. We wanted to expand the brand and make it way more distinguished from other existing brands.

There was a time when a person putting on a certain luxury brand from head to toe was cool. But today’s consumers are much smarter. They mix and match different brands. You can be a Baedal Minjok fan while being fond of Apple. It looks cool when a person with a Hermes bag holds “Chichelin Guide [the latest publication from Baedal Minjok about chicken].” It’s the beauty of contrast.

Services have gone through changes, too. Before, consumers simply considered Baedal Minjok as a brand that let them order fried chickens. Now, it has gained recognition as a platform that delivers cuisine that was not typically available for delivery such as tom yum kung, pasta and even lobster. That is why we have decided to more seriously deal with food in tandem with the launch of Baedal Minjok 2.0.

Woowa Brothers injected 10 billion won in March 2017 to kick-start the Baemin David project for developing delivery robots. In March this year, the company invested $2 million on Bear Robotics, a U.S. robot start-up. Where are you at in the development process?

The robotics we are interested in encompass delivery, connectivity and artificial intelligence. We successfully completed the initial test in June of a serving robot at a food court in Cheonan, South Chungcheong, in partnership with Korea University.

We are scheduled to conduct a second test of an autonomous serving robot, jointly with a local restaurant brand we cannot name, in August. The venue will be within a closed outdoor space – an apartment complex, for instance. A sizable portion of the Korean population lives in apartments and officetels and the portion is even bigger in Seoul and Gyeonggi. We are comparing having a human deliverer and a robot work together with a human for deliveries within an apartment complex.

What benefits do autonomous delivery robots offer?

When a robot delivers, delivery charges that normally range between 3,000 won and 4,000 won will go down to as much as several hundred won. The price of food that consumers think is appropriate in proportion to the amount of delivery charge is 18,000 won to 20,000 won. Not many are willing to pay a 4,000 won delivery fee for a 7,000 won dish.

We are paying attention to what impact the under-1,000 won delivery charge will have on the food delivery market. Under that scenario, people will be willing to have their breakfast delivered on a regular basis.

I want to have robots deliver not only food but also food ingredients, products sold at convenience stores, medicine and even newspapers. On their way back from delivering, robots could pick up recyclable waste from customer’s houses and throw it away. If consumers no longer have to buy a large amount of products at once at a supermarket thanks to delivery robots, the capacity of refrigerators would also be reduced.

Automated robots will help resolve security issues, too. Although modern apartment complexes have passwords at the building entrance, the passwords are already known by an unspecified number of people and types of deliverymen. If robots are the deliverymen then concerns over password leaks and potential crimes will disappear.

All of the things I have mentioned are not so far away from now. In some parts of the world, such as Silicon Valley, they are already experimenting with autonomous delivery robots. Unless Korea implements such technology, it may fall behind even further.

Baedal Minjok is renowned for various design goods used for marketing promotion. Have you considered spinning off a design unit?

I won’t split the unit because branding goods is valuable when they play a supplementary role to the main business – content marketing. For a company to keep up with changing customers’ perspective, it should provide content incessantly.

Content marketing requires two to five years of long-term investment. Assessing the result every six months won’t be the right thing to do. Our fonts are an example of content marketing. We spent less than 500 million won developing five fonts over the past five years, but their value continues to grow over time, helping the brand become even more recognizable.

In a related move, we published Magazine F in March. F is short for food. We joined hands with Magazine B from JOH, a branding company, to create its sister magazine. Magazine B is an advertisement-free publication that introduces a single brand per edition. The first edition of Magazine F dealt with salt and the second, which came out in May, was about cheese. The theme of the third edition will be chicken. We also had Lee Wook-jung, a producer at the Korea Broadcasting Station renowned for the food documentary series “Noodle Road,” shoot a documentary about the anthropological origin of chicken, its taste and nutritional value. Its premier is slated for early August. Magazine F will seriously handle food and ingredients, including water and wine.

Where does Korea stand in the global delivery market?

A lot of Koreans tend to think that food delivery is a unique culture here. But there are bigger food delivery services abroad – from Deliveroo in the United Kingdom to Delivery Hero in Germany – operator of Baedaltong and Yogiyo in Korea – and in China.

But Seoul is No. 2 after China when it comes to the number of orders placed on delivery apps. The delivery tally in Seoul is as big as in a few cities in Europe combined. It is mainly because Seoul is a megacity with a population of nearly 10 million. There aren’t many cities that compare to Seoul in terms of population except for London, New York and Tokyo. Within China there are Beijing, Shanghai and Shenzhen.

What is the speed of growth for delivery services?

The pace of growth is getting faster by year. Last year and the year before saw an over 70 percent on-year rise in delivery transactions volume, the total value of food ordered through the Baedal Minjok app. This year is projected to see another 70 percent increase. That is a tremendous speed. By the end of this year the annual transaction volume is expected to reach 4 to 5 trillion won, which compares to 2 trillion won in 2016 and 3 trillion won in 2017.

During the Russia World Cup period, we received 120,000 to 140,000 orders per hour, which translated to up to 500,000 a day. The daily order volume is an overwhelming record even when compared to that of e-commerce platforms. When an order volume is bloated to a certain level, it never reduces and only grows. That leads to enlarging the entire food delivery market.

