Food­panda on dis­count spree to cap­ture mar­ket

Business Standard - - FRONT PAGE - PATANJALI PAHWA & KARAN CHOUD­HURY

Imag­ine or­der­ing the reg­u­lar chicken biryani from your neigh­bour­hood eatery on a Satur­day af­ter­noon — not for ~149 per plate — but ~49.

Users of Ola-owned food-de­liv­ery ser­vice provider Food­panda are al­ready taking ad­van­tage of this. But, it gets bet­ter.

Hav­ing placed your or­der for two plates of biryani, you pro­ceed to pay through mo­bile wal­let Paytm, and find that you have been re­funded ~30. So, you ef­fec­tively pay ~68 for an or­der that would have other­wise made your purse lighter by ~280.

What can you have with your biryani? Mut­ton ke­babs? Chicken tikka? You could get it for ~109. If you want to try a dif­fer­ent cui­sine, a plate of chicken fried rice and shred­ded lamb will come to your doorstep for ~150. Feel­ing your sweet tooth itch? Get a gu­lab ja­mun de­liv­ered for ~9!

Food­panda is able to make this pos­si­ble by of­fer­ing dis­counts as high as 70 per cent as well as re­funds. Cur­rently work­ing out of 50 cities, it will soon ex­pand ser­vices to 100.

While ac­quir­ing Food­panda in December last year for $31 mil­lion, Old had an­nounced that it would in­vest $200 mil­lion. To take on mar­ket lead­ers

Swiggy, UberEats, and Zo­mato, it has been burn­ing cash to dis­count food and giv­ing higher mar­gins to restau­rant own­ers.

If it can be­come the mar­ket leader, Food­panda will be able to raise more funds soon.

No one from Ola or Food­panda com­mented on ques­tions sent to them.

Rid­ing high on cabs biz

A source in the com­pany said Ola was fol­low­ing the same play­book with Food­panda as it did in its early days as a cab ag­gre­ga­tor — deep dis­counts.

“The com­pany’s goal, at present, is to get as many users and or­ders as pos­si­ble. It has to take on Swiggy, Zo­mato, and UberEats,” said a for­mer Ola em­ployee.

But, is this sustainable? Will the users stick around once the dis­counts are with­drawn?

“By of­fer­ing food at al­most a third of the price, you will only be able to get deal hunters. That is not how brand loy­alty is cre­ated. In fact, it can even harm the rep­u­ta­tion of a restau­rant as peo­ple might ques­tion its quality. Why is a dish avail­able for such as throw­away price?” said a Delhi-based restau­rant chain owner and a se­nior mem­ber of the Fed­er­a­tion of Ho­tel & Restau­rant As­so­ci­a­tions of In­dia.

Cur­rently, Food­panda is foot­ing the bill.

An­other restau­rant owner said he was giv­ing only a 10 per cent dis­count, that too only on week­days. “There are days when the dis­count on our food ranges from 25 per cent to 60 per cent. But, we do not sub­sidise the food. Food­panda pays us the full rate,” said a restau­rant owner of an ori­en­tal food out­let in south Delhi. The surge in cus­tomers is com­ing at a huge loss.

“Food­panda needs each of its cus­tomer to or­der a min­i­mum of ~400 break even. For Swiggy and Zo­mato the cost is ~350. They also charge ex­tra if the or­der is for less than the min­i­mum amount re­quired for free de­liv­ery. Food­panda is pay­ing more to rid­ers and restau­rants, and taking home less cash,” said a source close to Ola.

Sweet deals for restau­rant own­ers A num­ber of mid-level restau­rants and high-end quick ser­vice restau­rants have been promised close ~10 mil­lion as rev­enue each year if they list ex­clu­sively with Food­panda. Some of th­ese restau­rants do not make more than ~2.5 mil­lion.

“What they have also promised is that Food­panda would pay 50 per cent of the delta if the tar­gets are missed. It means if Food­panda has promised ~10 mil­lion and the restau­rant man­ages to make just ~5 mil­lion, the com­pany will give the restau­rant ~2.5 mil­lion,” said a se­nior ex­ec­u­tive at a ri­val food de­liv­ery firm.

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