India-based, ride-hailing startup Ola is expanding operations for its Foodpanda’s food delivery business with more focus on cloud kitchens in a bid to regulate operating expenses due to declining margins and compete with rivals in India, says GlobalData, a leading data and analytics company.
Ola Cafe was the company’s first food delivery initiative in 2015, but had to shut operations in 2016. Foodpanda was Ola’s second attempt at food delivery in 2017. The latest move comes at a time when rivals Swiggy, Zomato and UberEats have been pumping money in the form of discounts, cash back offers and expanding their operations across India.
GlobalData forecasts the operator selling price in Indian food delivery market to grow at a compound annual growth rate of 9.1% from US$23bn in 2019 to US$29.9bn by 2022 due to growing number of time-starved and convenience-seeking consumers. According to GlobalData’s 2018 Q4 consumer survey, 53% of Indian consumers make online purchase of meals/takeaways to be delivered to their home.
Shagun Sachdeva, Consumer Insights Analyst at GlobalData, says: “Ola is being bullish about cloud kitchen vertical and seems to have chalked out a strategy to focus on a portfolio of own private labels such as the Great Khichdi Experiment, FLRT, Lovemade and Grandma’s Kitchen.”
However, Ola is still facing challenges in establishing direct synergy between its core taxi-booking business and food delivery business, as getting just the logistics right was not enough; innovation and understanding the preferences of the price-sensitive and cash-dependent Indian customer was much needed.
Sachdeva concludes: “With India emerging as one of the major foodservice industries globally, food delivery platforms will face fierce competition in terms of both sustainability and holding a strong customer base, it is therefore imperative for foodservice delivery operators to adopt disruption.”