Foodpanda, a subsidiary of Berlin-based food delivery company Delivery Hero, plans to roll out its services in new cities across the Asia Pacific region in 2020. The Singapore-headquartered firm is also eyeing to foray into markets such as Indonesia and Vietnam.
According to Luc Andreani, managing director of Foodpanda Singapore, the Asian food delivery startup is open to adopting both organic and inorganic route to chart out its growth. This will involve making strategic acquisitions or forging partnerships with local players in the regions it wants to enter into.
Andreani did not provide a target on the number of cities or markets it plans to enter but said that Foodpanda will adopt a city-led approach to growth over a market-led one. As such, this may see Foodpanda entrenching itself deeper in markets it is already present in.
Foodpanda is currently in 75 cities in 8 markets. These include countries namely Singapore, Malaysia, Thailand, Hong Kong, Taiwan, Bangladesh, Pakistan, and the Philippines.
Asian orders already make up about 26 per cent of Delivery Hero’s global orders of 268.8 million euros ($297 million) in the first half of 2019. It also comprised 44.5 per cent of its parent company’s total GMV of 3.2 billion euros ($3.5 billion) over the same period.
Foodpanda is looking to expand its operations in an already saturated market where there is a slew of food delivery players such as GrabFood, GoFood, and Deliveroo. So, the competition will be huge.
Southeast Asia’s “superapps” Grab and Gojek, for instance, aren’t just pouring in millions into their food delivery divisions but are also beginning to see these verticals emerge larger than their core ride-hailing operations.
Last week, Gojek’s president Andre Soelistyo told Bloomberg that Gofood is already looking to double the size of its transportation business. It also processed $2 billion worth of food delivery transactions in 2018. GrabFood, meanwhile, saw its daily food delivery volumes double in the first six months of this year across six Southeast Asian markets.
Andreani, however, is unfazed. He added that Foodpanda’s single-minded focus on food is the strength for the company and not a stumbling block.
“The complexity of food is so high – there’s something to be said for specialisation in it,” said Andreani. “Everyone speaks about the superapp concept, but there’s also a long history of failures of this in Southeast Asia, like how honestbee turned out. I think we should accelerate food and not diversify like crazy and lose track.”
Andreani added that Foodpanda’s competitors are also accruing higher logistics costs per order than they are – an indication of higher operational inefficiency.
“This (cash) burn is not endless. And in general, we are much better positioned in terms of the way we run the business and the efficiencies that we have. We are also older in the food delivery business and have the backing of Delivery Hero, which is a publicly-listed company. We have nothing to envy,” said Andreani.
Foodpanda will assess a coterie of factors for expansion, including city population density, the maturity of infrastructure, demographics, and the number of fast-food restaurants in the area.
Andreani added that the company has begun to see more value in entering tier two and three cities, or cities with lower population density in Southeast Asia. Some of these cities are so small that they may have populations as low as a few tens of thousands.
“Even up to one or two years ago, we used to have this idea where you needed to enter really huge, capital cities to make food delivery work…But when we started expanding to tier two and three cities, we realised that if you have the right food vendors, with just a couple of riders, some guerilla and offline marketing, you can take off really quickly,” explained Andreani.
Foodpanda also doesn’t assess a city’s potential by its income per capita.
“Income per capita is not a limiting factor (for expansion). You can still make it work because if you have a low average income per capita, the rider costs are not high. So even if your order basket is low, you still get a good commission. It’s all relative,” said Andreani.
He added that food delivery services tend to monetise via three channels: One, delivery fee (paid by customers), and second, a commission from food value (paid by merchants on a per order basis). Last but not least, advertisements, too, play a major role.
Andreani said that Foodpanda charges a low, or else close to zero delivery fee to its customers. It also does not prevent its merchants from delivering for other competitors. Its highest costs go into fleet management and it plans to invest heavily in technology moving forward.
Last month, Foodpanda announced that it has chosen to establish Singapore as its Asia Pacific headquarters. It also plans to expand its technology team and has committed to hiring over 500 staff across product and engineering to form a new tech hub for the region.
Foodpanda’s tech goals include developing products that will build a more tailored and seamless search process for its users while increasing the speed of its deliveries and logistics divisions.