Foodpanda reports a net loss of Rs 756 crore, revenue of Rs 82 cr for FY19

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.

Chasing a third spot, cab majors go on a food trail at hefty $400-mn bill

Online food discovery, ordering and delivery apps Foodpanda and Uber Eats, owned by cab aggregating giants Ola and Uber, respectively, spent almost $400 million in 2018 on rapid expansion as well as discounting to gain new customers, it is learnt.
According to sources, the two companies are planning to make similar investments this year as they plan to diversify into grocery delivery services and finally set up concierge service by end of the year.

Uber Eats and Foodpanda did not respond to detailed questionnaires sent to them.
The fight for number three
The duo have been fighting for the third spot in the food delivery ladder, with Uber Eats edging Foodpanda by 2 million orders. Together, they deliver 15 million orders a month. Market leaders Swiggy and Zomato deliver between 20 million and 30 million orders a month.
While acquiring Foodpanda in December 2017 for around $50 million, Ola had announced it would invest $200 million in the firm. It has stuck to that promise. To take on Swiggy and Zomato, it has been burning cash to discount food and give higher margins to restaurant owners.
A source in the company said Ola was following the same playbook with Foodpanda as it did in its early days as a cab aggregator — deep discounts. “The company’s goal, at present, is to get as many users and orders as possible. It has to take on Swiggy and Zomato,” said a former Ola employee. Foodpanda has been on a rapid expansion drive as well. With its expansion to 50 cities, Foodpanda’s delivery network is now the largest in the country, with more than 125,000 delivery partners attached to the platform. All of this comes at a price.
Food deliveryWhere exactly are they spending
The two foodtech unicorns burn much more than their mobility counterparts. But they have more depth in their food delivery arms and better built out internal solutions. “Rapid expansion as well as discounting cost money. Foodpanda is offering as much as 70 per cent discounts at times. They are paying the balance amounts to restaurants via which they are giving the offers. All this requires a lot of cash,” said a senior executive in Foodpanda’s marketing strategy team. UberEats has also turned up the discount volume in key cities.
Foodpanda is also working on expanding its network of cloud kitchens, which is a capital intensive programme. It started this after it acquired Holachef last year.
“Setting up central kitchens is always a capital intensive measure. The kitchens have to be equipped, chefs and support staff need to be hired and delivery logistics need to be installed around the kitchens. All this has been a major expenditure for Foodpanda,” said the source.
Along with this, Foodpanda also made large hires and stepped up restructuring in its existing workforce. All in all, it meant spending a lot to make the company competitive in the current landscape.
On the other hand, UberEats, which was launched in Mumbai in May 2017, has been spending on adding cities and creating the network for its grocery delivery initiative, which it plans to start this year.
Now present across 37 cities, it is also spending a fair amount on marketing to acquire customers either through discounts or outdoor ads.
This year, the company will also expand its network of virtual restaurants in partnership with Café Coffee Day.
Last year the two firms partnered to launch ‘delivery-only’ restaurant brands exclusively on the Uber Eats app. The company has been running a pilot since November last year and will expand on the programme.

Foodpanda unleashes monster discounts, refunds to capture market share

Imagine ordering the regular chicken biryani from your neighbourhood eatery on a Saturday afternoon — not for Rs 149 per plate — but Rs 49.
Users of Ola-owned food-delivery service provider Foodpanda are already taking advantage of this. But, it gets better.
Having placed your order for two plates of biryani, you proceed to pay through mobile wallet Paytm, and find that you have been refunded Rs 30. So, you effectively pay Rs 68 for an order that would have otherwise made your purse lighter by Rs 280.
What can you have with your biryani? Mutton kebabs? Chicken tikka? You could get it for Rs 109. If you want to try a different cuisine, a plate of chicken fried rice and shredded lamb will come to your doorstep for Rs 150. Feeling your sweet tooth itch? Get a gulab jamun delivered for Rs 9!
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Foodpanda is able to make this possible by offering discounts as high as 70 per cent as well as refunds. Currently working out of 50 cities, it will soon expand services to 100.
While acquiring Foodpanda in December last year for $31 million, Old had announced that it would invest $200 million. To take on market leaders Swiggy, UberEats, and Zomato, it has been burning cash to discount food and giving higher margins to restaurant owners.
If it can become the market leader, Foodpanda will be able to raise more funds soon. No one from Ola or Foodpanda commented on questions sent to them.
Riding high on cabs business
A source in the company said Ola was following the same playbook with Foodpanda as it did in its early days as a cab aggregator — deep discounts.
“The company’s goal, at present, is to get as many users and orders as possible. It has to take on Swiggy, Zomato, and UberEats,” said a former Ola employee. But, is this sustainable? Will the users stick around once the discounts are withdrawn?
“By offering food at almost a third of the price, you will only be able to get deal hunters. That is not how brand loyalty is created. In fact, it can even harm the reputation of a restaurant as people might question its quality. Why is a dish available for such as throwaway price?” said a Delhi-based restaurant chain owner and a senior member of the Federation of Hotel & Restaurant Associations of India.
Currently, Foodpanda is footing the bill. Another restaurant owner said he was giving only a 10 per cent discount, that too only on weekdays.
graph graph “There are days when the discount on our food ranges from 25 per cent to 60 per cent. But, we do not subsidise the food. Foodpanda pays us the full rate,” said a restaurant owner of an oriental food outlet in south Delhi. The surge in customers is coming at a huge loss.
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“Foodpanda needs each of its customers to order a minimum of Rs 400 break even. For Swiggy and Zomato the cost is Rs 350. They also charge extra if the order is for less than the minimum amount required for free delivery. Foodpanda is paying more to riders and restaurants, and taking home less cash,” said a source close to Ola.
Sweet deals for restaurant owners
A number of mid-level restaurants and high-end quick service restaurants have been promised close Rs 10 million as revenue each year if they list exclusively with Foodpanda.
Some of these restaurants do not make more than Rs 2.5 million.
“What they have also promised is that Foodpanda would pay 50 per cent of the delta if the targets are missed. It means if Foodpanda has promised Rs 10 million and the restaurant manages to make just Rs 5 million, the company will give the restaurant Rs 2.5 million,” said a senior executive at a rival food delivery firm.