Until recently we estimated the annual food delivery market size at 14-15 trillion won. But as the distinction between food that can be delivered and food that cannot be delivered was destroyed, the market size seems to have broken the ceiling.

The growth of the food delivery industry will have a butterfly effect on a range of industries. As it has become natural that electronic products, books and clothes are ordered online, food will be, too.

The real estate market will change as well. The essence of the restaurant business has been real estate thus far, but it is changing now. When I launch the Baedal Minjok app, it shows the 200 fried chicken locations within a 1.5 kilometer (0.9 mile) radius of my office. But when I walk around the neighborhood, chicken places are barely noticeable. It is because the shops are located in barely-visible areas or on cheaper land. It has become possible for obscure and smaller friend chicken places to compete against large franchises doing massive promotions such as BBQ and BHC.

Do you think Korean food culture is changing?

I see a huge change with the way people eat hansik, or Korean food. When you go to fine dining restaurants here, an increasing number of them serve food on a single tray or in the form of a course menu.

The way people eat hansik at home is changing as well. Whereas they used to have rice with five to seven banchan, or side dishes, before, the number has reduced to one or two – mainly because the single household demographic considers washing dishes, managing banchan containers and dealing with food waste a big hassle.

Some say bread will replace rice, but I believe people will keep consuming rice. Instead, preference for deopbap, or bowls of rice with various toppings – from marinated beef to tuna – will grow.

Korean food has a strong flavor, a downside that makes it hard to feel the original taste of the ingredients. If people grow the habit of having a single banchan with rice for a meal, the taste buds of general consumers will become more diverse. Banchan will become more refined.

Dosirak, or lunch boxes consisting of Korean food, sold at convenience stores will be overhauled. The producers’ focus will migrate from the number of banchan offered to the quality.

Aside from running the business, you assume various posts such as managing director at the Korea Venture Business Association, chairman of the Korea Startup Forum and innovative growth ombudsman. What are your views on the controversies over innovation and excessive regulations?

Everyone can talk about innovation and stress its importance – from public servants to journalists, businessmen and even the president. But I feel that the pace of innovation in Korea is pretty slow. China has outpaced us a long time ago and is ahead of us by around five years, and the speed of innovation in Southeast Asia is similar to Korea’s. I am not saying that Korea has failed. Korea is an economic powerhouse and is doing well. But I am concerned that it is falling behind in terms of the pace of innovation.

When it comes to regulations, I view them as being created by existing businesses and interest groups. I don’t think government officials impose regulations because of a lack of understanding. The best measure to ease regulations, in my view, is a marathon meeting where businessmen and government officials, academics and interest groups discuss the issue for days.

The idea was proposed by the Presidential Committee on the Fourth Industrial Revolution. When people meet they get to listen to each other and find a way through a certain problem.

What changes will the recent minimum wage hike bring to the food and restaurant industry?

Delivery fees have been hiked in the wake of the rise in the minimum wage, but consumers will get used to paying for food deliveries, particularly so with fried chicken franchises that began charging 2,000 won for delivery. Fried chicken costing 18,000 won and steak costing 18,000 won have been placed on a level playing field.

It is amazing that chicken accounts for one third of all food delivered by Baedal Minjok.

There are fried chicken places in every corner of Seoul. Korea has more chicken restaurants than McDonald’s, and there is no other food that has more diverse recipes than chicken. What is more interesting is that the popularity of chicken in today’s Korea was generated by oversupply. Oversupply led to more and more people eating chicken, and repeated eating made people think that chicken is delicious.

The number of chicken places exploded in the aftermath of the 1997 Asian financial turmoil. Opening a chicken franchise was the easiest option for corporate employees who lost their job with severance pay of 100 to 200 million won. The government fanned the trend as it eased the lending criteria. I, myself, eat chicken five to six times a month. For others, chicken is a soul food, but my children hate it because they eat it too often.

[Jumping on the bandwagon of chicken popularity, Baedal Minjok has been throwing a chain of fun events and promotions. The company launched an annual test to pick out a chimmelier, a portmanteau of chicken and sommelier, last year and a second edition took place on Sunday. The winners were given “Chimmelier Certificates.”

In June, Baedal Minjok published the “Chichelin Guide,” a book about selecting the right chicken, its history in Korea and various methods of enjoying chicken. In the same month, the firm began selling “Chimmeliale,” a pale ale developed jointly with The Booth, a local craft beer house. The beer is meant to enhance the taste of chicken.]

Baedal Minjok currently operates domestically. Do you plan to expand overseas?

No particular deal is underway at this moment, but we will keep trying to enter foreign markets. We have been conducting market research in London, where Deliveroo and JustEat are headquartered, and Southeast Asia. We tried to advance into China in vain and realized we won’t work in Japan because the country’s convenience stores are so strong.

Southeast Asia is one of our candidates, but we don’t think we can succeed simply by relying on the ongoing hallyu, or Korean wave. Hallyu may last, but it would be a mistake to think that Southeast Asians would unconditionally accept services by Koreans.

BY SEO JI-EUN, MOON SO-YOUNG [[email protected]]

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