Ola cuts investment in Foodpanda

Ola has more than halved its cash burn at its food business Foodpanda. The company is also planning to make its private label brands the cornerstone for growth.

Ola cuts investment in Foodpanda

Ola cuts investment in Foodpanda

As per the new mandate, Foodpanda will mainly focus on running the business more cost efficiently by focusing on its own private labels and cloud kitchens.

The list of cloud kitchens includes; The Great Khichdi Experiment; Lovemade; and FLRT brands.

A person who is aware of Ola’s plans added that Ola plans to focus on scaling its payments, lending, and core transportation portfolio, which includes scooters, international business and electric vehicles. He also said, “In January, Foodpanda cut marketing and customer acquisition costs by 2/3rds, in line with Ola’s de-prioritisation plan for the business in terms of investment. The internal expectation is orders will fall by 60% but business will grow more efficiently.”

Another person also commented on this, “These verticals alone are large markets, and play naturally to Ola’s strengths.”

A cloud kitchen startup said, “We typically see a spike in Foodpanda orders during an offer. But as offers pull back, volumes drastically fall. For Swiggy and Zomato too there is a spike when on an offer, but there is a base consistency in terms of order volume even without offers.”

For a cloud kitchen, net margins are close to 35-40 percent since overheads are low. If the brand resonates with customers, private labels can create a sticky, exclusive demand for the platform without relying on deep discounting. Market leader Swiggy too has two private labels, The Bowl Company and Homely.

For CEO Bhavish Aggarwal, Foodpanda was one of the core focus areas from last couple of months. Also the company set up was very aggressively expanding, hiring and marketing plans for the brand. The company also acquired cloud kitchen network Hola Chef last year to build its private label offering. Pranay Jivrajka, CEO of Foodpanda at the time of announcing the acquisition said, “We aim to build India’s largest cloud kitchen network that will be a major step in further elevating the food experience for our customers.”

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