Its now looking to outsource delivery and start its own kitchen as it seeks to bolster its failing business.
By Shrutika Verma & Ashish K. Mishra
Foodpanda is revisiting its India strategy by outsourcing delivery and is also looking to start its own kitchen, a comparatively higher-margin business, as it seeks to bolster its local business.
After being hammered by several issues related to fraud and systemic failure and a senior management churn, Foodpanda is now making several changes to bring in more automation and reduce manual interventions in the food-ordering process said Ralf Wenzel, global chief executive officer.
He said the company had turned operationally profitable in India as well as globally. The parent has also committed to increase its investments in India in the next couple of months. “Given that now we have a healthier base, have better gross margins, have new technology… we have decided to increase our investments in the country,” said Wenzel without disclosing the amount of new investments that will be pumped into the country. This could mean a 50-100% increase in the company’s marketing budget over 2015.
According to Wenzel, 2016 is the year for Foodpanda to globally focus on the path to profitability. At this point, 30% of Foodpanda’s food orders are delivered by its own personnel, while the rest are outsourced to restaurant or third-party logistics firms.
He also claims to have dramatically reduced the discounts it offered during 2015. “Today 80% of the new customers that we are acquiring are coming to us organically… share of paid marketing has become very less,” he added.
Among other things, Foodpanda has become more selective about which restaurant it partners with. The company has also started offering customers curated dishes produced in joint kitchen facilities in partnership with select restaurants.
Foodpanda, which until now has been driven by technology developed at its headquarters in Berlin, has also started to build its products locally. “Now we have local teams who interact with the restaurants and clients on ground and then create local products. This makes our products more flexible and execution is faster,” said Wenzel.
Its biggest costs till now have been call centres and delivery costs; processes are being automated to reduce expenses. In December 2015, Foodpanda India fired over 500 employees across all business segments – sales, marketing, vendor service, business intelligence, automation, on-boarding and an in-house call centre in Gurgaon. It also stopped food delivery in six cities, including Kolkata, Chennai, Nagpur and Coimbatore.
Rocket Internet-backed Foodpanda is one of the world’s largest online food-ordering marketplaces, present across India, Brazil, Russia, South-East Asia and Eastern Europe. It raised about USD 310 million since its launch in March 2012 from the Samwer Brothers of Rocket Internet and investment bank Goldman Sachs.
Foodpanda, one of the early movers in India’s food-ordering space, is yet to establish itself in a significant way. It faces tough competition from Indian rival Zomato, Bengaluru-based Swiggy and Mumbai’s TinyOwl. As it struggled to scale up its business and grappled with several internal issues, Foodpanda was reported to have been in talks with Zomato and Swiggy for a potential sale.
Foodpanda’s Wenzel denied this. “We were not looking to sell the business… it (news) came as a surprise to us. India is one of the key priority markets for us and it has become a blueprint market for whatever experiments we are making. Now we are operationally positive and it gives us opportunity to continue to invest in the country,” he affirmed.
In February, Rocket Internet sold its food takeaway businesses in Spain, Italy, Mexico and Brazil to Just Eat for USD 140 million. Brazil and Mexico accounted for about 5% of Foodpanda’s global revenue in 2015, according to Rocket Internet.
“We have decided to focus on large food-delivery markets and the markets that have a very short path to profitability,” said Wenzel.
