Company Overview

The Foodpanda group is a global online food delivery portal with a presence in 24
countries. In India they started operations in 2012. Living by the objective of making
online food ordering fast and easy, it aims to provide an opportunity of searching
nearby restaurants, choosing from a broad variety of food menus, and making
payments through a number of payment gateways and order conveniently.

Ordering food online through the Foodpanda Application

Food Industry Market Overview

Food has been one of the biggest fragments in India's retail division, esteemed at $490
billion in 2013. The Indian food retail market is relied upon to achieve Rs.61 lakh crore
($894.98 billion) by 2020. The Indian food processing industry represents 32 percent
of the nation's aggregate food market, one of the biggest enterprises in India and
positioned fifth in terms of production, consumption, export and expected growth.
The online food requesting business in India is in its early stage, however seeing
exponential development. The organized food business in India is worth $ 48 billion,
of which food delivery is esteemed at $15 billion. Interest in food startup businesses,
which mainly comprises food ordering apps, has increased by 93 percent to $130.3
million, consisting 17 deals till September 2015, as against only five deals in 2014.
Company history and background

In India, Foodpanda has operations in over 100 cities, with a listing of more than
12,000 restaurants. The company is backed by Rocket Internet, which constructs and
puts resources into Internet organizations that take demonstrated online plans of
action to new, quickly developing markets. Its system of organizations works an
assortment of plans of action in more than 110 nations on six mainlands with more
than 36,000 representatives toward the end of 2015.

Since its inception in 2012, Food panda has raised over USD 310 mm backed by
international investors such as Goldman Sachs, Imena group, Phenomen Ventures
and Rocket Internet. In April 2015, it raised USD 110 mm from Goldman Sachs and
rocket internet for expanding its operation in India. Saurabh Kochhar, CEO of
Foodpanda India, informed that in the past four years the company has grown 10
times in size and aims to make EBITDA profit by 2019.

Sector Background

Food delivery system is not a completely new service sector. First time we find its
presence during the world war ii in London when most of the homes were destroyed
and people had no place to cook, this created the perfect situation for the growth of
this sector. Initially it was completely labor sensitive sector but after the dotcom boom
in early 1990s concept of online food delivery system geared up. At the initial phase
primarily pizza chain and other well established food chain took this route. Dotcom
crash of 2000s created huge problem for this sector but soon after the growth of smart
phones competition in this sector received more attention. App based order-delivery
system helped this sector to penetrate untouched market. Major pizza chain like
Dominos have also created their own mobile applications and website and started
doing their 20-30% of their business online and company like Papa John's
International reported in 2008 that its online sales were growing at average 50 percent.
With the passage of time third party entered this sector and started implementing the
online food delivery for a network of restaurants.

Delivery system

As per the requirement of restaurants and convenience of customers this sector got
divided into three different form based on delivery system and services. First and
oldest form is fully integrated also called as restaurant controlled. This form is
profitable for only those who have huge market share and consumer base in this form
restaurants and popular food chains develop their own delivery channel like pizza
hut, KFC etc. and focus on all the aspects of food delivery from consumer experience
to delivery logistics. Second form of service is provided for those restaurants who
cant invest in their own full-fledged delivery system. Here the restaurants are neither
directly linked with the end customer nor responsible for the delivery. This is simply
like hiring third party for the delivery service. Third type of online food delivery
service provider are in the form of Aggregator as develop a solution which create
network of restaurants and then they populate details offered by restaurant to end
customer. Restaurants has access to the system that gets real-time orders and they are
responsible the delivery to end consumer. Here as an aggregator they are primarily
responsible for Search & Discovery of customer, Order Construction, Payment
Processing, Delivery tracking & Logistics

