The food tech space in the Indian startup ecosystem has become a war zone where the weapon is money and all the major players – Swiggy, Zomato, UberEats – have been using this weapon. How? By using discounts to increase GMV.
Ola’s foodpanda also tried to ride the same wave of discounts into growth but has now realised that this model isn’t working for it.
It has cut down investment in its food delivery project to almost half and the team that had shifted from Ola to foodpanda has also been shifted back to the original cab hailing giant.
The Bhavish Aggarwal-led company had originally planned to invest $200 million to scale up foodpanda, but it hasn’t made a post acquisition follow on investment ever since. This development has taken place as the company realised that scaling foodpanda by discounts isn’t an efficient way to grow.
It also doesn’t have the capital to match Zomato and Swiggy’s discounts in the long run as their sole focus is foodtech, while Ola has to focus on its core of transportation as well.
Further, the company has observed that whenever it tones down the discounts, there is no basic consistency in orders, unlike Swiggy or Zomato.
As a solution to this, the company has decided to scale private labels and cloud-kitchen based models instead. For Ola, these happen to be Great Khichdi Experiment, Lovemade, and FLRT brands under foodpanda. The company had earlier acquired HolaChef, a cloud kitchen to nurture it as a private label.
In foodpanda, apart from investment, the company has also cut its marketing and customer acquisition costs down to 1/3rd.
All these moves are expected to lower the orders by 60 per cent, but on the brighter side the business would become efficient, revealed ET’s sources.
The rejig in focus does not only intend to go from foodpanda to cloud kitchen, but it also brings Ola to refocus on scaling payments, lending, scooters, electric vehicles, and its international expansion.
This will be the second time the ride-hailing major realised that its foodtech stint has been unsuccessful. Earlier, it was similar with Ola Cafe, a homegrown delivery arm that it had tried to run but had later shut down.
It would be interesting to see if Ola’s hopes of becoming India’s largest cloud kitchen network are successful or not.