In 2012, when the founders of Foodpanda, the online food ordering company, received backing from the Berlin-based incubator, Rocket Internet, they knew that they were that much closer to their aggressive growth target. Here’s why; Rocket Internet, with its team of finance and management specialists, apes the business model of already successful Internet companies and applies these ideas in other places, thus leaving little room for risk. And, it has a reputation of helping businesses expand aggressively. India-based e-commerce shopping portal, Jabong and customised printing services company, Printvenue, serving as examples. “The advantage of being incubated by Rocket Internet is that you get access to other startups incubated by the company, build a valuable network and share your learnings with the other founders,” indicates Rohit Chadda, co-founder of Foodpanda (also known as Hellofood.com in the global markets). Today, within just two years of founding, Foodpanda is active in 40 countries across the world and has partnered with over 22,000 restaurants globally. In India, it has partnered with 3,500 restaurants in over 33 cities.
“When we started in 2012, the overall food delivery market in India was pegged to be at Rs. 1,000 crore and was expected to grow at 40 per cent year-on-year (y-o-y), as compared to the organised food retail market, which was likely to grow at just 25 per cent y-o-y,” recalls Chadda. This coupled with the growth in the e-commerce segment provided tremendous growth opportunities for the company. “Last October, we had 200 million online users in India. And, even today, there are hardly any big players in the online food ordering market here. This indicates that the market is wide open. That’s why it made sense for us to take a plunge into this segment,” he reasons.
Foodpanda’s business model is quite simple. It features location-specific restaurant listings on its website. Thus, when a customer places an order from a particular restaurant, it processes the order, sends it to partner restaurants, who then deliver to the customers. Foodpanda earns a commission on every order, which varies from market to market. Though unwilling to disclose the number of monthly orders, Chadda indicates that Foodpanda records a daily page traffic of 60,000 visitors.
Bringing in the money
In May 2013, the startup raised US $20 million from AB Kinnevik, Phenomen Ventures and Rocket Internet, and in September 2013, it raised US $8 million from iMENA Holdings. Typically, both AB Kinnevik and iMENA Holdings are regular investors in Rocket Internet-incubated startups and AB Kinnevik is one of the shareholders at Rocket Internet.
To top this, in February 2014, Foodpanda raised US $20 million from Phenomen Ventures, and in August 2014, raised $60 Million from a group of investors, including various existing investors, Falcon Edge Capital and Rocket Internet AG, taking the total investments to US $108 million. “The new funding will be invested in continuous growth in our existing markets, by partnering with even more restaurants in more cities and further improving customer service. We want to establish ourselves as the market-leading food ordering company, creating the most convenient way to order food,” said Ralf Wenzel, global managing director of Foodpanda, in a press statement.
Setting the right expectations
Though Foodpanda has witnessed a rapid growth in the last two years, it has faced its fair share of challenges during the early stage, especially in India. First among them was to create awareness among restaurateurs about the importance of food delivery. “Most of them assume that if the food is good, it’s all fine. They don’t understand that if the customer places an order and the food doesn’t reach him/ her on time, they stand to lose a customer,” says Chadda. Second was to educate them on the importance of packaging in food delivery. “It’s not just about delivery, but about improving the overall experience. There were times when we provided hotboxes to some of our partners and helped them with staffing, on-ground operations and analytics,” explains Chadda. Thirdly, he indicates that since online food ordering is a new vertical in India, getting restaurateurs to understand the importance of creating an online presence to improve customer inflow was a challenge.
As is the case with Rocket Internet-backed startups, and unlike its global competitor, JustEat.in, Foodpanda drives expansions mainly into emerging markets. “In developed markets, some of the players have been there for a long time. That’s why we see emerging markets as the way to go. We become early movers, grow with the market and help the market grow,” states Chadda.
Typically, before partnering with restaurants and listing them on its website, Foodpanda’s sales representatives go through an exhaustive checklist, to understand the restaurant’s attitude towards customers and deliveries. “At the end of the day, if a customer is ordering through Foodpanda, they’re our customer. Even though we are not involved in delivery, we feel obligated to the customer and the customer has that expectation from us,” indicates Chadda.
Enabling collaborative growth
In February 2014, the startup partnered with the Southeast Asian review portal, OpenRice, thus making it the second partner, along with India-based TimesCity.com. “It’s common knowledge that a customer would like to be informed about a restaurant before placing an order from there. Since OpenRice and TimesCity is popular among our customers, we collaborated with them to enhance customer experience,” says Chadda. Although Foodpanda itself has a reviews section, its partner websites offer an additional source of information about restaurants and fulfilments happen through both Foodpanda and its partner websites. “Essentially it’s a win-win model. In fact, we’re exploring more such partnerships in the near future,” adds Chadda.
In March 2013, Foodpanda launched its first mobile application for the Android and iOS platform. The app allowed its customers to conduct a location-based restaurant search. This June, it improved the user interface, introduced new features such as online payments and launched the app on all platforms. “Today, our mobile penetration stands at 25 per cent and the rest is through Internet and tele-ordering. We’ve improvised the mobile app to increase penetration on this front,” states Chadda.
Foodpanda has designed different marketing campaigns to target its online and offline customers. For online customers, it takes the traditional social media and SEO route and for offline customers, it is exploring television advertising. “First, we capture the online customers and educate them about online ordering, then, we move offline and target other customers. Until now, we’ve focussed on our online customers only. But, going forward, we’d like to leverage on both,” shares Chadda. In fact, here again, Foodpanda is banking on the knowledge sharing and networking opportunities created by Rocket Internet. For instance, before planning its television campaign, it approached the founders of Printvenue, who began advertising on this space earlier, for information and guidance.
Today, the biggest driver for Foodpanda in India, is the lack of a structured player in the online food ordering space. “People are hardly familiar with this concept and if anything, there are only hyper-local players. Our job is to educate the consumer about the convenience of online ordering,” says Chadda. He believes that it takes away language barriers, creates ease of payment and helps customers save on orders too.
In the next financial year, Chadda aims to cover nearly all Tier-I and Tier-II cities in India and make the concept of online food ordering a household phenomenon.
Concept in brief
Rohit Chadda and his co-founders launched Foodpanda, the online food ordering portal, in 2012, with the belief that the concept was still nascent in emerging markets and the market was wide open. Incubated by Rocket Internet, and additionally funded by AB Kinnevick, Phenomen Ventures, iMena Technologies (in three rounds), to the tune of US $48 million, Foodpanda aims to increase its presence from the current 3,500 restaurants in over 33 cities in India, and reach a majority of Tier-I and Tier-II cities in India, by 2015, making online food ordering a household phenomenon. In a move to expand its reach, it has also improvised its mobile app, by making it available on all platforms and introducing new features such as online payments.
Investors: Rocket Internet, Phenomen Ventures, iMENA Technologies, AB Kinnevik
Presence: Partnered with 3,500 restaurants in over 33 cities
Headquarters: Berlin, Germany