Marketing System, Costs and Revenues

Effective implementation of food delivery service business will incur three different
types of cost at different stages of business first Advertisement cost for the marketing
of the service, here they can target different segments like youth/college students,
office workers and house wives as there is huge opportunity to spread business in
these segments. For youth/college students they can use coupons and social
networking sites cost of using coupon will depend on market share and profit margin
during the operation. Newspaper and television advertisement will cost most of the
marketing budget but it will also attract the major untouched segments. Collaboration
with the private firms, canteens on bulk delivery will be an effective medium to attract
office goers and bulk consumer. Effective marketing for this segment is important and
they consist of huge percentage of regular consumer. Second cost incurred during
customer database collection and restaurant network creation which will incur in the
initial phase of business. Third type of cost incur as delivery cost which will include
both transportation cost and salary of employee. This cost will be the regular cost of
operation and will depend on performance and location.

Source of income can be divided into two parts primary and secondary. Primary
source of income may include pre-decided commission from the restaurants for each
order or charge from customer as delivery fee. This source of income varies with
delivery method as Food panda worked primarily as an aggregator so they may
charge from both party or from any one based on stage of business and market share.
Secondary source includes alternate methods like placing ads on its online platform Commented [k1]: Repetead in pricing strategy again
and coupons. Other than this they can also use their customer and restaurant database
for earning by sharing it with other firms.
Demand in the market future trends
Food is one of the largest segments in Indias retail sector valued at around $490 billion
in 2013. It is also one of the fastest growing sectors and Indian food retail market is
expected to reach Rs.61 lakh crore ($894.98 billion) by 2020. Organized food business Commented [k2]: Sid covered this in market overview
still has a relatively small contribution in the sector and is worth $ 48 billion, of which
food delivery is valued at $15 billion. It thus has huge potential and is recently
witnessing exponential growth.

The target audience for the food delivery business are the young and working class of
society with ages between 18-30, who have time constraints in their daily life. These
are tech savvy and technologically advanced people who find it convenient and
comfortable to order food online or using apps.

The top 25 cities in India have around 75,000 restaurants (including organized chains
and standalone restaurants). The number of daily orders over phone for food (mainly
lunch and dinner) range between 0.7 million and 1 million. Overall food tech startups
cater to less than 50,000 orders a day. That's just 5% of the total daily orders and thus
has a huge growth potential.

Since the customer base for food delivery services is closely related to the number of
people that have access to digital devices, it is important to consider the increase in
this user base (shown in Exhibit I) when it comes to predicting future trends in
demand.

Foodpanda is associated with 4000 restaurant spread over 100+ cities in India.
Foodpanda has established itself in Delhi, Mumbai and Bengaluru. The company is
targeting to expand more aggressively in Tier-II and Tier-III cities, with a network of
12,000 restaurants. Since it operates online and via apps, the image of Foodpanda and
its competitors in the market can be judged by the user feedback in these mediums
(Exhibit II & III)

Call Centre/Customer Interaction

The process that Foodpanda follows to get orders from the customers requires the
user to choose the restaurant according to the location. The search can be based on
restaurant type, cuisine type, dish name or other such keywords. Although the
delivery in most cases is done by the restaurants, any changes in the order or problems
related to delivery are to be communicated to the restaurant through Foodpanda,
which makes the chain somewhat complicated and tough for user to keep track of.

The delivery time and costs vary from restaurant to restaurant and after placing an
order, delivery time might change according to the convenience of the restaurant.

Foodpanda provides a 45 min or free offer, which means the food is delivered free of
cost in case delivery takes more than 45 minutes whenever the offer is applicable. But
the implementation of the offer is challenging and there have been several complaints
of this offer not being implemented by customer care service. The feedbacks show
there is still a lot of scope for improvement in the customer care services.

