As food tech industry continues to struggle for infusion of fresh funds amidst mass retrenchment, Foodpanda is betting big on technology and marketing to drive its business in India. It opted for automation early this year as it sacked 500 of its employees.
As food tech industry continues to struggle for infusion of fresh funds amidst mass retrenchment, Foodpanda is betting big on technology and marketing to drive its business in India. It opted for automation early this year as it sacked 500 of its employees. Also the company, which has spent about R2-3 crore on television advertising in the last three months, will continue the same amount in the coming months especially during festive season. In June this year, according to disclosure made by Rocket Internet, Foodpanda reported net revenues of 10 million euros or R75 crore for the January-March 2016 period, a sequential increase of 20%. Besides, losses came down significantly to 13 million euros from 30.3 million euros in the previous quarter. Saurabh Kochhar, CEO, foodpanda.in, talks with Anushree Bhattacharyya and Hita Gupta about how the company is reaping the benefits of automation. Excerpts:
How has the scene changed for Foodpanda post automation?
We are now reaping the benefits of automation. In fact, we have seen a 30-40% surge in number of orders after March. Till March this year, we clocked 70,000 orders a day. We are no longer losing any money per order.
Is Rocket Internet looking to sell off Foodpanda?
For Foodpanda it is a different story. It has a very diversified shareholding, which is also a differentiating factor with Global Fashion Group (GFG) where Rocket was the largest shareholder. While Rocket Internet is a significant shareholder in Foodpanda at global level, it does not hold majority shares. For us Rocket is one of the shareholders. Together rest of the investors including Goldman Sachs, which is the second largest investor, iMENA Group, AB Kinnevik, Phenomen Ventures are majority shareholders. So we are not a Rocket business.
With Foodpanda turning operationally profitable has losses reduced?
We are not incurring any loss on per order. Also we have been able to bring down the cost of customer acquisition by 20-30%. However, the scale of our business has grown in the last one year, hence losses too have increased. Other reasons for the increase in loss is that we are investing more money in continuous improvement of technology besides marketing. For example, from the period July till August we have spent R2-3 crore per month on advertising on television. The tech team has 150-200 people. Then there is corporate overheads. So in the short term losses would increase. The aim is to increase the number of orders and commission, which will help in covering the corporate overheads.
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So have you increased the commission?
Yes. We have renegotiated contracts with some restaurants which has helped us increasing the commission. This is because we now provide many back-end services such as marketing, in-kitchen process, deliveries to restaurants. The commission we earn per order ranges from 10-15% to as much as 35%.
We earn 35% commission from those restaurants where we provide the entire back-end service. So of the 12,000 restaurants we work with, we handle the delivery for 25% that is about 3,000 restaurants and it is from these restaurants we earn maximum commission.
How do you plan to scale up the business?
We are on the path to achieve profitability and we have set yourself a goal of three years. Besides technology, the delivery side of the business still requires some amount of work. We are adding more delivery boys to the existing fleet. We have about 1,500-2,000 delivery boys currently. At present, 40% of the orders are delivered by our fleet and the rest 60% orders are delivered by restaurants. Till end of December 2015 only 25% of the orders were delivered by our delivery boys.