Foodpanda to focus on cloud kitchens as parent Ola tightens purse strings

Foodpanda to focus on cloud kitchens as parent Ola tightens purse strings
28 Jan, 2019

A year after acquiring Foodpanda, ride-hailing unicorn Ola is significantly scaling down expenditure on its food delivery subsidiary as part of a broader strategy to prioritise investments in its core transportation business besides digital payments and lending.

According to a report in The Economic Times, Foodpanda has slashed its marketing and customer acquisition expenses by two-thirds this month and the cost-reduction initiatives are expected to result in orders falling by 60%.

Citing three people in the know, the report said that Ola is initiating several austerity measures at Foodpanda while charting a growth strategy centred around a cloud kitchen model. It added that Foodpanda will leverage Ola’s customer base to grow its private label brands such as The Great Khichdi Experiment, Lovemade and FLRT.

Ola is also said to have brought back some of its product team members it had moved across to Foodpanda last year.

Homegrown Ola had acquired the Indian business of food delivery platform Foodpanda from its Germany-based parent Delivery Hero in a stock deal in December 2017.

Ola had also committed to inject $200 million into Foodpanda India to expand its business. The company later acquired shuttered food-tech startup Holachef for an undisclosed sum, which marked Foodpanda’s entry into the cloud kitchens space.

While Ola has not made any follow-on investment into Foodpanda, rivals Swiggy and Zomato have raised massive rounds of funding in recent months. Ola rival Uber has meanwhile has continued its aggressive discount-led growth strategy for food delivery unit Uber Eats.

Swiggy raised $1 billion in a fresh round of funding led by South African technology conglomerate Naspers in December while Zomato last raised about $210 million from Chinese e-commerce giant Alibaba Group’s payment affiliate in October last year.

The recent success of cloud kitchen companies such as Faasos and FreshMenu, and the prospects of greater profitability of this model, has pushed the delivery marketplaces to launch their own cloud kitchen programmes.

Swiggy currently has two private brands -- ‘The Bowl Company’ and ‘Homely’ home food -- besides its cloud kitchen initiative ‘Swiggy Access’.

Launched in November 2017 in Bengaluru, Swiggy Access aims to offer partner restaurants a supply-only kitchen facility for faster delivery. The programme was expanded to Delhi, Kolkata, and Hyderabad in less than a year’s time.  

Meanwhile, Zomato is taking a different route on its cloud kitchen journey. The company had shut down its cloud kitchen operations under Zomato Infrastructure Services (ZIS) citing expansion concerns, but has instead invested in a third-party cloud kitchen company called Loyal Hospitality, which provides ready-to-occupy kitchens to restaurants.