Pricing Strategy
Revenue comes to Foodpanda by providing restaurants a stage to bring their menus
online and hence develop their customer base. Foodpanda helps restaurants increase
their sales by using analysis and customer generated recommendations. Some other
income sources are member commission, conveyance charges, sponsorship and ads.
The methods of revenue generation used by Foodpanda are: Commented [k3]: Sources of revenue cos pricing just
covers discounts

Commission from participatory restaurants: The main source of Foodpandas

revenue comes from the commission of listed restaurants. (Arpita Arora,
Internet marketing analyst).
Delivery charges: Foodpanda earns 40% of its revenue from delivery business
according to Saurabh Kochar, CEO of Foodpanda India.
Advertising: Foodpanda earns 10% profit from display ads. Normally it
charges advertisement fee for-
a. Page served.
b. Ads unit served per page.
c. Redirecting to pages.
Order charges: Foodpanda generates revenue from ordering charges. When an
order placed through the website of Foodpanda, it gets 5-10% of the total prices
of ordered foods.
Selling customer habits information: Foodpanda, one of the biggest food
delivering service provider, sells customers habits to the market researchers. It
is another source of its revenue.
What Makes Working with Food Panda Unique? Commented [k4]: Restructuring/grammar check required

The food panda group is a global mobile food delivery marketplace headquartered in
Berlin, Germany and in India its located at Gurgaon, Haryana and its always seems
better for its good and friendly work culture and regarding its productivity and
creativity, actually its go hand in hand and it provides independent work culture as
well as flexible work timing like it provides 24/7 work culture.

Management handled it very carefully and its spread across different departments
and it has many food delivery experts and it has some very good vendor services and
management hired special employees for sales and billing and the management team
provided very good content and it has tremendous marketing team to handle and it
has special human resource team to handle the entire responsibilities.

This company started a very good, career development for freshers and it provides a
very good platform for the individual growth for any individual who are employee
of this company and the benefit that have to the employee of this company is the
employees can contribute their job through offline marketing and the best thing which
company provides that the employees of that company can switch between the
departments which comes in the favor of the employee of that company so every
employee would not feel bore in the same type of job in the company.

Areas of improvement Commented [k5]: This suits better for analysis

First company should work on workplace environment. As we have seen it has one
and only office in Gurgaon, Haryana and what they should do is, they can set up
offices country wide and also we have seen it has 24/7 work culture so, what they can
do is, they can manage work hours means they can minimize this timing and for the
employees of this company should have the specific time of reporting and the main
thing is the leave policies. As we have seen there is no provision of leave policies in
this company so now they can revise the policy of leave.

The management team should decide they should target the cellular families and the
bachelors for the better market segment and we have seen that the packaging of the
food earlier was not very good and because of that many times its leaked so what can
they do is they should care about the food packaging and delivery and one of the
major thing is that they should provide tracking facilities for the customer support
and they should also do marketing campaign to make peoples aware about that the
company and the facilities provided by the company and this company has some
setup stalls in public gatherings for promoting food panda.

The company should increase incentive of the employees according to the

performance of the employee and they should give reward them according to that and
the company should provide and create positive environment which make the work
interesting so that the employees can get fully involved and engage in their activities
and one special thing is the company should do is they can provide the special food
coupons for the employees of that company.

Competition

The competition faced by Foodpanda has been growing continuously for the past 3
years. With the advent of the start-up boom phase and the liberal and friendly NDA
policies, every city in India now has a bunch of online food delivery companies. Local
players imposed as much of a threat in the specific cities as did national players in the
country.

Over the past one year, there has been an exponential growth in the number of food
startups. Investors are eyeing this market as a possible long term strategy, with Boston
Consulting Group reporting the market size to be Rs.42 lakh crore by the year 2020.
Even though Foodpanda still remains the highest funded food delivery startup,
national players are soon catching up to raise funding and steal the market share.

The worlds biggest restaurant discovery servicer, Zomato, has also joined the food
delivery competition. Zomatos advantage lies on the fact that it has already built
trustworthy and diligent relationship with the restaurants that are listed on its
application. These restaurants have seen their profits surge due to the listing provided
by Zomato, and are happy to help them whenever and however they can. Another
start-up, Swiggy, has raised huge funding in 2015 and is soon catching up to
Foodpanda with 5000 restaurants already being listed in its domain. However,
Swiggy has a different approach to the food delivery system. It appoints its own staff
for pick-up and delivery of parcels from the restaurants to the customers. This
provides better customer experience and reduces the delivery time since the process
is entirely controlled by Swiggy.

