foodpanda says it’s on the path to profitability in SEA
By Benjamin Cher July 5, 2016
- Boasts of 400% growth for 2015, averaging 25% month-on-month growth
- Unfazed by competition, takes it as positive indicator of its ‘proven model’
DESPITE increasing competition, Rocket Internet’s food delivery startup foodpanda says most of its markets in South-East Asia are on the path to profitability.
In this region, the company has operations in Brunei, Indonesia, Malaysia, the Philippines, Singapore and Thailand.
Singapore is a key market, but while its other South-East Asian markets are growing more slowly than Singapore, they are “still growing nicely,” said Jakob Angele (pic above), foodpanda senior vice president and Singapore chief executive officer.
“In those countries, we are more focused on turning the business profitable – for a startup, it is a huge step,” he told Digital News Asia (DNA) in Singapore recently.
“Actually, most of the markets in South-East Asia are on the brink of profitability,” he declared.
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Indeed, according to foodpanda Singapore managing director Emma Heap, “Every single market is profitable on a variable cost basis – every single order we do, we are making money, which means we are on a strong and clear path to profitability.”
“This is something we believe gives us a long-term advantage over our competitors,” she said.
“The company strategy has a clear path to profitability and we are also ready a long way along that path – now the next step is for second tier markets to turn profitable within the next six to 12 months,” she added.
The startup also claimed that it grew 400% in terms of orders and revenue in 2015, although it declined to give actual figures.
“From the business side we are extremely happy – we are a very big company, but we’re still growing very fast,” said Angele.
“This year we are still growing 25% month-on-month in orders and revenue, which is quite an achievement,” he added.
But the company is not resting on its laurels, faced as it is with a number of challenges, according to Angele.
Maintaining restaurant quality is one such challenge: Restaurants new to its platform can be overwhelmed by their foodpanda orders alone, he claimed.
“Quite often, when we bring a restaurant on board and we start providing it with many orders, it starts struggling in the kitchen.
“That’s when we come into play, continuously screening quality and not allowing the customer experience to be affected,” he added.
Another challenge is being able to hire enough drivers to sustain its growth – especially given that foodpanda itself now fulfils 90% of all deliveries from the restaurants on its platform, up from 60% last year, according to Heap.
The startup currently has 2,500 riders in Singapore, but labour shortages have made recruitment and retention tough, even for the more established players, Angele admitted.
“What we do is offer a competitive compensation package, but that’s only one side of the story – we really do a lot to make the riders feel part of the foodpanda company,” he said.
“We even did a lucky draw with our loyal riders and sent them to Europe for a couple of days for a [UEFA] Champions’ League game.
“That’s only the tip of the iceberg – it’s really about being there for them when they have problems with their bikes, riding insurance, etc.
“We take care of our riders … who allowed us to build the biggest rider network in Singapore, within a couple of months,” he added.
“We also reward the best performing riders to give incentives to perform even better and go the extra mile for the customer,” quipped Heap.
“For example, we sent two of our top performing riders to the opening game of the Euros (European Championship 2016) in France as a ‘thank you.’
“I think by doing things like this on the side and building a community, would make riders want to go the extra mile for customers,” she added.
Staving off competition
The food delivery scene in South-East Asia is getting crowded with recent entrants like Deliveroo vying against entrenched local players, but foodpanda sees competition as a positive indicator that it is doing something right, claimed Angele.
“It is a very interesting playing field – we have counted about 15 competing companies that have mirrored our business model to some extent, only here in Singapore,” he said.
“It tells us that we are doing something right and our business model is proven to work, and more companies are getting interested in that,” he added.
However, Angele said he believes foodpanda’s main competitor sits in every kitchen: The frying pan, as well as takeaways.
“That’s really where we have to convert customers, and convince them of the benefits of foodpanda,” he said.
Growth and profitability focus
Still, according to Heap (pic), foodpanda is more interested in growing the entire pie rather than just its share of it.
“As a market leader, that’s our responsibility – to grow the size of the pie and not just rely on the current market we have,” she said.
For now, foodpanda’s top priority is enhancing its customer experience and optimising its technology.
“We want to keep growing and capturing uninformed customers, converting them to foodpanda addicts,” said Angele.
“For us it is important to keep on our strong growth path, to keep growing as we did in the past, and then about turning our key countries like Thailand and Malaysia profitable,” he added.
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