We Haven’t Hit Breakeven Yet. Pakistan Is Geographically Spread Out. So Expansion Is Not As Cost Effective As It Is In Other Countries
Foodpanda Pakistan CEO Nauman Sikandar Mirza has said he expects the company to reach breakeven in 2023. In a recent interview with Dawn, the CEO of the online food and grocery delivery platform said the company has been growing its top line at an annualised rate of more than 50 per cent for the last three years. “We haven’t hit the breakeven yet. Pakistan is geographically spread out. So the expansion is not as cost effective as it is in other countries,” said Mr Mirza who founded an online food guide by the name of The Food Connection in 2011, which later morphed into EatOye.
Meanwhile, European multinational Delivery Hero launched Foodpanda in Pakistan in 2013, which acquired EatOye in 2015 and has retained Mr Mirza as CEO since then. Assures riders’ experience will be very different with the platform in coming months Mr Mirza refused to reveal important figures like the bottom line or even the number of monthly orders. However, he said the company’s gross merchandise value (GMV) — a widely used ecommerce indicator that measures the value of products processed for sale by an app/website — is roughly Rs40 billion a year. This isn’t the company’s net revenue though as a major chunk of it belongs to the actual sellers of food delivered through the online platform.
Foodpanda has received criticism on social media for charging exorbitantly high commissions to smaller restaurants while keeping its fee on the lower side for more established ones. “This is not true. Our commission rates range from 22-23 per cent to 29-30pc,” he said, adding that the company has a four-tier commission structure. Multinational brands like KFC, Subway and McDonald’s are top-tiered and pay the lowest commission for bringing their own “brand pull”. Second-tier players include major national brands like OPTP and Broadway Pizza. The third tier consists of brands that operate three to four restaurants in a city. The last tier has “singleton units” that are charged the highest commissions. As many as 20,000 restaurants and home chefs in 50 cities deliver their food through Foodpanda’s fleet of 50,000 riders across Pakistan.
Mr Mirza estimates approximately one-quarter of all restaurants operating in the country have signed up for his online food delivery platform. Main competitors of Foodpanda in the aggregator category include Careem Now, Cheetay and Jovi. He claims the company’s share within the aggregators’ market is between 60pc and 65pc. “In terms of overall food sales, we constitute 2-4pc (including dine-in revenue). Of the food home-delivery pie, we should have a 10-15pc share,” he said. Despite the conspicuous presence of Foodpanda riders on the streets of all major cities, the local operations of the global food delivery platform barely gets a passing reference in the financial accounts of the Berlin-based holding company.
“We’re years behind (the rest of the world) in terms of food ordering. Bangkok’s population is eight million and it has 100,000 restaurants as opposed to a total of up to 90,000 restaurants across Pakistan,” he said. Competitors of Foodpanda approached the Competition Commission of Pakistan (CCP) a few months ago, alleging that it was using its dominant market position to drive out competition. They alleged that its loyalty agreements with restaurants demanding exclusivity were creating a monopoly in the food delivery segment. “We’ve signed loyalty agreements with about 150 of the 20,000 restaurants we work with. We did that after getting formal approval from the CCP,” he said, noting that these restaurants signed up so they could pay 1-1.5 percentage points less than the standard commission rate.
Another allegation that is consistently levelled against the company is that it pays its riders a pittance and treats them poorly when they’re robbed or injured in accidents. “No rider ever says he didn’t get paid,” he said, implying that such complaints come from customers instead. “If you pay people less, they’ll stop working for you altogether. We don’t have that problem. We’re a very fair employer when it comes to paying money,” he said.
A typical rider makes on average Rs30,000 a month if he works eight hours a day for six days a week, according to Mr Mirza. If he’s a “dedicated” rider, he can earn double that amount while working the same number of hours, he added. A rider gets a certain amount on every order regardless of its size. “Since we optimise distances, a rider is able to do two to three orders in an hour. Some of our good riders do up to 30 orders a day,” he said. As for the compensation in the case of snatching or accident, Mr Mirza said the reality is “50:50” because the company “can do much better”. “We’ve worked extensively on this issue for the last two, three months,” he said, noting that the family of a rider now gets Rs500,000 in case of death. “In the next two to three months, you’ll see the riders’ experience will be very different,” he added.
This news was originally published at Dawn