Apart from these two major competitors, a large number of players have swamped
the market, offering variety of cuisines in unimaginable discounted rates. Runnr,
JustEat, Faasos and a lot more aggregators have led to huge competition. There is
heavy price war and the profit margins are really low. Many players have already
shut down business and even Foodpanda has been facing losses at an ever increasing
rate.
Customers Commented [k6]: Would be better in bullets

Foodpandas customers can be broadly divided into three groups families, corporate
workers and students. With the continuously growing food delivery business and
increasing variety of cuisines, families have taken a liking to ordering food at home
and spending quality time in comfort while enjoying the delicacies offered by various
restaurants. These customers generally order in huge quantities, approximately for
five-six people, and also a variety of dishes. Corporate workers normally order food
which can be eaten either quickly inside the office space or on-the-go. These orders
might be of high price and quality, but the quantities are generally small. Students
order in huge quantities but mostly from restaurants that have low pricing. They are
the most price sensitive and look for value purchases.

The main reasons for ordering food online in India could be noted down as follows:

1. Convenience Food can be ordered easily through applications which can be

used on mobile phones and tablets. Studies show that 75% of food ordered
online are actually ordered via mobiles.
2. Simpler menu Eye-catching pictures of the expected dishes and easy access
to a huge list of restaurants and cuisines make the menu simple yet holistic.
The orders can be changed on multiple occasions as well, which makes
choosing and ordering much easier.
3. Money savings Market penetration policies and requirement of high volumes
have left these food delivery aggregators with no option but to provide huge
discounts and engage in price wars. Though it is a very unprofitable model, it
is highly beneficial to the customers.

The Crisis

Over the past one year, Foodpanda has faced a loss of Rs.36 crores, which is five times
the loss of its previous year. Since its inception, the company hasnt seen profits in any
quarter. These factors, coupled with a few other operating issues, have led to decrease
in confidence of the investors. Foodpanda is a company dependent on funding, and
losing market share to its competitors in the light of increasing losses does not serve
its purpose.

Foodpanda has always been caught up in the middle of controversies. It laid off 300
employees in December 2015 and also shut operations in six cities in February 2016.

The past year was a rough period for Foodpanda, as it was also caught in the middle
of a series of violations. Foodpanda had boasted the number of restaurants and orders
thereof, to show high volume of activity by the company. Huge number of restaurants
listed in the company were either already shut down or didnt exist at all. They also
showcased fictitious transactions so as to gain high perceived market share. This led
to decrease in investor confidence, who now seem to have moved towards other
competitors. Inept and inefficient call centers, sexual harassment of customers by
delivery boys and malfunctioning of the website and applications also lead to decrease
in brand image.

Foodpandas current strategy is solely based on increasing demands through offering

heavy discounts. They actually face a loss per order they receive. This is not a
sustainable business format in the long run. Foodpanda has very limited options to
gain momentum and turn profitable. It has to ensure quality service and also earn
some profit per order they deliver. What can it now do to become a profitable and
sustainable business?

Appendix

Exhibit I

Users of Various Digital Devices in India (mn)

2012 2013 2019(P)

mobile phones 406 475 522
PCs 31 32 34
smartphones 27 65 365
notebooks 15 17 21

Exhibit II (Mobile App feedback)

App Rating No of ratings Total downloads

Foodpanda 3.9 161,905 5,000,000
Zomato 3.6 9,282 500,000
Swiggy 3.8 27,657 1,000,000
Faasos 4.0 63,050 1,000,000

Exhibit III (Facebook followers)

App Likes on Facebook page

Foodpanda 2,261,700

Zomato 1,288,295

Swiggy 73,026

Faasos 107,211

Funds raised by different Food Startups

Revenue and Profit comparisons of major competitors (2014-15)

Food Panda expenses (in lakhs)

The Crisis explained: Huge loss (2014-15)