Till January this year, reports had detailed out Ola’s plans to scale down Foodpanda and focus on cloud kitchen business instead. Confirming all the assertions and speculations it seems that Ola is completely shutting down its food delivery business.
You heard it right. Ola’s second attempt at food delivery, after unsuccessful Ola Cafe of 2015, is coming to a definitive halt after mounting losses and months of struggling in the highly competitive market that requires a constant money outflow with marginal returns.
In numeric terms, food delivery business fetches Ola a 20% commission via Foodpanda as the 40% margin is divided equally with the restaurant partner. In cloud kitchen business, the entire average margin of 30-40% goes into Ola’s pockets, as pointed out by Mint.
The order figures of Foodpanda have capped at 200,000 orders a day during August last year at the time of deep discounting practices. Now the orders have dropped down to 5,000 a day, for the company acquired by Ola in December 2017 for $40-50 million, and received $200 million worth extra investment. For perspective, Swiggy and Zomato clock around 1.1 million orders a day.
FY18 anyway had seen Foodpanda’s losses took a 5.1X jump to Rs 227.96 crore while the revenues only slighty (17%) increased to Rs 72.85 crore.
These factors, along with the clarity that Ola cannot afford to empty its pockets into food delivery like Zomato, Swiggy, and UberEats, the company has suspended the food delivery business. Marketplace model is off as most restaurants have become unavailable. 40 employees have been laid off.
First the entry level employees were informed and then the on-ground operations team. The ground team has been dissolved completely, but the senior management has been retained to oversee cloud-kitchen business.
Majority of the 1,500 delivery personnels’ contracts have been terminated.
For the delivery of food prepared in the in-house cloud kitchens, Ola is in talks with Zomato and Dunzo to relist these outlets on their platforms. So far, the company has three cloud kitchens – Holachef, acquired in October last year, Great Khichdi Experiment, and FLRT.
Few more cloud kitchens are to be added to this list in upcoming future, as per Mint’s sources.
While scaling up cloud kitchens is also a tricky business, Ola is counting on its user base to help with the same. In hindsight, this was also a support mechanism for marketplace Foodpanda, but we know how that has turned out. Hopefully, Ola will have a better luck with cloud kitchen business, given its history with foodtech so far.
It is unclear whether the grocery plans of the company via Foodpanda are also abandoned. But it is a likely situation considering this would require further heavy and high risk investment in a segment where several deep pocketed companies are already operating, and might create a situation similar to that of Foodpanda’s marketplace.