Foodpanda, the food delivery firm owned by ride-hailing giant Ola reported a net loss of Rs 756 crore during the financial year 2018-19. This is a 230 per cent increase from the last financial year, according to the financial data accessed by business intelligence platform, Tofler. Foodpanda's revenue for the same fiscal was Rs 82 crore, which is a marginal increase of 11 per cent from the last year.
"Foodpanda's burn rate of Rs 756 crore over Rs 82 crore of revenue is one of the highest among Indian startups. The significant increase in expenses from the last year is contributed by discounts provided and delivery charges incurred,” said Anchal Agarwal, CEO, Tofler. “It is interesting to note that the company has incurred delivery charges of Rs 267 crore compared to its revenues of Rs 82 crore. The discount expenses were to the tune of Rs 137 crore (that's nearly 1.5x of revenues),” said Agarwal.
Earlier this year it was reported that Ola had suspended the company’s food delivery business Foodpanda, laid off many mid- to entry-level employees and terminated the contracts of most of its food delivery executives. However, Ola had said that it was not suspending its food delivery business Foodpanda and was pivoting towards focussing on its own private label brands through its cloud kitchens. A 'cloud kitchen' is one that does not offer dine-in facility and accepts food orders only through an online ordering system.
“This decision now makes sense in light of the surging expenses the company seems to have incurred in the previous year. They have also infused $100 million in the form of debt in the company,” said Agarwal.
The SoftBank-backed Ola was building its online food delivery platform through Foodpanda’s India business, which it acquired from Germany-based Delivery Hero Group in December 2017. Ola had committed an investment of $200 million into Foodpanda India, and was competing with Swiggy, Zomato and Uber Eats in this space, while burning a lot of cash in the process, with rising competition.
According to the industry sources Ola is now betting big on the food business in a different way and is planning to launch a portfolio of in-house food brands and take them across the country. These brands would not only be available on external platforms like food delivery apps Swiggy and Zomato, but also offline stores including restaurants, cloud kitchens, food trucks and pop-up kiosks that Ola is also planning to set up.
Ola’s food business will focus on becoming a food-first company with a massive kitchen infrastructure and a slew of brands. These include brands related to desserts, rice bowls and biryanis which would be unveiled within this year. These initiatives will also help the company reach new customers by penetrating deeper into the existing markets and expanding to tier-2 and tier-3 cities and towns. To begin with, the company recently launched its flagship brand ‘Khichdi Experiment’ which has gone live in Bengaluru, Hyderabad, Mumbai, Pune and Chennai.
This month, Foodpanda’s rival Swiggy reported a net loss of Rs 2,346 crore for the financial year 2018-19. This was a more than 500 per cent increase from the last financial year, according to Tofler. The company’s total expenses for the fiscal were reported as Rs 3,638 crore. The Naspers-backed company’s revenue for the same fiscal was Rs 1,292 crore, a 183 per cent jump since the last financial year. "The increase in losses is due to a multifold increase in advertising expenses, employee expenses and delivery costs. Clearly, Swiggy's focus right now is growing its customer base, unlike many other startups who focussed on achieving sustainability and controlling costs this financial year,” said Agarwal of Tofler.
"Foodpanda's burn rate of Rs 756 crore over Rs 82 crore of revenue is one of the highest among Indian startups. The significant increase in expenses from the last year is contributed by discounts provided and delivery charges incurred,” said Anchal Agarwal, CEO, Tofler. “It is interesting to note that the company has incurred delivery charges of Rs 267 crore compared to its revenues of Rs 82 crore. The discount expenses were to the tune of Rs 137 crore (that's nearly 1.5x of revenues),” said Agarwal.
Earlier this year it was reported that Ola had suspended the company’s food delivery business Foodpanda, laid off many mid- to entry-level employees and terminated the contracts of most of its food delivery executives. However, Ola had said that it was not suspending its food delivery business Foodpanda and was pivoting towards focussing on its own private label brands through its cloud kitchens. A 'cloud kitchen' is one that does not offer dine-in facility and accepts food orders only through an online ordering system.
“This decision now makes sense in light of the surging expenses the company seems to have incurred in the previous year. They have also infused $100 million in the form of debt in the company,” said Agarwal.
The SoftBank-backed Ola was building its online food delivery platform through Foodpanda’s India business, which it acquired from Germany-based Delivery Hero Group in December 2017. Ola had committed an investment of $200 million into Foodpanda India, and was competing with Swiggy, Zomato and Uber Eats in this space, while burning a lot of cash in the process, with rising competition.
According to the industry sources Ola is now betting big on the food business in a different way and is planning to launch a portfolio of in-house food brands and take them across the country. These brands would not only be available on external platforms like food delivery apps Swiggy and Zomato, but also offline stores including restaurants, cloud kitchens, food trucks and pop-up kiosks that Ola is also planning to set up.
Ola’s food business will focus on becoming a food-first company with a massive kitchen infrastructure and a slew of brands. These include brands related to desserts, rice bowls and biryanis which would be unveiled within this year. These initiatives will also help the company reach new customers by penetrating deeper into the existing markets and expanding to tier-2 and tier-3 cities and towns. To begin with, the company recently launched its flagship brand ‘Khichdi Experiment’ which has gone live in Bengaluru, Hyderabad, Mumbai, Pune and Chennai.
This month, Foodpanda’s rival Swiggy reported a net loss of Rs 2,346 crore for the financial year 2018-19. This was a more than 500 per cent increase from the last financial year, according to Tofler. The company’s total expenses for the fiscal were reported as Rs 3,638 crore. The Naspers-backed company’s revenue for the same fiscal was Rs 1,292 crore, a 183 per cent jump since the last financial year. "The increase in losses is due to a multifold increase in advertising expenses, employee expenses and delivery costs. Clearly, Swiggy's focus right now is growing its customer base, unlike many other startups who focussed on achieving sustainability and controlling costs this financial year,” said Agarwal of Tofler.
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