Food delivery has become an obvious extension of global ride-hailing firms. Uber, Grab, and Go-Jek have been evangelising food delivery segment for a long time. Toying the idea from these peers, Ola also had harbored dream of making big in online food ordering space.
Last year, in a surprising move, the SoftBank-backed company had acquired Foodpanda from Delivery Hero in a fire sale. Since then, Ola also pumped in about Rs 400 crore in the food ordering platform. To strengthen the new business vertical, it’s now eyeing to acquire FreshMenu, reports Mint.
FreshMenu is a full stack food tech company that prepares specialised menu. Unlike Zomato and Swiggy, it owns multiple kitchens through a hub and spoke model. For an instance, if you order from Indiranagar in Bengaluru, you get served from kitchen based out of the same area.
Fulfilment through hyperlocal kitchens helps FreshMenu to maintain the freshness of the food. Many observers see its model sustainable as it snaps up the healthy margin in the range of 25 to 35 per cent). While several funded startups had shut shops as funding dried up during the 2015-17 period, FreshMenu had managed to demonstrate decent growth.
Acquiring FreshMenu will certainly give a strong position in Bengaluru where the former has been able to create loyal consumer base. Importantly, food delivery business is notorious for bleeding profusely. In contrast, FreshMenu has a better unit economics and higher chances of attaining profitability.
Meanwhile, Ola is also eyeing to set-up an independent business entity for food delivery. Through a slew of entities including Ola Money, the company is thinking about creating multiple businesses to inflate its valuation in future funding rounds.
Bhavish Aggarwal and his team are seeing great value in following Go-Jek model. The Indonesian unicorn started with ride-hailing service, but in 2015 it forayed into food delivery space. Currently, it does more orders than Swiggy, Zomato and Foodpanda collectively.
The size of the market and its projected growth seem to be other enticing factors behind Ola’s decision to ramp up its stake in food delivery segment.
According to the Kotak Institutional Equities, the food delivery and takeaway market is set to grow to $29 billion by 2021 with the number of orders going up to 51 million on a monthly basis.
There is enough potential to grow in this segment.
Though, the acquisition of foodpanda has given some foothold to Ola’s second attempt on food delivery. Over the years, foodpanda has lost a major chunk of customers to rival Swiggy and Zomato. At present, it has little relevance and traction.
On contrary, Zomato and Swiggy had raked-in large fundings from heavyweights including Alibaba and Naspers. Challenging the aforementioned companies and re-claiming past marketshare would be tough for Ola. Anyway, fight for supremacy in foodtech space would be exciting to watch for many years from now.