Foodpanda aims for a bigger slice of the pie

Food delivery app Foodpanda — which had been reeling under troubles that ranged from allegations of fake restaurants on the platform to rumours of shutting down after it fired about 500 employees last year — is now getting back on its feet, and has set an audacious target of 25-times growth in the next five years.

The Rocket Internet company has not only turned operationally profitable, but is also significantly cutting down losses to grow in a more sustainable fashion. This has made the Gurgaon-based company a star in Rocket Internet’s portfolio.

As per Rocket Internet’s financial results for the first half of 2016 (calendar year), Foodpanda’s net revenues grew 72 per cent in H1 2016 as against the same period last year to reach €21.7 million from €12.6 million last year. More importantly, Foodpanda’s losses shrunk from €39.1 million in the same period last year to €27.8 million this year. The company had a gross profit of €20.7 million in the period this year.

“We have decent amount of cash reserves with us, so we do not have to talk about sustainability and existence. Secondly, our focus has shifted towards sustainable growth in the last one year,” Saurabh Kochhar, CEO, Foodpanda India, told BusinessLine .

Kochhar now seems so confident with sustainable growth that he’s targeted 25-times revenue growth in the next five years.

“We have been focussing on customer experience and right unit economics in the last one year; we are now operationally profitable as an aggregate business both for deliveries and our marketplace. That’s been our biggest achievement. With that, we believe we have the licence to grow.”

Technology has played the biggest role in Foodpanda’s revival. The company has been able to automate 99.99 per cent of its orders — which means there is no human intervention right from when a customer selects a food item on the app, to the order placement at the kitchen, and assignment of delivery boys.

Last year, automation stood at a mere 20 per cent of all orders.

“Similarly, when it comes to delivery, we have our own proprietary mapping tool, proprietary algorithms and analytics engine, which ensure that every orderis seamlessly passed on to restaurants and riders. This has allowed us to reduced delivery cost; the average delivery time is down to 32 minutes,” Kochhar said.

He said this has ensured that each delivery boy is now able to deliver thrice as many orders per hour as he could a year ago. This reduces delivery time, improves margins for the company and reduces the headache of constantly building an army of delivery boys to meet demand, he said.

To further ensure deliveries do not become an issue during the upcoming festive season, with online retailers such as Flipkart and Amazon are already set to hire tens of thousands of delivery boys on a temporary basis, Foodpanda is working on resource sharing agreements with various companies.

“We have started multiple partnerships. We are piloting sharing of capacity with Ecom Express (a last-mile delivery company).”

Kochhar said that to ensure the growth is sustainable from here, the company will not look at growing beyond its existing presence in 150 cities in the country and instead focus on delivering better and growing within these cities.

The company recently launched a hygiene certification programme, wherein restaurants on the platform will soon be rated on their hygiene standards to improve customer trust on the platform.

While certifying 12,000 registered restaurants seems like a daunting task for the venture still struggling to improve margins, Kochhar said this could be a big revenue opportunity for the company. The company is hiring about 600 hotel management graduates to carry out restaurant audits and conduct trainings and consultation for these restaurants.

“Our investment on these people, about ₹2-3 crore in the next one year, will predominantly be on training these guys and creating the backbone infrastructure. The rest will be pretty much on financial transaction for advanced consultation,” Kochhar said.

Foodpanda is also in talks for a partnership with food regulatory authority FSSAI to see if this hygiene standard can be mandated for restaurants across the country. With these initiatives, Foodpanda is trying to not only ensure the competition stops eating its lunch, but also create a bigger pie for itself.

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