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Ola to cut down investments in Foodpanda and look elsewhere

Ola Cabs logo taken from the app

Ola is India’s answer to Uber and whatever it does next. The company has competed for toe to toe with Uber and has managed to create its own space. The ride-hailing company has been a massive hit amongst the Indians and have accepted the company with open arms. Uber and Ola manage to co-exist in this huge market in the sub-continent. There are hardly any other players in the country who can relentlessly compete with the giants.

Ola might have a huge market in the taxi-hailing business but the company still needed to foray into other sectors. A few years ago, Uber entered the food-tech sector with UberEats and Ola also followed with Foodpanda. Ola had to buy Foodpanda and it had injected a lot of money into the company so that it could compete with the giants in that sector.

Bhavish Agarwal had promised $200 million investment in the company and was going to expand the entire Foodpanda business all over the country. It was going to be the next big thing for Ola and Agarwal. The company had also bought cloud kitchen network company Hola Chef in 2018, this was in order to raise its own labels and offerings to the customers. Apart from this, in 2017, the company had acquired a European company Delivery Hero, it had acquired 95% stake for EUR 26.5 million which is around INR 200 crore.

Ola invested an amount similar to INR 200 crore in the company just months after acquiring Delivery Hero. That said, fast forward to today and the company is cutting investments in Foodpanda. It has a lot to do with the trend that has been going on for quite some time now. Foodpanda competes with the best in business that is Swiggy and Zomato. There is nothing that can stop these giants as the market is shared largely between the two companies.

In that case, Foodpanda sees a lot of increase in orders when aggressive discounts are running. However, the moment the discounts dry up the orders decrease in number and this has been the trend observed by many in the company and also by the kitchens and restaurants. Swiggy and Zomato, on the other hand, also see a spike in their orders when discounts are running but once the discounts end their order base is stable and doesn’t see a huge decline. This is where Foodpanda cannot compete.

In this case, Ola, the parent company has decided to cut down on its investments and has made Foodpanda focus on cloud kitchens and private labels. It will see a decline in orders but the business will grow. This is because cloud kitchens have a profit or a margin of about 40% as there are low overheads. If the brand becomes highly popular then the rewards are pretty good as deep discounts don’t play a major part in this.

Apart from this, the company also wants to focus on its other sides of businesses. The company will now focus on its businesses of transportation, lending and also entering the electric cars market.

-Unmesh Phule

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