Defying odds, foodpanda Pakistan to be profitable next year: CEO

KARACHI: Foodpanda Pakistan will be profitable next year, said its managing director and CEO Muntaqa Peracha, a statement that comes at a time when some of its peer companies are either shutting down some business verticals or trimming operations in the country.

In a recent interview with Business Recorder, Peracha, appointed the new Pakistan MD and CEO with effect from June 1, 2022, said the online food and grocery delivery platform has been posting “double-digit growth post-pandemic”, putting it firmly on course to achieve profitability.

Foodpanda is owned by Berlin-based Delivery Hero, which acquired it for $500 million in 2016, according to information available on crunchbase website.

However, the present day platform in Pakistan found its roots back in 2011 when Nauman Sikandar Mirza founded an online food review platform called Food Connection Pakistan.

Mirza and his team managed to raise $250,000 in 2013, funds that helped start EatOye. Two years later, it came on the radar of foodpanda that consolidated its presence in the country with the acquisition. Mirza was retained as CEO of the newly-merged entity until earlier this year.

“I led foodpanda Pakistan and built the country’s largest e-commerce company with a top-line of $500 million in fiscal year 2021,” Mirza, the former foodpanda Pakistan CEO, told Business Recorder.

Mirza says he is now enjoying his time in “semi-retirement” after leaving the company in February.

His successor, Peracha, did not share current sales or bottomline figures, but said the company has been posting double-digit growth post-pandemic.

Peracha said foodpanda Pakistan’s parent company sees potential in the country’s market as they have continued to invest double-digit million dollars every year since the acquisition.

In its company presentation in August, Delivery Hero reported close to 45% of its overall revenue from its Asian markets in the first half of 2022, a region that also showed the highest growth at nearly 60%.

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“Nothing better to gain investor and shareholder confidence than over-performance. Delivery Hero reports breakeven on our platform business in May and June as opposed to the (expectation in) second half of 2022,” Peracha wrote in a LinkedIn post two months ago.

One of the many subsidiaries of Delivery Hero, foodpanda operates mainly in Asia with headquarters in Singapore.

Thailand, Pakistan, Singapore, Malaysia, Taiwan, Bangladesh, Hong Kong, Philippines, Myanmar, Slovakia, Hungary, and Germany are among its markets.

Meanwhile, Peracha said foodpanda, by tweaking commission rates, could become profitable in Pakistan right now, but it will reduce topline and harm customer experience.

“To ensure sustainability, we are approaching this with a steady hand.”

Foodpanda Pakistan has over 20,000 restaurants, and over 4,000 grocery stores listed on its platform, while 50,000 riders and 5,000 home chefs are registered with the company.

While scaling at a rapid pace, foodpanda in Pakistan has received criticism on social media for what users call high commission rates from restaurants, but Peracha said that there is a cap at 30% and the average for all orders stands at approximately 25%.

He said foodpanda has been trying to “optimise its operations since last year” and the company presently has no plan to downsize its workforce. The company directly employs around 650 employees.

Cloud kitchens

In terms of cloud kitchens, foodpanda now has eight such establishments – five of them are in Karachi, two in Lahore, and another in Multan.

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A cloud kitchen, also known as a dark/ghost/virtual kitchen, is a commercial space kitted out with cooking equipment, fridges and stoves, whose sole purpose is to fulfil online food delivery orders. There is no storefront, and no dine-in or take away option. In fact, customers often have no idea that if they, for instance, placed an online order for a pizza from an established brand, their food could well be coming from a small, unmarked commercial kitchen located in their neighbourhood.

By doing this, foodpanda says it helps restaurants increase their presence and saves on costs. Among the more reputed names, Kababjees is using such a kitchen to increase its presence.

Delivery through drones

Peracha said the company is waiting for an official policy from the government to be able to start drone-deliveries.

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“We have the technology. If the government issues a policy for the technology to be used, foodpanda is ready to start and see if it’s commercially viable,” he said.

Riders’ issues

Delivery service providers in Pakistan are criticised for not taking care of their frontline workers – the riders – but Peracha insisted earnings are competitive.

“An average rider earns Rs40,000 a month if they work 40 to 48 hours in a week on the platform,” Peracha said, adding that this is much higher than the average minimum salary in the country.

Independent riders have also confirmed that they could earn Rs40,000 if they work six days a week with each work-day spanning eight hours.

“Freelance or gig economy focus is flexibility. We provide flexibility to riders. They can work any time they want,” Peracha said.

He added that foodpanda also provides medical and life insurance cover to its riders.

Sustainability of online food business

Meanwhile, Peracha said foodpanda, the parent, continues to see potential in Pakistan’s online food business, which is the reason it has continued to inject investment.

“Some entities have closed recently due to economic issues, which is a global phenomenon. However, many entities will enter again in a year or two as things improve,” Peracha said in a confident tone.

Copyright Business Recorder, 2022